7 Reasons Why You Need to Prioritize Customer Retention


Justina BakutyteGrowth Marketing Manager at Yieldify

Tuesday, June 23, 2020

Customers are the lifeblood of a business. It’s simple, the more leads you generate, the more sales you can produce, ultimately resulting in an expanded bottom line. But while increasing sales numbers is imperative, losing sight over customer retention could prove costly.

Article 6 Minutes
7 Reasons Why You Need to Prioritize Customer Retention

McKinsey & Company found that, on average, a new eCommerce customer will spend $24.50, whereas a repeat customer will spend double, $52.50.

After all, what’s the point of building and nurturing leads if they’re just going to be a one-hit-wonder? There’s no value in that. The way to add exponential value is by getting repeat customers.

Customer retention is vital

A retained customer is infinitely more valuable than a one-time customer. No matter what your current retention rate is, your goal should be to improve upon it and foster longer-term relationships.

Customer retention differs across industries, and according to Mixpanel, the average rate for large businesses is less than 20%. If you don’t know your average retention rate, you can use this handy formula to calculate it. Ultimately, you want to raise it above 20% in order to increase the value of your organization.

But why? Increasing customer retention rates by just a mere 5% can increase profits by anywhere from 25% to a whopping 95%. Despite your marketing efforts for acquisition, this is by far the most effective strategy for increasing revenue in the long run.

But what might be other reasons to need a customer retention strategy? Read on as we share our top seven.

1. Higher selling probability

You’re 40% more likely to sell to a returning customer than to a new one. Why? Because those who have never bought anything from you before may still be wary of your products, services, and methods of operation. They just don’t know you yet.

However, a returning customer is a tried-and-true consumer who’s been working with you long enough to understand the value you bring to them, thus encouraging them to continue buying with you.

2. It’s cheaper on your end

Not only will higher customer retention increase your profits through repeated sales, you’ll also save money by not having to invest in customer acquisition. According to the Harvard Business Review, obtaining new customers can be anywhere between 5 - 25 more expensive than retaining existing customers.

It’s true; customer acquisition can get quite pricey when you think about all of the different tools and strategies you employ to obtain new customers. Marketing, sales, outreach, research, and more cost a lot of money that you don’t need to spend when tapping into a customer base you’ve already established.

3. Prevent customer loss

Any business with a high churn rate is bound for disaster. You can expect many things to happen. None of which are good. Such as a lack of sales, canceled subscriptions, or terminated services by your customers. You can control your churn rate by managing retained customers and investing in a strategy that’ll help keep your excited consumers on board.

Studies show that companies that put a higher emphasis on retention are far less likely to have an increase in churn than those that are more focused on acquisition. Indeed, 45% of companies who focused on retention didn’t see increases in churn over the last year.

4. Repeat customers have higher lifetime value

Every customer has a different value assigned to them depending on how much they spend with you and how often they return. There’s a specific formula for measuring the total value of a single customer throughout their entire relationship with you. With loyal customers, you could measure their value for the rest of their natural lives!

You may not think it makes a huge difference whether a customer has made one purchase with you or years of purchases with you, but it turns out that loyal customer spending habits are very different from one-time customers. According to RJ Metrics, the top 1% of customers spend over 30 times the amount of money that average customers do, meaning it pays to think ahead!

5. You can cross & upsell

According to Forrester research analyst Sucharita Kodali, upsells and product recommendations account for anywhere between 10% - 30% of your total revenue. So if you’re not doing it, you’re missing out on a huge chunk of potential revenue gains.

It’s much easier to cross or upsell to your current customer base than it is to someone purchasing from you for the first time. These customers have been around for a while and they’re familiar with what you have to offer.

Therefore, they’re going to be more receptive to your cross-selling or upselling pitch. It’s also possible these customers may choose to experience more of what you have to offer on their own accord, adding extra items or services without prompt.

6. Control fixed costs

Customer retention can boost profitability since repeat customers are likely to spend more. But that’s not the only way you can make money.

From a B2B perspective, customer retention also allows for easy control of fixed costs. Companies that are too focused on large customer acquisition campaigns will end up spending more money to hire a new sales team and develop marketing strategies that can become costly when research and data analysis is involved.

If you hire more salespeople to increase the number of customers coming in, you may not make that much in revenue altogether when you consider how much you just spent to spur growth.

Don’t worry about scaling up to match a growing customer base. Instead, focus on increasing your retention rates and engaging in quality customer service practices to ensure your existing customers stick around. It’s all about finding that perfect product-market balance.

7. Easier to measure customer satisfaction

With many loyal customers returning more frequently, it’s much simpler to gain feedback and measure satisfaction rates. Focus on measuring levels of customer loyalty, as well as purchase intent, in order to identify the key drivers for your existing customers coming back. This is a great way to streamline the acquisition of important data metrics that can help you adjust your marketing strategy in the future.

Not to mention, satisfied customers are far more likely to recommend your services or products to people they know. According to Customer Thermometer, satisfied customers tell an average of nine other people about their favorite businesses, directing further traffic to your site.

Develop customer retention strategies today

It’s clear from the numerous studies and research developments that a retention-focused marketing strategy is among the most effective. Shifting your focus from solely customer acquisition to balancing it with customer retention can save you money and give you more accurate data when it comes to measuring satisfaction.

If you don’t already have a retention strategy in place, start working on one right away. It’ll give you a huge boost in revenue and a new growth opportunity across the board.

Justina Bakutyte

Growth Marketing Manager at Yieldify


Justina Bakutyte is the Growth Marketing Manager at Yieldify, helping eCommerce companies quickly and easily grow their leads, conversions, and revenue by creating personalized customer journeys.


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