A lot of people disagree on what is more important between customer acquisition and customer retention. Most people think that acquiring customers is more important because there is something very satisfying about luring new customers. However, the truth is that you should focus more on customer retention than on-boarding especially if you are running an established enterprise. After all, what is the point of investing huge amounts of money, skills, and time into acquiring new clients only to lose them to your competitors because you did not keep them engaged and interested in your products or service? Here are four reasons why your business needs a client-retention strategy.
Recent studies show that around 80% of your company’s future revenue comes from just 20% of your current clients. Why? This is because your existing customers know more about your company and are easier to sell to. In fact, the research shows that the likelihood of converting a current client to buy your product or service again is 60-70% while the chance of luring a new client to buy from you is only 5-20%. This statistic confirms that it is a good idea to focus your efforts on building your existing relationships.
By mobilizing resources to keep your current clients happy, your business has the potential to increase its revenue and expand compared to simply focusing on on-boarding. Simply put, the more clients you retain, the more money you will generate. Besides, you will not have to develop sophisticated marketing campaigns to attract a huge number of new prospects.
Reducing costs is another reason why your business needs a customer-retention strategy. Compared to new prospects, current clients are more familiar with your company and understand how and where to get help when they face problems. They require less hand-holding. Thus, the maintenance costs associated with serving your current clients is lower than the cost of serving new prospects.
Customer retention efforts not only help generate money to fund customer acquisitions but also help marketers to enhance their marketing strategies and acquire new customers. When you focus more on retention, you will learn more about your customer base. You will understand more about your client’s needs and ambitions. This will help you come up with marketing strategies that will capture the attention of new clients. Retention will also help you target the right audience.
Business leaders, especially those in subscription-based businesses, have been using the on-boarding process to ensure their clients are successfully using their products. To help you understand how retention improves the on-boarding process, let us first describe the on-boarding process.
The on-boarding process refers to a process in which new clients acquire the skills, behavior, and knowledge to optimize the value they get from your products or service. Now how does retention affect the on-boarding process? Here is how. Concentrating maintains your current client base and helps you understand why customers left your company during the on-boarding process. You can use this insight to better the onboarding process for your new clients.
Keeping your customers around for long means that you are doing something right and they are happy with your services. Good customer experience can turn your clients into loyal clients and make them advocates of your solutions. You can also turn your clients' success stories into case studies that you can use to lure new customers.
With the reasons mentioned above, it’s clear that you should not spend huge amounts of money and time on new customers that may never convert. You ought to let go out-dated client acquisition techniques and focus on improving the experience of the existing clients. To achieve this, ensure you come up with an effective retention program. Additionally, try investment management with CRM technology and engage your clients with relevant promotional information. Most importantly, you should avoid misreading your customers. When making any decision, you should always remember that customer retention is important and should be part of your business strategies.