Why Customer Retention is Important for Growing a Business


Customer retention or CR refers to strategies businesses employ to encourage repeat purchases from existing customers. All businesses, big and small, know the value of having a constant base of customers, but some still fail to invest in proper retention.

In this article, we cover the importance of CR and why it’s the most cost-effective strategy for growing and maintaining any venture. 

The Importance of Existing Customers

According to Small Business Trends, around 65% of a company’s business will come from existing customers. Despite that, many companies tend to invest a lot more effort and money on acquiring new customers rather than maintaining existing ones.

This is a short-term strategy and comes with one major flaw.

As a business owner, you need to think long-term. 

If you treat them well, existing customers will continue to buy from you, giving you a steady source of revenue.

And while it is important to spread out and get as many people as possible to pay for your products or services, customer loyalty will guarantee that your enterprise stays afloat for years to come. 

Why Is Customer Retention the Ultimate Growth Strategy?

The Importance of CR in Business

No business can thrive if it doesn’t try to retain as many consumers as possible. In fact, according to a 2014 KPMG report on the retail industry, CR was the biggest revenue driver at 52%, followed closely by customer acquisition.

In fact, if you focus your efforts on retention, you can expect the following results:

  • Your revenue will be up consistently each year (some companies even reported a massive 95% increase)
  • You will have long-term loyal buyers
  • Each loyal buyer will spread the word for your company, giving you free advertising
  • Through word-of-mouth, loyal consumers will inevitably attract new ones

The Cost of Attraction vs. the Cost of Retention

Maintaining decent retention makes a lot of sense business-wise.

According to recent data, it will cost you five times more to acquire a new buyer than to maintain an existing one. Furthermore, you are far more likely to sell your product to an existing buyer than a new one. In raw percentages, that amounts to 60-70% probability for existing and only 5-20% for new buyers

On average, an individual will tell 9 people about good experiences

Effective Ways to Build Brand Loyalty

In order to maintain a steady client base, actively focus on your repeat buyers. That includes direct output, frequent communication, and constant improvement on your part. Let’s break those down.

Direct output relates to feedback. It’s important to take everything the client says into account. Sometimes your product might not meet a buyer’s expectations. Other times, customer service might be the issue.

Pay attention to what the clients are saying, because a single bad experience can cost you dearly. Nearly half of all customers switch to a competitor company after just one bad experience with customer service. Multiple bad experiences? That number balloons to 80%.

With all that in mind, your business needs to be directly open for feedback. You can do that by providing your clients a place to discuss your products and services.

User forums are a good place to start, but don’t stop there.

Social media websites like Facebook, Twitter, and Instagram are great sources of direct feedback as well. Moreover, they have a wider reach than a user forum might. But remember to engage with every comment, good or bad. It shows you’re actively listening and care about your customers.

Finally, improve your product or service constantly. Take all the feedback into account and start from there. Address the most common issues first, then work your way toward less common ones. The more you improve, the more loyal your customers will be. 

Improving Consumer Retention

Best Retention Practices

Since your goal is for buyers to keep coming back to your brand, you’ll need to employ a set of practices to make each purchase worth their time and money. And while customer service and feedback are an important first step, they are far from being the only one.

Here are a few key strategies to ensure your clients have a strong customer experience and come back.

User Accounts

A user account on your company’s website makes purchasing upgrades and accessories easier, because it saves additional information already entered, such as previous purchases and shipping info. Moreover, it’s a quick way to observe buyer behaviors of your customer base and see who your loyal clients are.

User accounts also makes it easier to notify customers of special discounts, loyalty programs, etc. 

But keep in mind, having a user account could have the opposite effect and drive away new customers.

Not everyone is willing to create an account on a new website simply to make a single purchase. Give them the freedom to choose, so they can decide whether or not to commit to your brand later on. Allow them to make the first purchase without creating an account, and provide a prompt for registering right after the purchase.

There are several benefits to this option:

  • The new buyer doesn’t feel forced into registering without knowing the quality of your brand
  • Your prompt will always remind them that registering is an option
  • The buyer can make repeat purchases without feeling committed to register
  • Once they feel confident in your brand, they will register of their own free will

Loyalty Programs

Loyalty programs are simple enough. If your client makes repeat purchases, you award them with special, members-only perks. These can range from personalized notes, to coupons and even free gifts or services. In other words, the buyer gets rewarded for their loyalty, while you ensure a steady stream of revenue. 

Discounts and Credits 

Offering a discount or a credit are other ways to reward repeat buyers.

But, be careful how you approach this method. Too many discounts could result in you losing money in the long run. Plus, your loyal consumers will get used to the idea of receiving constant discounts, so when they stop, they could switch to a competitor. 

Engaging Emails

Email is by far the most powerful tool for CR, with a success rate of 56%. As such, focus on sending your repeat consumers impactful, personalized emails that cater directly to their interests. Some email strategies include the following:

  • Send a ‘thank you’ email a week or two after the initial purchase, offering additional products
  • Send emails notifying the buyer of upcoming sales, discounts, etc.
  • Send emails to dormant consumers a few months after the last purchase, with new and exciting offers
  • Send emails asking for direct feedback and involve the consumer further

Employing New Technologies

Proper analytics is crucial for any business. So use different platforms to monitor consumer retention. Most of the software on the market focuses on sales data, user feedback, and personalization. So, do your research and utilize the software that fits your business model best. 

Lowering Customer Churn Rate

In simple terms, customer churn rate is the number of buyers your brand has lost over time. That churn can be accidental, due to consumer death or the loss of assets. But, most customer churn is voluntary, i.e., they stop buying, simply because they decided to do so. 

In order to lower your customer churn rate, identify the main cause and then focus your time and resources on fixing it. As stated earlier, anything from poor customer service or low product quality can cause a client to abandon your brand. Therefore, it’s incredibly important to maintain contact with your user base as you’re working on fixing the issues at hand.  

Final Thoughts

If maintained properly, customer retention can boost your business’ revenue enormously. In fact, a repeat consumer will be eager to pay more for your services simply because you treat them well. Just remember that maintaining retention is a never-ending process and that a single wrong move can result in you losing thousands of dollars almost overnight.

Do you have a customer retention plan currently in place? Let us know in the comments. And if you have any ideas for future articles, write us at feedback@dyl.com. We’re always looking for new ideas!

By Alex Vetter

Alex Vetter is the product marketing manager at DYL. With a Masters from College de Paris, he runs the marketing department and helps with product management at DYL.

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