I often get asked about the importance of customer retention. “Is customer retention important?” I don’t need to worry about it there are plenty of new customers out there or some variation of the theme.
Its importance varies by the business you are in. Although that said, retaining and building a base of loyal customers can be one of the most lucrative activities you can undertake in business if you know what to do with them.
For many businesses, retaining customers is a bit like a dog chasing a car. Damned if they know what they are going to do if they ever catch a car.
Any single statistic can be over emphasised. For a business which is driven by renewals or subscriptions the need for good customer retention is far more obvious than business where they sell a more ‘one-and-done’ type products.
Most Business miss the link between new customer acquisition and customer retention
Basically, the more customers you lose the more customers you need to replace with new ones each year. Sounds simple enough but many times what is practiced seems to ignore this rather obvious principle. The more you keep the less new ones you need to find to replace the ones you lose, the more growth you are going to experience for adding so many customers.
- If two competing businesses are both adding 200 customers a year, one is losing 150 customers a year and the other is losing 75 which one is going to grow faster? The one that is only losing 75. Which one will be able to extract more value out of their customers? All things being equal, the one only losing 75.
- Which business is going to have a larger army of satisfied customers who will refer new business to them? The company that is only losing 75 customers. Because over time it will build up a larger customer base sooner.
- Which business is going to be more attractive to other business owners to promote to? The one only losing 75 customers. Because it has a larger list.
- Which business is going to get a better return when they introduce new products? The one only losing 75 customers. Because it has a larger list so it has more opportunities to succeed.
- Which business is going to sell for more? The one only losing 75 customers because it has a larger more loyal customer base which means it represents greater future earnings to the buyer.
Customer retention is not the be all and end all but it dramatically alters the long term sustainability and profitability of your business.
You can read an in-depth report about customer retention called ‘The New Model of Doing Business. Revealed: The new hidden currency, how it became the most valuable commodity in the world’ by going to www.morebusinessandreferrals.com it is a bonus when you download The Business Owner’s Guide to Getting More Repeat Business and Referrals