Why does customer retention matter?

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Getting a customer to successfully complete a purchase from you is a battle only half won. The true challenge is retaining old customers, so they continue to buy from you and help you get some new customers in the process through vouching for your loyalty. Additionally, securing new customers is ten-fold times more costly than retaining an existing one.

Customer retention, hence, will not only save you money but also let you hold your customers for a prolonged period, so they spend more at your business over their lifetime. Do not confuse customer retention and customer acquisition; customer retention is the exact opposite of customer acquisition. Customer acquisition, which is the process of gaining new customers, will help you grow your business, but customer retention, which is the ability to engage with old customers repeatedly, will help you sustain your business.

What is customer retention?

If you are still confused about what customer retention really is, then understand it this way. Suppose your company is a bucket, and your customers are the water filling the bucket. If you want the water to fill the bucket completely, you must ensure there are no holes in the bucket, and the water is continuously running.

If there are holes in the bucket, no matter how hard you try, even with continuous running water, you will not be able to fill the bucket. Therefore, along with acquiring new customers, i.e., running water, you must retain your old customers, i.e., patch water holes in the bucket.

“Customer retention is the best indicator of how well a company is doing as a business. Retention drives acquisition by increasing the total amount of money a customer gives you; therefore, a company can have higher customer acquisition costs.” Additionally, great retention will lead to more opportunities to increase revenue from a specific customer.

Why does customer retention matter?

Mentioned below are the top benefits of customer retention to help you understand why customer retention is important in today’s excessively competitive marketplace.

Loyal customers pave the way to lifetime value.

Loyal customers do not only provide better returns, but they also prove to be cheaper in the long run. According to Bruno Estrella – a well-known growth practitioner, loyal customers stick around even if prices have been hiked as compared to a new one, who will continue looking for cheaper options. Additionally, through word of mouth publicity, old customers also bring with them the possibility of new potential customers who have a high probability of sticking around.

The willingness to try new products

Existing customers are 50% more likely to try new products as compared to new ones because of their faith in your company and the efficiency of your other products. Upon liking or disliking the new product, they will also help you with candid feedback, which will be a great opportunity for you to improvise accordingly.

It is great for your brand image.

For people to praise your company and recommend your product to others, they need to buy from you more than once. If your services and products are good, if the customer is coming back to buy from you, that means customers like your company, which would then help you build a positive brand image. When the customer recommends you to others, he/she will most probably specify why you are worth it.