After becoming a long-time customer of a business, have you ever stumbled upon a discount being offered by that company for new customers and thought to yourself, “I’m a loyal customer, I wish I could get a discount.”?
Utilizing strategies to acquire new customers is a major focus for businesses everywhere, and it should be. To grow, businesses can’t rely exclusively on their existing customer base. However, businesses shouldn’t take existing customers for granted. A business’s marketing and sales strategy should not be singularly focused on gaining new customers; customer retention should be a factor, as well.
Here are five stats that show why maintaining high customer retention is essential:
1. 65 percent of a company’s business comes from existing customers.
In the book Managing for Quality and Performance Excellence, authors James R. Evans and William M. Lindsay cite research that finds nearly two-thirds of an average business’s revenue is generated by customers they already have.
2. Improving customer retention rates by 5 percent can increase profits by as much as 95 percent.
In an article published by Harvard Business School Working Knowledge, research conducted by Bain & Company is cited. Bain’s study found that customer retention rates can have a profound impact on a business’s ability to increase profits. A 5 percent increase in customer retention was shown to grow profits 25 to 95 percent.
3. It costs 5 times more to find a new customer than to keep an existing one.
This statistic is also mentioned in Managing for Quality and Performance Excellence, and shows that the cost of customer acquisition far exceeds the cost of customer retention. While this number has been debated due to several factors related to customer lifetime value, there is a substantial amount of research that shows the cost of acquiring new customers can range from 4 to 7 times more than the cost of retaining them.
4. 61 percent of customers take their business to a competitor when they end a business relationship.
This stat is from the popular statistics website Kissmetrics.com. When a business loses a customer, the former customer may still have use for the product or service they were being provided. When this is the case, the individual may defect to a competitor that provides a similar product or service. In short, losing customers benefits the competition.
5. The average business loses around 20 percent of its customers annually by failing to attend to customer relationships.
This statistic from Marketing Wizdom shows the importance of positive relationships between businesses and their customers. Building relationships with customers, especially in a B2B setting, is a key factor in maintaining high customer retention rates.