If you’re not selling fidget spinners in 2017 (remember that toy?) or pop-its in 2021, you definitely need loyal customers! Every offer has its demand, and therefore, there is a customer; the number of customers is at least limited by how and where our services are available. A lost loyal customer equals the cost of finding a new one plus retention. A loyal customer will return on their own, and the costs of keeping satisfied customers are minimal.
Investing money in customer retention strategies is more profitable for a business compared to attracting new customers. Let’s look at a few reasons and provide some statistics:
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Marketing Savings and Increased Profitability: Attracting new customers is significantly more expensive for a business than retaining existing ones. According to studies, acquiring new customers can cost 5 to 25 times more than retaining current ones. Loyal customers generate more revenue because they spend 57% more on brands they are loyal to (European Business Review).
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Increased Likelihood of Repeat Purchases: The probability of selling a product or service to a loyal customer is 60-70%, whereas for a new customer, it’s only 5-20% (www.smallbizgenius.net). This fact highlights the importance of customer retention for a business aiming for sustainable growth.
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Long-Term Loyalty and Stability: According to studies, increasing customer retention by just 5% can lead to a profit increase of 25-95% (www.smallbizgenius.net). This effect is due to loyal customers continuing to make purchases and being less likely to switch to competitors.
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Reduced Price Competition: Loyal customers are less influenced by price competition because they value other aspects of the brand, such as service quality and unique offers. Brands that implement effective customer engagement strategies achieve an impressive customer retention rate of 89%, which is significantly higher than the average (Capital One Shopping).
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Valuable Feedback and Product Improvement: Loyal customers often provide valuable feedback and suggestions, which help improve the company’s products and services. 97% of customers become more loyal if they see that the company takes their feedback and suggestions into account (TrueList).
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Emotional Connection with the Brand: A positive experience with the brand strengthens the emotional connection customers have with it. According to research, 56% of customers remain loyal to brands that "understand them" (www.smallbizgenius.net). Effective loyalty programs, such as point accumulation systems and personalized offers, also contribute to increasing customer retention levels.
These are the main factors making loyal customers a more profitable investment for businesses, as they provide stable revenue, reduce marketing costs, and help develop products based on real feedback and suggestions.