In my previous post, I wrote about a troubling statistic released by Bain & Company that shows how even satisfied customers defect to the competition. What does it take to retain those satisfied customers?
According to countless studies, it costs 4 to 10 times more to acquire a new customer than to keep an existing one (some studies even place it as high as 30 times more expensive!). Think of all the money you’re investing to get new customers in the door. How much are you spending for those new leads? According to NADA Data, dealerships are spending over $600 in advertising per new unit sold, on average. All this to acquire a new customer, “satisfy” them, and send them along their merry way to a competitor for their next service or purchase.
Now consider the fact that existing customers spend 67% more than newly acquired customers. Both of these stats are common business knowledge, but sadly so often overlooked.
The reality is you’re pumping tons of money into lead generation to acquire new customers, who will likely defect even after giving positive CSI scores. At the same time, the loyal customers who have already opened their wallets and are spending significantly more are being neglected. Does that math work out for anyone? Can you rely on that first customer experience to persuade your customer to come back again and again? I mean they said they were satisfied, right?
No – the truth is, a focus on customer retention is critical to the overall success of your company. Take a moment and think about your current advertising spend. What percentage is focused on keeping your existing customers? Be honest about it – don’t redefine “existing customers” to make your results more favorable. What percentage is truly devoted to customer retention?
You know that existing customers cost significantly less and spend significantly more. Why then wouldn’t you invest in your current customers? What does that mean for your bottom line? According to leading customer loyalty researcher and inventor of the Net Promotor Score, Fred Reichheld, a 5% increase in customer retention can improve a company’s bottom-line profitability by between 25% and 85%. Can you afford not to focus on customer loyalty?
Cultivating true customer loyalty starts with showing customers appreciation for their business. By rewarding them, you lock them into future business. That investment goes a long way.
Sure, it’s different from what you’ve done before – but was that old way really driving dramatic results? According to Jeff Bezos, CEO of Amazon.com, “What’s dangerous is not to evolve.”
Stay tuned for the conclusion of this series where I discuss tips, tools and programs that keep your most profitable customers coming back.
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