Since 1992, National Customer Service Week has been celebrated annually during the first full week of October. Thousands of companies across the country recognize the importance of customer service and the people dedicated to supporting customers on a daily basis.
At Summit Financial Resources, client service is the foundation on which we build strong working relationships in order to help companies grow. When it comes to increasing sales, many small businesses focus on acquiring new customers and clients and put less effort into retaining those they already have. Statistics show that 44% of companies have a greater focus on customer acquisition versus 18% that focus on retention.
It’s common to think that if you have a great product or service, customer retention will happen naturally. However, given the fact that 52% of respondents to an Accenture survey said they switched brands recently because of poor service, having a solid strategy for keeping current customers happy has never been more critical. Here are some of the top reasons why:
It’s cheaper to keep existing customers than to acquire new ones.
If you need just one reason why building loyal customer relationships matters, consider the fact that it costs significantly more to acquire a new customer than it does to retain an existing one. Depending on the industry, it can cost between four and 10 times more, and some sources say the cost of acquiring a new customer is as much as 30 times that of keeping one.
In addition to reducing your marketing expenses, retaining customers once they have literally or virtually walked in the door is essential for sustained and healthy business growth. Your customers are your greatest asset, and high customer turnover can hamper your company’s potential. Small business owners need to make customer retention an integral part of their strategy in order to reduce churn and increase profitability.
Loyal customers are more profitable.
Customer retention helps boost the profitability of your business in a number of ways, and there is a large body of research to support this. For example:
- Increasing customer retention rates by just 5% increases profits by 25% to 95%.
- Engaged customers deliver 23% more revenue and profitability than the average customer.
- Actively disengaged customers can cost a brand 13% of its revenue.
Since existing customers trust you and your products or services, you can focus less on price and more on value, avoiding the need to constantly offer discounts. Repeat customers are also likely to be open to making additional purchases as a result of marketing tactics such as up-selling and cross-selling.
Repeat customers generate repeat business.
Loyal customers will make regular purchases from your business. According to research, engaged consumers buy 90% more frequently and are five times more likely to choose your brand again when making future purchases.
In addition, existing customers are 50% more likely to buy new products, so it is important to pay attention to their preferences and purchase habits. Loyalty is grounded in the belief that companies listen and respond to customer needs and requests, and living up to these expectations is more critical than ever.
Current customers are willing to spend more.
Returning customers typically spend more than newly acquired customers. They tend to frequent a retailer they trust more often; buy a broader range of products or services; and make larger and larger purchases, spending an average of 60% more per transaction.
Because they know and value your company, long-time customers are also far less price-conscious than new customers. In fact, customers often associate higher prices with quality and service. Customers who already do business with you trust you to go above and beyond your competitors, and they are willing to pay for it. Providing consistent quality and superior service is imperative to keep them from going elsewhere.
Engaged customers can provide valuable feedback.
Feedback is essential to the success of every small business. Customers who make frequent purchases can offer a wealth of valuable information on your products, services, and performance.
They will know whether or not your products or services meet expectations and are a good value for money. They can weigh in on the quality of your customer service and specific areas that can be improved. This type of feedback can result in new opportunities as well as increased sales and retention rates, and it will be impossible to obtain if you are only focusing on new customers.
Ask your repeat customers how your business can serve them better, and listen to what they have to say. Research indicates that people who have complained and seen their issue resolved are 84% less likely to decrease their spend, while 55% of consumers said they are not likely to continue buying from a company that ignores their feedback.
Satisfied customers will spread the word.
Word-of-mouth is the most impactful and cost-effective form of advertising. Among small businesses polled in a Verizon and Small Business Trends survey, 85% said word-of-mouth is the most common way customers learn about their businesses. No other type of marketing or advertising even came close.
When you provide a positive customer experience, repeat buyers will be happy to tell their family, friends, and colleagues. This is the most powerful form of brand awareness because people are strongly influenced by the opinions of those closest to them. For example, 92% of people trust recommendations from family and friends more than other types of marketing, and those who are referred by a friend are four times more likely to buy from a business.
Retaining a loyal customer base is proof that you deliver a great customer experience, which in turn will inspire potential customers to trust your brand. As we observe National Customer Service Week, Summit Financial Resources celebrates the people who serve our clients each and every day, as well as the customers who understand that building long-term relationships is the key to creating a win-win for their business and for ours.
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