Cold calls. Email blasts. Pay-per-click ad campaigns.
SMB marketing teams bend over backward to make these types of marketing activities more creative. Sales and marketing work hand-in-hand to reach new customers every day.
Getting new customers is important. It’s essential for any SMB growth plan. Strong acquisition numbers are a sure sign that your marketing and products are on target. You’re getting new customers because your message and service are appealing.Sometimes, however, sales and marketing focus so much on getting new customers that current customers get shortchanged.
5 Reasons to Focus On Customer Retention
- It costs more to get new customers than to keep current ones. Invesp created an infographic compiling stats that compare customer acquisition to retention costs. It costs five times as much to attract a new customer, than to keep an existing one. So where is your marketing budget better spent? Shift funds from new leads to other goals. Focus instead on creating stronger customer service, developing loyalty programs, and adding CRM tools that offer greater customer insight.
- It’s just good business. Invesp also says increasing customer retention rates by 5% increases profits anywhere from 25 to 95%. You can’t argue with that math. Over the long term, retaining customers is simply a smart business strategy.
- The 80/20 rule prevails. The 80/20 rule says that 80% of your revenue comes from 20% of your customers. The Invesp infographic lists the probability of selling to an existing customer as 60-70%. For a new prospect, it's only 5 to 20%.
- Loyalty matters. It matters and it’s a two-way street. Be loyal to your customers and they’ll be loyal to you. What can you do to show loyalty? Institute a rewards program to benefit customers for frequent business. Use a CRM that records how long they’ve been your customer. Then, in your next interaction with them, comment on the length and tell them their loyalty is appreciated. Above all else, make sure your loyalty programs and tools focus on the customer, and not on your business.
- Happy customers tell 8 others; unhappy customers tell 21 others. This stat comes from the American Express Global Customer Service Barometer. The same survey shows 74% of consumers have spent more with a company that provided positive excellent service. Happy, loyal customers as your goodwill ambassadors. They will ultimately spend more and tell others when their experience is good.
Of course, don’t stop trying to add new customers. But do weigh those efforts against time spent on retention. If one side far outweighs the other, it’s time to rethink your strategy.