Check out the accompanying infographic on the same subject
Your marketing organization works hard to gain customers, and keeping those customers loyal, drives profitability. In today's retail business environment, existing customers cost less to reach, cost less to sell, are less vulnerable to marketing initiatives from the competition, and buy more over the long term.
According to Frederick Reichheld of Bain & Company, and author of The Loyalty Effect, The economics of customer retention is clear. The long-term customer spending tends to accelerate over time, as they become more efficient users of the products and services that they purchase. Also, Long-term customers have lower operational costs; long-term satisfied customers provide more referrals; and longer-term customers are less price-sensitive than newer customers.
The end result is that the overall value of a customer increases the longer that customer remains a customer. The bottom line of Bain & Company’s research? Increasing customer retention rates by 5% increases profits by up to 95%! To add to that, 80% of a company’s future revenue will come from just 20% of their existing customers.
Here are the 7 great things about long-term customers:
They are less inclined to switch to similar products or services
Your customers are 4X more likely to stay away from competitors if they have a positive customer experience with your brand. This is especially important in retail business, where customer retention programs are invaluable to encourage repeat customer sales.
They tend to be less price sensitive
According to report at Loyalty360.com, price sensitive consumers can be loyal, high spending shoppers, and active brand advocates. What’s more, very price sensitive shoppers within CRM programs spend 14% more than the average retained shopper and are 36% less likely to leave the brand.
They initiate free word of mouth promotions and referrals
One of the most important aspects of existing customers is their ability to evangelize our brands and to help us attain new customers through word of mouth. Word of Mouth is a powerful thing, with VIP and loyalty program members 70% more likely to spread the word about your business. So why are customer referrals so important?
Because they are from a credible third-party that has experienced the first hand benefits of doing business with your company.
They are more likely to purchase high-margin ancillary or supplemental products
Loyal customers tend to be satisfied with their relationship with the company, making competitor market entry or share more difficult. What are you doing to get other products in front of your existing customers, and to encourage customer upsell?
Retained customers mean more profit in your organization. Understanding the reasons behind that fact can help provide your business with guidance on methods to maximize retention and profitability.
They are generally less expensive to service
Loyal customers are usually less expensive to service because they are familiar with the company and process, require less ‘education’ when ordering, and are fairly consistent with their order placement. Additionally, it costs up to 7X more to acquire a new customer, than to retain and existing customer. Wow! Clearly, no matter what type business you’ve built, your key to long-term success is repeat and loyal customers.
They make employees' jobs easier and more satisfying, creating happier employees, feeding back into higher customer satisfaction in a virtuous circle
Customer loyalty is also a reflection of happy, satisfied employees. In this highly competitive marketplace for both employees and customers, it is critical that organizations cultivate a satisfied, and engaged workforce. In return, businesses profit from markedly higher customer satisfaction and loyalty, for greater returns on investment.
Customers for Life
Engendering and enhancing customer loyalty should be a core objective of your organization’s customer loyalty marketing. Your organization must invest in people — both your customers and your employees — to achieve and succeed at customer loyalty.
In today’s highly competitive retail landscape, customer loyalty programs are the most effective way to differentiate your organization from the competition. This differentiation effectively drives customer loyalty when customers are engaged on an emotional and intellectual level, and when a customer cherishes a product or service before, during and after its use — they become customers for life!