Repeat Customers Buy More and Cost Less---The Importance of Customer Retention
Repeat customers buy products, buy more products and they buy more products year after year. It’s that simple! For the most part, they are the most dependable revenue for most companies. This should be enough of a reason to try to keep them… right? However, there is more value to maintaining existing customers than many companies realize.
Customer retention is always cheaper than obtaining new customers. Data consistently shows that it is always much more cost-effective to keep a customer than it is to bring in new customers.
According to the Harvard Business Review, acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing customer depending upon the type of business.1
Customer loyalty is not only less expensive; it also has a better rate of return according to research. No matter where you look, the statistics for the return on investment for existing clients is much better than it is for new customers.
“Further, a returning customer purchases 30 percent more items and brings in three to seven times more revenue per order,” according to INC Magazine.2
Additional research indicates that existing customers buy 90% more frequently and spend 60% more per transaction than newer customers. They are also five times more likely to continue to buy your products in the future, and are actually bringing in 23% more total revenue and profitability over new customers.3
With statistics like these, it is easy to recognize the importance of keeping customers happy! At CANTEX, we continually take steps to keep our existing PVC electrical product customers satisfied with the best possible quality and service. Steps we’ve taken this year alone for our PVC electrical product customers include the following:
1. Major capital improvements to facilities to maintain excellent delivery times during a time of growth.
2. Acquisition of a new PVC electrical product line to maintain better service and help control cost.
3. Product engineering improvements (read Leveraging Product Improvements article).
4. Improved and more accessible product information to better educate our consumers.
5. Improved customer engagement opportunities through Social Media.
Here are some important strategies to help improve customer retention:
1. Build strong healthy customer relationships.
A large part of customer retention is based on relationship building, and good relationships make life better for everyone! While new business is merely transactional, great relationships are good for your well-being as well as your pockets. In this Digital Age, where many businesses have lost much of the human factor, don’t underestimate the power of human interaction. Remember, whenever you gain customer loyalty for one product, that customer is likely to look at other products and highly likely to make additional purchases. By building trust through relationships, customers will accept your recommendations and recommend your products to others. According to statistics, repeat customers are also less likely to flee when there is a problem because they know you and they trust that you tried your best.
2. Provide better personal experience.
Repeat business isn’t won with good products or service alone; it also takes exceptional personal experiences. Encourage employees to interact with customers in a welcoming manner and to find their own unique way to provide a great personal experience. Whether it’s a visit or simple thank you note, the personal touch in today’s impersonal digital sales world can quickly establish a good relationship and fill the “personal touch void” of the cold Information Age. A kind word, may just win a customer for life.
3. Let your existing customers know that they are valued.
Think like a consumer for a second. How do you feel about brands you interact with from companies that value you as a customer? Without even hearing your response, I know you appreciate feeling valued for your business and loyalty. In a world of businesses that seem to value new business over existing customers, you will stand out by showing appreciation your existing customers. You will not only be appreciated, you will earn more business and probably referrals.
Think like a consumer for a second. How do you feel about brands you interact with from companies that value you as a customer? Without even hearing your response, I know you appreciate feeling valued for your business and loyalty. In a world of businesses that seem to value new business over existing customers, you will stand out by showing appreciation for your existing customers. You will not only be appreciated, you will earn more business and probably referrals.
Ways to let customers know that they are valued include the following:
- Listen to customers and act on their behalf. Find out their needs through conversations, social media interactions, or surveys and make improvements based on their concerns. Turn complaints into positives by fixing problems.
- Use some sort of rewards program for customer loyalty and repeat business.
- Be sure that your customer service people act like they value existing customers and are supportive, kind, and available to help fix issues.
- Learn why customers left in the past so you can address areas of dissatisfaction.
- Be sincere in your communication and keep promises. When you can’t keep a promise, be transparent, and turn the situation into a positive by offering alternatives.
4. Foster a sense of community.
Today, customers are not just looking for products; they become loyal to brands with which they feel a connection to being part of something worthy. If they feel like they are part of something meaningful, they aren’t easily lured away by competitors with good sales pitches offering lower prices.
Ways to help foster a sense of community include the following:
- Get involved in noble causes in the community through activities or giving. Communicate about your involvement.
- Engage with customers by sharing more about who you are and interacting with them through Social Media. Show them that you want to know what they think.
- Give your website a human touch by telling your story. Are you a family business or do you have and interesting history? Tell your customers so they want to be a part of your story.
5. Revive inactive customers.
Winning customers back is much less expensive in terms of time and marketing expenses than getting new customers. According to research, customers who bought from you in the past, but stopped buying from you for some reason, are likely to be receptive when you encourage them to come back. According to Small Business Trends, 60 to 70 percent of customers WILL do business with a company again, if you address their issues and offer some sort reward for their return.4 Sometimes one phone call to show someone that you care about losing their business is enough to bring them back, while a new customer might come at the cost of an expensive marketing campaign or lots of hours of work!
1. The Value of Keeping the Right Customers, Harvard Business Review, hbr.com
2. Thinking Beyond the Sale: The Power of Retention and Post-Sale Nurturing, INC.com
3. The Top Ten Benefits of Customer Retention, blog.accessdevelopment.com
4. CUSTOMER RETENTION STATISTICS – The Ultimate Collection for Small Business, smallbiztrends.com