Understanding why customer retention matters — and having a plan in place to maximize yours — has a huge impact on your business growth and bottom line.
Simply put, without customers, you have no business. And yet, a singular focus on new customer acquisition can be a significant, and ultimately inefficient, drain on your resources.
Getting new customers is necessary, of course. But the cost of acquiring new customers is much higher than retaining existing customers.
In fact, it’s generally accepted that it costs at least five times more to attract a new customer than to keep an existing one. Some studies indicate that figure is six to seven times more.
With the resources you save through customer retention, you can invest in other initiatives important to your business, realize increased profits, or reinvest even more money back into customer acquisition and accelerate your business growth.
Not to mention, the benefits of better customer retention don’t stop at this cost-effectiveness.
Research from Harvard Business School shows that increasing customer retention by just 5% increases a company’s profits by 25% up to a whopping 95%.
This is driven by the fact that retained customers, by definition, stay with the company longer. They buy more and tend to refer other new customers to the company more frequently.
Generally, operating costs to serve these customers also tend to go down. And everything else being the same, this sends profits even higher.
Loyal, retained customers don’t simply buy more because they stay with you longer. They buy more often, and they tend to spend more on each transaction.
In fact, Markinblog reports that loyal customers spend 67% more than new ones.
Because of the relationship and higher trust, they’re also more likely — 50% more, according to Markinblog — to try new products and services as you launch them.
Clearly, customer retention makes good business sense. It supports the bottom line as well as product line expansion and overall growth.
ARC has helped countless companies launch and optimize CX programs, and we can help you, too.
If you’d like to see how it could apply to your company, we invite you to get in touch.
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