Customer Retention > Customer Acquisition

Companies are spending more and more on customer loyalty than ever before – why is this? Why is customer loyalty important for an organization? Are there benefits, and are they worth it?

Well, customer retention, marketing costs, branding, and consumer influence are all improved when more time and thought is put into customer loyalty and retention efforts.


Customer retention


Is your company more focused on customer acquisition or retention? If customer acquisition, you should consider realigning your efforts. Customer acquisition is a good starting point, but companies are more likely to thrive when their focus is on customer retention.

· It is 5x more expensive to acquire a new customer than it is to retain an existing customer.


· It is 16x more expensive to build a long-term relationship with a new customer than to simply cultivate a relationship with an existing customer.


· A 5% increase in customer retention rate produces more than a 25% increase in profit.


· A 2% increase in customer retention can lower costs by 10%.

· The profitability of selling to an existing customer is 60 – 70%. The profitability of selling to a prospect is 5 – 20%.


· 80% of future profits will come from 20% of existing customers.


· 61% of customers take their business to a competitor when they leave.

As a bonus, loyal customers spreading the word about your company help generate leads and bring in new customers.


Reduced marketing cost


Reduced marketing costs are a considerable benefit of customer retention and loyalty. Why? Because we trust the feedback of those we have relationships with more than we trust a fancy, digital advertisement.


Improved brand image


A powerful brand image is one of the most valuable assets a company possesses. It tells customers what they can expect, such as product quality and post-purchase behavior, when they buy a product or service. Among the top reasons customers make repeat purchases are fast shipping, fast and easy returns, expertise, knowledge, and personalization – all of which are a significant factor of a quality brand image and customer relationship.


Bottom line – companies not prioritizing loyalty programs and customer retention are missing out and selling themselves short.


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Sources: Forrester, Annex Cloud, Harvard Business School Publishing, Small Business Trends, Vendasta, Forbes.

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