Cultivating customers and encouraging them to purchase products or services is necessary for any company. Some focus on attracting new customers while others are more interested in developing relationships with customers to encourage them to return and make more purchases. Here are six reasons you should focus on retaining customers rather than gaining new ones.
1. Retention Helps Maintain Or Improve Your Profits And Company Value
One of the sales metrics commonly used to help determine your company’s overall value and profits is customer retention. Retaining your customers tends to be quite valuable because customers who stay and continue to purchase your products or services ensure you continue to make sales and therefore maintain your profitability. Using retention and churn rates as metrics helps you determine areas of high and low profitability.
2. It’s Easier To Manage Customer Relationships And Satisfaction
In general, it’s much easier to manage relationships and reactions with people you know, particularly those you know well. This concept applies as much to customer relationships as it does to interpersonal relationships. You can use your relationship with customers to understand their wants, needs, interests and criticisms. Then you can use this information to improve those relationships and improve customer satisfaction. The longer a relationship with a customer lasts, the better you get to know the customer and the better your relationship will tend to be.
3. It’s Faster To Entice Existing Customers Than New Ones
When you’re cultivating new customers, you need to take your time. You need to spend time doing research on market segmentation, the habits of potential customers and the viability of your products, services and advertising. Then, you need to implement your marketing campaign and wait to see if it works as planned to generate interest and profits. With existing customers, you’ve already crossed all those hurdles. It takes much less time and effort to generate interest and profits from your existing customers than from new or potential customers.
4. It’s Easier To Create New Marketing Campaigns
When you have a high retention rate, you can create highly targeted marketing campaigns meant to nudge current customers into making repeat purchases or purchasing new products or services from your company. These campaigns may be built out of previous or existing campaigns. New customers will require new, more robust marketing because they will have less experience interacting with your brand and are less likely to be swayed by your advertising than existing customers. This means marketing to your existing customers will be much more profitable and cost-effective than marketing to potential customers.
5. Retaining Customers Is Cheaper Than Attracting New Ones
It can cost plenty of money to figure out how best to attract new customers and then to implement your plans to do so. By comparison, retaining customers is much less expensive. Existing customers will have much better and more direct knowledge of your company and your offerings than potential customers, which means they’re more likely to be interested in your offerings and you won’t waste money on people who won’t end up making any purchases. You can also utilize information on the interests and buying habits of your current customers to create more targeted and accurate marketing.
6. It’s Easier To Improve Products And Services
You can leverage information and feedback you gather from your current customers to make improvements to products and services and to create new products and services. New customers and those who have never interacted with your company before are unlikely to have enough experience with your products or services to provide adequate reviews, critiques and other feedback. Current customers, by contrast, tend to have specific ideas regarding what they like about your offerings and the kinds of improvements they think could be useful.
Ultimately, the choice of whether to focus more on retaining existing customers, gaining new customers or on both equally depends on the types of products or services your company offers. Some products or services are more likely to be purchased frequently than others.