According to Lee Resource Inc.: “Attracting new customers will cost your company 5 times more than keeping an existing customer”
How often does it happen that companies focus on customer acquisition strategies and invests huge budget into advertising and public relations to acquire new customers. If you have a lot to invest, then probably the strategy will work. What if, you want to increase your bottom line but don’t want to or have the required money to invest? The answer is simple focus on Customer Retention strategies. There have been numerous studies and researches on, whether Customer Retention works better than Customer Acquisition or vice versa. Researches show that probability of selling to a prospect is mere 2-20%, as when compared to selling to an existing customer, the probability goes up to more than 50%.
Consider this eye opening data fact:
According to Bain and Co.: “Boosting customer retention rates by 5% can actually increase profitability by 75%“
What these stat actually means is that, the sources of revenue which has been the key discussion topic in the board rooms of numerous organizations, are with them already, just waiting to be identified, correctly nurtured and cultivated. Probably the only reason why leaders don’t have customer retention in the top of their mind is that it generally takes time to bear the fruit unlike customer acquisition which gives instant results. The famous 80-20 principle that applies almost anywhere in an organization can also be applied in the customer retention principle which would state, 80% of a company’s future revenue can come from 20% of its existing customers.
This probably signifies one more eye opening fact, that if you have right customer retention strategies, you also get to bring in new customers thorough the most effective and cheapest marketing tool, the word of mouth, of course. Cutting the long story short on how to achieve the bottom line target for the financial year – Manufacture great products and offer excellent customer service.