Top 8 benefits of customer retention

Growing smarter. As we’ve already seen above, customer retention contributes heavily towards sustainable company growth. It lowers costs and increases profit. In financial services, for example, a 5% increase in customer retention produces more than 25% increase in company profit. And sometimes that increase soars to nearly 95%. Although that impressive statistic varies across industries, a good customer retention program will repay your efforts in spades.

My money don’t jiggle. By investing in customer retention strategies (e.g., through a loyalty program), you can increase CLV (Customer Lifetime Value) as well as your chosen customer retention statistic or metric – the longer customers stay loyal, the more they tend to spend. Because you’ve already paid the cost of acquisition, your ROI grows. This applies to all profit channels – e.g., spend, or indirect—e.g., referrals of new customers. 

It’s the data, darling. Historical data from customers (behavioral data, purchase history) can really help organizations make better business decisions. With customer data, you can understand why a certain customer action means a particular result, predict likely purchasing trends, see where the market gaps may be, and identify opportunities for improvement—across the board.

Superfans sing your praises. Loyal customers are more likely to act as references, generate positive word of mouth and contribute towards new acquisitions. We all know the power of a personal recommendation, so leverage that to build your business. When you get that reference—use it! New customers are far more likely to trust a testimonial than your sales pitch, so boost your marketing with plenty of first-hand accounts about how good your product and service is.

A bird in the hand is worth two in the bush. It’s cheaper to keep customers than try to acquire new ones. Plus, it’s easier to market to customers you already know well, then learning about new ones. The cost of acquiring a new customer can be anywhere between 4 and 10 times that of keeping a current one—depending on the source. No matter how you slice it, it’s clear that smart businesses make sure customer retention is a key focus.

Aging gracefully. Customers who come back help you understand what’s working with your products, and what’s not. For example, which products or services do they go for, and which ones they avoid. Asking why can offer insight into your product development and refinement and means you can sense-check what you’re doing at every step of the way. Make sure you’re hitting all aspects and asking your customers at multiple touchpoints to get a full picture. Go beyond the exit survey and ask questions much earlier in their customer journey.

No slipping the net. Customer churn can cost you. A high churn rate weighs down your entire sales team’s growth rate; from the cost of acquiring a new customer, as discussed above, to missing out on the higher rate of selling—a current customer is far more likely to buy from you than a new one. But customer retention can be boosted with a few simple tactics like offering incentives for your longest-standing customers or deploying your best customer service reps to work with customers-at-risk. 

Expanding the line-up. Because current customers trust you, and your product, you can try out new things. That trust gives you space to experiment with new products or services, that customers are more likely to try as soon as you launch. Bottom line, a loyal customer is 23% more likely to spend with you than your average customer. You can offer loyal customers beta testing, or a discount on a new product or service. Make them feel special and you’ll reap the rewards.