Did you know that if you raise your customer retention rate by a mere five percent, you can increase revenue by 25% to 95%? It makes sense since the longer you have a customer on your books, the more money they’ll be paying.
Take a look at your customer lifetime value (CLV) to understand how much will be lost if a customer is not retained. Your CLV is the total expected profit from a customer over a time period.
Keep reading if you want to learn how retention can help you increase profits and why you may be losing clients.
How Does Customer Retention Affect Your Profits?
Maintaining customers is just as critical – if not more – when you’re working towards substantial annual goals. Here are three significant reasons as to how retention affects your profits.
- It’s cheaper.
Salespeople will spend less time upselling current clients than the efforts necessary to acquire a new one. One report even shows that it costs five times more to attract a new customer than to retain an existing customer.
- You’ll get a higher return on investment (ROI).
Current customers are likely to spend more than a newly contracted patron. Generally, customers you’re already working with will spend 31% more than new customers.
- Lost customers equate to lost money.
United States businesses are wasting $136 billion every year on avoidable customer churn. Consider how your numbers would look if you were able to retain even 50% more business while acquiring new customers too.
Why Are You Losing Clients?
Pricing, customer service, and mistakes are the top three reasons consumers switch to a competing brand. Luckily these three aspects are areas where a company can make improvements and cultivate brand loyalty.
Although changing your pricing structure may not be the best route of action, you can show that the company is worth the higher price tag by adding value. Give your customers self-help options to increase convenience, offer better quality products or services, and find other ways to add value specific to your industry.
Consistently strive to improve customer satisfaction by gathering feedback and training your employees. Mistakes are bound to occur, but you can reduce the number of errors with standard operating procedures and the use of technology.
The Majority of Customers Don’t Stick Around More Than Three Years
How long do your customers remain supporters of your business? Less than half of 34,000 consumers in one survey said they were with their current service providers for a minimum of three years.
Contact me, Jack Belford of FocalPoint of Illinois, to explore how you can expand sales and customer retention.