Why Customer Retention is Important

Stepping aside from concerns of pure profitability, customer retention is  one of the best ways to measure how reliably your company is providing  its service. Put simply, companies with high retention rates are knocking it  out of the park, and doing such good work their customers realize they  would be worse off without them.

Strong customer retention rates can also be a great driver of customer  acquisition, through referrals and the case study evidence you can provide  to potential clients.

When it comes to revenue, customer retention is hugely important to  consistent growth and financial planning. The more committed customers  you have for the next financial quarter, the easier it is to make budgetry  decisions. Another benefit of retained customers over acquired customers,  is the fact they generally require less maintenance.

Breaking Down Customer Lifetime Value

When we talk about "customer lifetime value," what we're referring to is a  prediction of the total profit generated by a customer over a projected  period of time. Calculating this number helps businesses see the long-term  vision, in terms of how valuable a client would be if retained for a set  cycle.

Here are some great numbers that were put together by Invesp, who  conducted a survey:

•  Acquiring a new customer is five times as expensive as retaining an

existing customer.

•  44% of companies admit they, "have a greater focus" on acquisition,

while 18% focus on retention (the rest claim to have an equal focus).

•  89% of businesses, "see customer experience as a key factor in

driving customer loyalty and retention."

•  76% of companies see Customer Lifetime Value as "an important

concept for their organization."

•  The success rate of selling to a customer you already have is 60-

70%, while the success rate of selling to a new customer is 5-20%.

•  "Increasing customer retention rates by 5% increases profits by 25-

95%."

