There is an immense amount of time and energy expended in acquiring leads and customers. How many resources are you devoting to keeping your current customers, getting them to buy from you again, and turning into evangelists for your business?
Too many businesses make the same mistake: that once a customer is a customer, they don’t need to be marketed to. This is a huge mistake and runs the risk of losing future revenue.
Keeping your customers can be even more lucrative than acquiring new ones. It can cost upwards of 4 to 10 times more to acquire a new customer than retain an existing one.
Why Keep Your Customers?
Let’s say you have 20 clients at any single time. They spend an average of $500 per month and usually spend about 1 year with you. The cost to acquire these customers is about $750. Let’s see what happens when there isn’t a customer retention strategy:
Annual Revenue Generated = (12 months * $500 Average Order Value) * 20 Clients = $120,000/year
Customer Acquisition Cost (CAC) = 20 * $750 = $15,000/year
Customer Lifetime Value = 12 * $500 AOV = $6,000 – $750 CAC = $5,500.
It’s all pretty straightforward. To acquire $120,000/year in revenue, you need to spend $15,000 a year. Now that’s money you have to spend every year just to maintain your business.
Customer Retention Strategy
Next, let’s say you implement a retention strategy that extends their stay with you for, on average, 1 additional year. A retention strategy costs $100/person/year. How does that impact your business?
Annual Revenue Generated = (12 months * $500 AOV) * 20 Clients = $120,000/year
Customer Acquisition Cost (CAC) = 20 * $500 = $15,000/year
Retention Program Cost (RPC) = 20 * $100 = $2,000/year
Customer Lifetime Value:
Year 1: $120,000 – $17,000 (total Year 1 CAC)
Year 2: $120,000 – $2,000 (total Year 2 CAC)
CLV: $240,000 – $19,000 = $221,000
The retention strategy nets you $221,000 after 2 years and the no retention strategy would net $210,000 after 2 years (with a greater amount of time and resources invested). Which strategy would you choose?
5 Ways To Keep Your Customers
Share the Info
Information is power. Are you empowering your customers? A blog is not just for attracting new clients but also for keeping your existing ones. Create content that keeps customers and clients coming back to your site and engaging with your content. We’ve already shown that existing customers are cheaper to keep than acquiring new ones. Devote some of that time you spend writing to your current customers too.
Good types of content for existing customers:
Trend Reports and Updates
How To’s Tailored to them
Use your customer data to tell stories. Similar to sharing the info, take data that’s generated by your customers and share the story that it tells. Is there anything interesting or unique about the behavior your clients are exhibiting? Jawbone shared a story about how a California earthquake disrupted sleeping patterns around the epicenter.
Mail a Card
They may call it snail mail, but there are few things people enjoy seeing as a card in the mail. Appropriate times for these are birthdays and holidays as well as special events (new baby, weddings, and other significant events). There are even services that help you pick a card, fill in some info, and get it mailed – all for around $4-5.
Be a Connector
You can also be the connector between your clients. They may not know each other personally, but that doesn’t mean you can’t make an introduction between clients that may benefit from each other. If someone needs drywall repair, and you do the books for a handyman, introduce them. There are all sorts of links and connections you can make when you are at the center of a network of individuals.
Be Their #1 Fan
Always be your customers’ number one fan. Be enthusiastic when you meet with them, share their success, promote them over your website and social media accounts. You may love your clients but if you aren’t showing it, how will they know?
Simple ways to show the love:
Celebrate them on social media
Put them on your website
Show up to their events
Final Thoughts on Keeping Your Customers
Retaining a customer is cheaper than acquiring a new customer. Ultimately it’s even easier and requires less marketing time and resources. As a bonus, who wouldn’t want to work for the company that works hard to keeps its customers? Retention almost becomes an acquisition strategy if you’re really good at it.