What is Customer Retention after all?
Few may call it loyalty of customers, few may name it under customer success and life cycle. Names and methods might be different but the end goal is same and in the end, it all boils down to keeping the customer happy and engaged so that they keep coming.
Changing landscape of Marketing
With the changing landscape of the digital space, marketing has evolved in multitudes. Footprints of businesses are not limited to just a few folks in the neighborhood, the whole world has become a single marketplace. With a global audience, handling needs and requirements of the thousands and millions of customer becomes very challenging.
Digital marketing has changed the prior equations and will continue to be so dynamic. We have multiple of marketing channels to reach our audience and also multiple of platforms for customers to interact with. Ease and simplicity of marketing is a complex web now leading to a very fragmented customer journey.
Why is Customer Retention important?
In a business, acquisition, and retention go hand in hand, but the development phase of your business decides which area you should focus on more. Of Course, the acquisition is the building block of your user database, without a customer in your store, there is no one to keep onboard.
Generally, it costs less to keep a customer than to acquire one. But, the problem is the majority of companies especially e-commerce companies, invest most of their resources in acquisition despite the fact that repeat customers bring them the majority of revenue.
Companies need to establish their brand, run various marketing campaigns, giving more lucrative offers compared to their competitors, expenses on sales reps etc all add up to their acquisition expenses while retention is more profitable to them. Let’s see a simple example:
You can see the profit margin from an existing customer is 100% more.
Some facts about Customer Retention
- According to the Gartner Group, 80% of your company’s future revenue will come from just 20% of your existing customers.
- Marketing Metrics report says the probability of selling to an existing customer is 60-70% while the probability of selling to a new customer is 5-20%.
- According to Bain & Co, A 5% increase in customer retention can increase a company’s profitability by 75%.
- It costs 6-7 times more to acquire a new customer than to retain an existing one.
How can you improve your Customer Retention?
“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.” – Steve Jobs
A Few years back retention marketing was like the loose fitted brick in the wall. Companies knew retention was much of their need to make the strong walls of a profitable business but the “how?” part was a major stumbling block. How to personalize the interactions, touchpoints for growing customer base? How to personalize the offers to the customers need?
Now, with the swiftness of technology, we almost have answers to all the questions. The tools needed to achieve this level of individualized communication are all available. Customer’s demographic, transactional, behavioral and social data helps companies in a big way to understand their customers. Customers can be given personalized and unique experience so that they happily keep flocking to your website over and over.