NO! This business development strategy doesn’t pay off in the long run.
If your company excels in customer service and has a good product, your current customers will stay with you, right? WRONG!
You have to earn the loyalty of your customers with a marketing strategy that recognizes and addresses your customer base.
Marketing Truth
According to the Harvard Business Review, it costs five to twenty-five times more money to convert prospects to customers than it does to retain current customers. It takes a business development marketing plan to attract prospects and convert them to customers. Once you have them, why would you ignore them and risk losing them?
Want to increase your profits by 25%?
According to a study by Bain & Company, you only need to retain a mere 5% additional customers and you can boost your profits by 25%.
To monitor retention rate, you can look at the rate of customer churn – the percentage of customers who leave you each month or quarter for some reason. The opposite of the churn rate is the retention rate — the percentage of customers who stay with you each month. Increase that percentage by just 5% and your profits will show an increase of 25% or more, depending on your industry.
Boost your customer value.
A 10% increase in customer retention levels can mean up to a 30% increase in a company’s value. The old “80/20 Rule” applies here as well. As much as 80% of your company’s future revenue will come from just 20% of your existing customers.
What this tells us – loud and clear – is to take good care of your current customers!
What most companies think and do is to focus on the short-term gain of acquiring new customers. The better strategy is understanding the importance of customer retention in building customer brand loyalty. What you want to build is a core of people who regularly choose your brand over the competition – regardless of price and convenience.
Forbes, Inc. reports that 67% of consumers have become “serial switchers” who are more than willing to switch brands because of poor customer experience. This lack of loyalty, which can very well be from bad customer experiences and weak retention efforts, costs US businesses billions of dollars every year.
What can you do to retain more and more of your customer base?
You need to add value to their customer experience and remind them that you are doing so. Value your customers as unique individuals through personalized communication and developing a strong relationship. Send them an e-newsletter or place a buck slip with a greeting of thanks for their continued business into your invoice envelope. Send them a card on their special days – birthdays, wedding anniversary, and/or holidays. When you have special offers for new or first-time customers, don’t leave out your current customers. That only makes them feel like you don’t care about them anymore and may push them to become some other company’s new customer.
Loyal customers have other benefits, too.
People are strongly influenced by referrals from those they know. Loyal customers are more likely to recommend you to their friends and family. They are also more likely to comment favorably about your company on their (or your) social media pages. They are more willing to give you a written testimonial or online review.
Loyal customers are valuable sources of honest feedback. When you want an opinion about a course of action or a product you want to introduce, ask your staff and experts in the field … but also get the opinions of your loyal customers.
Customers who are NOT engaged with a brand make purchase decisions based on price and convenience. When costs rise with one brand (a sometimes necessary business decision), disengaged customers will churn and seek a better deal elsewhere. Loyal customers are much more likely to stay.
To sum up … the importance of customer retention must not be underestimated. Instead of putting all your resources (marketing budget) into acquiring new customers, create an environment where customers feel good about your products and services, where they will make larger and more frequent purchases, and share your brand and their enthusiasm for it with their friends and family.