An Illustration of the Importance of Customer Retention Marketing

by Gabriel Salome Lead Generation Expert

One of the fundamental ways to grow your business is to acquire new customers and retain the old ones. Likewise, you can grow the number of your customers if you do not lose them. But customer retention is easier said than done. To be able to avoid losing customers, you may need to have a solid customer retention strategy.

It is but normal for businesses to keep finding, and acquiring new customers as their top priority. But just continually acquiring new clients will not be enough to grow any business. They should also equally give importance to retaining their old and current customers. Your task as an entrepreneur does not stop when your new customer buys your products or subscribe to the services you are offering. What many entrepreneurs do not realize is that the first purchase of their new customer is actually just the beginning of the real business. Serving and retaining them, in the long run, gives you the real business value.

On average, businesses, regardless of size and industry, tend to lose about 20 percent of their customers per year simply because they failed to address the needs of their customers and they also failed to attend to their relationship with them. Some businesses can even lose up to 80% of their customers and retain only 20%. This is quite alarming.

This simple and short illustration will help you understand more the importance of customer retention marketing.

Both company a and company b find, target, and successfully acquire 100 new customers per year. They both come from the same industry and almost the same size. Because company a has very effective customer retention management services, they are able to retain a huge percentage of their customers and loses only an average of 10 per year. However, company b is too focused on obtaining new customers and only take customer retention as just third to their priority list. And because of this, company b losses around 50 customers per year. But they do not mind the number because they are able to find 100 new customers and that means only half is lost.

Thinking about the short-term goal, this can be alright. But if you start counting on years, you will eventually realize how much they lost. Over 5 years, company a is able to get a total of 500 new customers and lose an average of only 50 customers. Company b is also able to get a total of 500 new customers but lose 250 customers all in all. In the end, company a is able to retain 450 customers while company b only got 250. See a huge difference?