Venturing out to get new customers might seem like the best thing to do but the question is what happens to the existing customers or how best have you been able to manage already existing customers?
How profitable is it to acquire a new customer as opposed to retaining a customer?
In a recent study, it was stated that 80% of your business would be a result of 20% of your existing customers. What it means is that you are more likely to get ongoing business from those that have already patronized your services or products.
This means that customer acquisition is not necessarily the best option for improving sales and Return On Investment (ROI) all you might just need to do is to tend to already existing customers.
Customer Retention is about Customer Service
The cost of retaining a customer is equivalent to the cost spent on customer service and building good customer relations.
This does require a lot of following up and continuous customer maintenance to remain topmost in the mind of your existing customers.
In comparison to customer acquisition, in which you can directly measure result and immediately see the numbers increase; in customer retention it’s seemingly a continuous process and it seems like it’s time consuming. But when compared to the cost of acquiring new customers, which means investing in search engine optimisation, advertisement, discounts and promotions, etc and a lot of persuasion, it is easier working your already existent customer.
For customer retention, all you need to do is capitalize on your previous business success and ‘re-transact’ with them.
This is easier because they’ve had an experience with you and trust your legitimacy and competency. You deal more with loyalty, relationships and engagement. Whereas in acquisition, you need to do a whole lot to prove that you are for real, publish lead geneneration forms as well as launch ad campaigns.
Customer Retention can Give Birth to Acquisition
It’s amazing to know that although customer acquisition might not guarantee retention, customer retention does a lot to add to more customer acquisition.
Most customers would rather hear proofs from those that have bought from your company and hear what they have to say than them being having to decide by just what your company has to say.
Referrals, testimonials, reviews are always a function of an already existing customer. The feedbacks that proves your competency is based on a retained customer putting in a word for you.
While researching on this I came across a study that showed that “satisfied customers end up telling nine others” about their positive experience while negative experiences are told to 22 others".
The bottom line is: customers talk and will keep talking. This way you are either acquiring more customers or you are destroying your opportunity of building better client base.
Thus, by treating your customers good and implementing smart retention strategies, referrals for more customer acquisition is still the end result and on the web (e-commerce) referrals spread like wildfire.
Word of mouse spreads even faster than word of mouth.
Profitability Comparison Between Retention and Acquisition
You can easily sell to a satisfied already existing customer as compared to mere visitors or trying to get new customers.
According to marketing metrics, the probability of converting an already existing customer is sixty to seventy percent, whilst with a prospective customer its just five to twenty percent.
Don’t forget, people feel more at home with people or companies they are already familiar with than with total strangers.
In conclusion, there are different ways to retain customers and boost sales, from loyalty programs, to more personalized services and also to social media engagement, it boils down to your business model and customers.
Cover Image credit: SEOP Blog