4 Things to Know About Retention Marketing
Retention marketing is a critical element to your marketing strategy in today’s competitive market. Simply put, retention marketing is a strategy which focuses on the existing customer base, with the aim of making them repeat customers as much as possible by keeping them happy.
Here are four things to know about retention marketing and why it can be valuable to your business:
1. Existing Customers Are Easier To Sell To
A common term when it comes to business is the 80/20 rule. As researched by Gartner Group, 80 percent of future revenue will come from 20 percent of existing customers. These numbers alone show the importance of selling to existing customers.
Likewise, according to Small Business Trends, the chances of selling to an existing customer is 60-70 percent, while selling to a new customer generally has a 5-20 percent conversion rate. Several studies back up the theory that existing customers are far easier to sell to than new customers.
2. Existing Customers Spend More
Studies have shown that returning customers spend an average of 33 percent more than new customers. This can largely be attributed to their previous experiences with the product or services. Because of past experience, returning customers are less likely to be price sensitive as they already understand the value you have to offer.
3. It costs 10 percent less to keep customers, rather than acquire new ones
With the competitive nature of business, the cost to acquire a new customer is rapidly becoming more expensive. Likewise, retaining previous customers can be as simple as taking a top-of-mind awareness approach. Those who have purchased from you before may only need a simple reminder, rather than trying to completely educate them on a new product or service.
In the book “The Loyalty Effect,” Fred Reichheld states that “a five percent improvement in customer retention rates will yield between a 25 to 100 percent increase in profits across a wide range of industries.”
By putting in the minimal work to implement a retention strategy, your business will be able to significantly increase profits. That’s what we call a strong return on investment!
4. Loyal Customers Become Brand Ambassadors
I’ve been telling clients for years that the best way to find new customers is through existing customers. Customer retention strategies not only focus on bringing past customers back but also at tapping into their network of friends and family to share the love.
An easy way to see the value in creating loyal customers is this: every previous customer has at least one friend or family member who could also benefit from your product or services. Imagine if every customer brought you just one new customer. This would virtually double your sales. Your loyal customers can become some of your best resources for attracting new customers.
What value have you seen in focusing on retention marketing?