5 Reasons to Consider Customer Retention for Business Growth

5 Reasons to Consider Customer Retention for Business Growth

Companies invest a lot of time and money into building customers’ trust. Customer retention is how businesses satisfy their customers in order to have them continue to buy from their brand as opposed to choosing other options available in the market. In other words, it is the way in which companies make their customers into repeat buyers and prevent them from turning to a competitor.

One may ask why the need for customer retention arises. The answer lies in the long term profits that a business makes from having loyal customers who stick by the brand and select your products over your competitors’. So, adjusting your brand according to the needs of the consumers not only rewards brand loyalty, but also has many financial advantages. Furthermore, on average, to get a new customer to try out your brand costs 5 times as much as it does to keep an existing customer. This excludes the marketing cost, which takes the budget even higher. Here are five important reasons as to why you should invest in customer retention.

1. Huge profits

When you increase the customer retention rate by just 5 percent, you can almost double your profits, ranging from 25 percent to a whopping 95 percent. Needless to say, repeat purchases translate into repeat profit. Also, faithful buyers tend to spend more money than new customers. When someone has trust in you, it becomes easier for them to go overboard with their spending because they know the purchase would be worth the money. However, the same is not the case with new customers, as they can be skeptical to even purchase their first item. Therefore, existing customers can increase your profits manyfold and also try out new products of your brand given the mutual trust and loyalty. A loyal customer not only buys from your brand because your products are better than others in the market but also because the company’s values align with their own.

2. Low marketing cost

Marketing need not be as expensive and grand for the repeat buyers of your brand, for they are already well versed with the company’s products and that it aligns with their requirements. It is, therefore, recommended to not invest a lot of money into luring already loyal customers. According to reports, advertising to a new customer is 5 times as expensive as marketing products to an existing customer. It makes sense to save the money spent on extravagant advertising and use it elsewhere.

3. Valued feedback

Feedback, whether positive or negative, can transform any business for good. It indicates customers’ participation and engagement with your brand and how they perceive it. Their overall experience can be used to improve the shortcomings, and focus can be placed on highlighting the liked parts about your brand. Listening to customers and optimizing their experience is highly important, for it helps in winning their trust and ensuring them of full support in case of need. The majority of customers love to associate themselves with a company that successfully incorporates their feedback. Moreover, having people give their feedback simply requires you to conduct surveys, send emails, or put up polls on your company’s social media page.

4. Word-of-mouth advertising

Word of mouth is the most cost-effective way of marketing your products. It is done by people loyal to your business, who are repeat customers and have full faith in your brand. Repeat buyers tend to share and spread the word of their positive experiences with other people. Having loyal customers, you get to have free marketers for your business as well. This form of advertising is really convincing, for people often listen and rely on the opinions of their close ones. More than 90 percent of people rely on the recommendation of their family and friends over other sources of advertising.

5. Existing customers spend more

Repeat customers do not shy away from spending on premium items. They are less price-conscious than new buyers. Familiarity with and trust in the brand leads them to spend more money without having any second thoughts. Additionally, many people associate premium prices with luxury, comfort, and quality products and services. For a lot of millennials and younger people, high prices do not really matter. What matters most to them is the product they are buying is of great quality, as well as the after-sales service.

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The above-mentioned five reasons can motivate you to take the leap of putting efforts into customer retention policies, for it can have several benefits to your company. All in all, customer retention helps your business flourish and reach new horizons without having to spend heavily on marketing. It not only cuts down on marketing costs but also increases the company’s profits with repeat buyers and word-of-mouth advertising.