Attracting a new customer can cost five times more than satisfying and retaining one. Ben Lambert, Managing Director at Strategic Five Marketing, states: “Many businesses underestimate how much customer retention can influence a company’s profit and growth.” Research shows that a 2% increase in customer retention can have the same effect as decreasing costs by 10%. Furthermore, depending on the industry, reducing the defection rate by just 5% can increase a company’s profitability by 25% to 125% (pbsmartessentials.com).
“Customer retention gives an accurate picture of how well a company can build relationships and instil customers’ loyalty”, explains Ben Lambert at Strategic Five Marketing. If there are for example two businesses, one retaining 90% of its customers, the other one 80%, and both win new customers at a rate of 20% per year; the first business would have a net growth in customers of 10% per year while the second one would have none. The first company would virtually double every seven years while the second one would have no real growth (marketingwizdom.com). Ben Lambert therefore advises businesses to consider customer relationships and loyalty as one of their main priorities.
According to a published report (‘Improving and monitoring customer retention’ by Jacqueline Urquizo), it is crucial for companies to develop an effective customer retention strategy in order to strengthen customers’ loyalty. Their profitability tends to boost over the years as trust increases. “If customers are leaving, companies need to identify why and where they go”, says Ben Lambert at Strategic Five Marketing.
There are different reasons why customers would look elsewhere. According to a study released by the US Small Business Administration and the US Chamber of Commerce, considerable 68% of customers leave because they are not happy with the treatment they receive. “Without customers, a business cannot operate”, says Ben Lambert at Strategic Five Marketing. “Providing excellent customer service is one of our top priorities. We always aim to offer our customers something they do not expect, something different from what other companies offer.” The study also reveals that some customers may leave because they do not like the product, develop other business relationships or relocate (pbsmartessentials.com).
“Strategies need to be in place in order to retain customers”, summarises Ben Lambert at Strategic Five Marketing. 96% of customers do not complain if they experience an issue (marketingwizdom.com). Ben Lambert recommends companies to develop a strong dedication to customer satisfaction through a caring service mentality and service recovery procedures. “We can be happy if a customer raises an issue, but in order to receive feedback from the 96% who do not complain, companies may implement a technique to contact their customers after each purchase”, says Ben Lambert. Furthermore, customer retention needs to be looked at on a regular basis in order to recognise any changes and to be able to act immediately if necessary. It remains a great tool to find out how well a business is doing in building relationships to all its customers and where it needs improvement.
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