Customers are like friendships, if you don’t invest in them they gradually, and sometimes very quickly, find other suppliers. We all know that maintaining a relationship of any sort takes effort and commitment and yet we regularly forget this in the commercial world.
According to Invesp, 44% of companies have a greater focus on customer acquisition than the 18% that focuses on retention. This focus on gathering new customers rather than having a more balanced approach ignores the fact that relationships with existing customers can be their actual best source of growth.
There are a number of reasons for a focus on customer retention.
Why is it important to retain old customers?
Existing customers are already willing to listen to you because they’ve tried your products or services before. They know what to expect, and they will often try what you can offer them to see if you’re still worth following.
New customers, on the other hand, don’t know what they’re getting, therefore they’re more sceptical. It’s harder to grab their attention because of this. The probability that you can sell to a new prospect is only at 5-20%, as opposed to the 60-70% chance of selling to an existing customer.
Loyal customers are also more likely to recommend you to people they know – either personally or anonymously. Recommendations from other people remains as one of the biggest influencing factors for people – 82% of consumers proactively seek referrals from their peers while 92% of consumers trust referrals from people they know. Not to mention that the average small business gets 60% of its customers from referrals.
Financially, of course, retaining existing customer s is also cheaper that finding new ones.
How customer retention is cheaper than customer acquisition
Customer acquisition is anywhere between five to 25 times more expensive than retaining your existing customer base. This is founded on the simple premise that you’re spending more on time and resources to catch a new customers attention, retain it, and then convince them to try you out, as opposed to simply maintaining your existing customers.
Our Social Times also found that companies understand just how important customer retention is, not only as the cheaper option but also a driver f increased ROI (return on investment). 70% of companies say it’s cheaper to retain a customer than acquire one, and 49% say that they achieve better ROI with relationship marketing over acquisition marketing.
How do you retain customers?
We mentioned above that maintaining what your customers have experienced with you before is much cheaper than trying to make new customers actually pay attention to you, and many businesses think that this simply means maintaining the product or services that their customer base gets from them. However, one key factor in customer retention is how the business connects with it’s customers – in other words, customer service.
Your business can deliver the best products or services, represent the strongest socio-political issues, have the trendiest marketing plan but at the end of the day, customer service still serves as a highly-important detail that many businesses fall flat on.
What’s the use of all the best you can give them if your customers don’t feel like the business actually cares about them – especially when something goes wrong?
This is also a big factor in how customer retention is marginally cheaper than customer acquisition. When your customers feel like they are welcomed by the business, that their opinions matter, and that the business takes time to help them out, they are more likely to stay loyal. Training your staff to respond better to customers is infinitely cheaper than buying the most cutting-edge technology to sell your products or services.
Think of it as a customer being made to choose between a high-class restaurant with exquisite dishes but snobbish staff and a restaurant that serves simpler, more rustic dishes with welcoming and helpful servers. The food may be great, but the way customers are treated affects the whole experience.
There’s nothing wrong with wanting to expand your customer base – all businesses need to expand and grow. But you shouldn’t forget about your old customers – your best asset when it comes to unlocking the rest of your potential market. It’s better for your business’ budget, too!
Ready to up the customer service of your business? Contact Sparkle Training today to learn more about our Customer Service Training program.