Managing Churn as Important as New Customer Acquisition?
Customer Retention Can Take Time To Bear Fruit- Frederick F. Reichheld and Phil Schefter of the Harvard Business School cited a study (conducted by Bain & Company, in coordination with Earl Sasser of HBS) analyzing the costs and revenues that came from serving customers over their whole purchasing life cycle.
They said: "We showed that in industry after industry, the high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. The bottom line: Increasing customer retention rates by 5% increases profits by 25% to 95%." - Read more at: http://scl.io/frWEZmF0#gs.883befU
Retention Is Likely To Be More Profitable Than Acquisition
Existing customers are much easier to sell to. According to Marketing Metrics, the probability of converting an existing customer is 60 percent to 70 percent. The probability of converting a new prospect, on the other hand, is only 5 percent to 20 percent. These numbers make perfect sense, and as we all know, people are more responsive to individuals or companies they’re already familiar with, compared to complete strangers. - Read more at: http://www.cmo.com/features/articles/2013/7/18/customer_retention.html#gs.ExoQ_5A
The truth is, there is no one best way to boost customer retention because it all boils down to the nature of your business model and customers. However, judging by the several successfully implemented retention campaigns we’ve seen, there are always two common denominators to a high retention rate: great products and excellent customer service. Before rushing off to cook up a loyalty program, start with those two components first, then go from there.