Balancing Priorities: Why Customer Retention Is So Essential
When a business first launches, it makes sense that customer acquisition should dominate the initial stages. Over time, these priorities need to shift to create a healthy balance between acquisition and retention.
Advertising through multiple sources, networking, and bringing in new business is an important endeavor for even well-established companies. But many forget that advertising can equally be used to retain business as well.
Studies have shown that over 40% of companies focus on customer acquisition while only 18% focus on retention. If this sounds like your business, the good news is that even the smallest shift can have a huge impact.
What is a Customer Worth to Your Business?
We recently published an article which covers the case for calculating your Customer Life Value (CLV). In short, it speaks to the importance of knowing how much money you can make from one customer over the years that the customer is with your business.
And while 76% of companies recognize the CLV is important, less than half have an accurate estimation.
Without this number, how can you know if you’re spending too much or too little trying to acquire customers? How can you know how much to invest in retention?
Research has shown that increasing your customer retention by as little as 5% can increase profits between 25% and 95%. This shows that increasing your retention strategy in conjunction with a strong acquisition strategy is the most lucrative way to operate a business.
The Benefits of Retention
Imagine two restaurants in front of you that both sell the same food. The first one you’ve gone to already and have received excellent service and delicious food every time but you’ve never tried the second. When it comes to taking out friends and family or going on a date, which one will you choose?
While there’s usually a temptation to try something different, people prefer to feel comfortable and have their expectations met. A company that brings in new business and also goes out of its way to cater to existing customers will reap the rewards in the long run.
This is because loyal customers spend over 30% more than new customers because they trust the quality of the business. This trust plays a crucial role in any future transactions since you have a 60-70% chance of selling to an existing customer.
When acquiring customers, a proper mailing list is an effective tool for creating effective direct mail campaigns that resonate and reach the right people. For existing customers, you have the advantage of using the information you already have on them to provide more tailored offers and encourage sales.
Acquire the right people and retaining them will be far easier.
Direct Mail and Customer Retention
If a customer comes to your store and orders the same thing every time, it makes sense that you should occasionally give them a discount on that product or service.
Sending the right offer will not only make them feel valued but it will ensure you stand out over any competition in the area who will likely be sending them generic offers.
You can even take this one step further by using Variable Data Printing to personalize each mail piece to include the customer’s name and other information. This level of personalization in conjunction with color has shown to improve response rates by up to 500%.
This also will give your business a reputation for valuing its customers meaning your acquisition campaigns will be more effective when people research you.
Find the Right Balance
Understanding your company’s CLV and utilizing the data you have ensures you can more accurately forecast, budget, and prioritize your acquisition and retention efforts.
In doing so, you will have a more adaptable organization that brings in new business as needed while ensuring existing customers continue to receive the highest level of service and quality.
If you need help bringing your retention efforts to life and running a strong direct marketing campaign, the experts at Modern Postcard can help you do it.
By Modern Postcard
Call a Direct Marketing Specialist at 800.959.8365.