Let’s take a look at why retaining existing customers can transform a business’s growth.
Acquiring new customers is expensive
Acquiring new customers costs a lot of time and money. The average business spends anywhere between $7 to $315 on marketing to acquire just one new customer. This consists of the actual spend on campaigns, plus time spent planning effective adwords, retargeting, social media initiatives. For most businesses, the probability that a new prospect makes a purchase is just 5-20%, putting the cost of generating an actual purchase between 5 and 20 times higher. By spending just 1/5th of that customer acquisition cost, however, businesses can generate a 60-70% chance of sale from an existing customer over their lifetime.
Return customers are worth more in revenue and profit
The average customer increases his or her spending with a company later in a relationship. According to a study by Bain, in the online retail industry, the average repeat customer spends 67% more per year, despite costing less to retain, just three years from their first purchase. By HBRs measures, some businesses can almost double profit by improving customer retention by just 5%.
Loyal customers help acquire new ones at a lower cost
Word-of-mouth marketing is the best marketing tool that a business can have. Bain notes that a second-time customer refers an average of 3 people and the number grows with increases with the number of repeat purchases.
Loyal customers are less sensitive to price changes
When customers grow loyal to your brand, they are less sensitive to price changes. Repeat customers are more likely to buy from you than the competition, even if business or market conditions force you to increase your prices.
Customer retention should be a business priority, rather than a convenience. When businesses compete for the same customers, strong customer relationships provide a competitive edge. Both CRM and helpdesk systems are powerful tools that give customer-facing employees a complete picture of customer needs and buying habits that help them deliver greater customer value. Stay tuned for our next article to learn how to use Vtiger CRM to improve relationships and build a loyal customer base.
Hello Shree,
Really interesting article. I couldn’t agree more with the sentence that customer retention should be a business priority. Nowadays we often seem to focus too much on onboarding new customers and at the same time, we underestimate the benefits that current clients bring in to our company. I think even when we increase the price for our product/service, it’s not so important for our loyal customers because they know that they are supported on the highest level. It’s important that we are giving them product they can be sure of. And if the product provides them with real value, they will be eager to recommend it — which makes onboarding easier and cheaper in the long run.
Good job.
Thank you, Cathy!
I completely agree with your views. Loyal customers are less sensitive to price changes when they are assured of a great product and support.