8
 min read

Why Customer Retention is the Ultimate Growth Strategy

The powerful ROI of client retention

  1. The probability of selling to an existing customer is between 60% and 70%.
  2. The probability of selling to a new customer is only between 5% to 20%. 
  3. Existing customers are 50% more likely to try your business’s new product. 
  4. Existing customers are also 31% more likely to spend more on their average order value with your business.
  5. Increasing customer spending by 5% can raise profits by 25% to 95%.

                                                   - SEMrush


Sometimes little companies like to play like big companies. We see Crest doing something in their marketing so we mimic what we can. But here’s the thing, Crest is huge. They have the budget and ingrained brand loyalty built over generations. How many of you still use the brands your parents bought? I certainly do. 

But one thing that the big huge brands can’t compete with the small companies is customer retention. Crest can send out email marketing and can send coupons. But that’s it. Tiny companies that have less than 200 clients (or better yet less than 50) can have genuine relationships with their clients. 

It’s more than Customer Service

Customer service absolutely makes a difference but when you are small, great customer service is the bare minimum. Think about your local grocery store. You probably have a favorite checkout person. It’s not because they are better at “customer service” than the others. It’s because they ask about your kids or their face warms when they see you. 

If you shop local, you probably have lots of places that know your face. The restaurant that knows your order or the bakery that tells you when your seasonal favorite will be returning. 

It’s more than Knowing Your Customers

It’s about truly caring about them. When you are tiny, you can modify prices or add services or modify the layout of your store. You can do all those things because you don’t have a board to deal with. And you really care. That’s where tiny companies can blow big companies out of the water. 

Let’s talk Geography

If you do a lot of traveling you know that prices and offerings change in different regions of the country. Wal-Mart is a great example of the limitations of big companies. No matter where you live in the country, the prices on Wal-Mart.com are the same. So you could live in Manhattan and get a great deal or Dalton, GA, and the online prices are all pretty much higher than your local store. 

When you are small company, you have the flexibility to be truly custom for each client. If you are limited to a geographic area like most of our clients this is ideal. Because you are only serving customers in at most a handful of zip codes. So your web copy can speak directly to them. Your prices make sense for them. And you can leverage truly local stuff in your social media feed. Big companies can’t do that. 

And even if you are a national service like we are, because we have such a short client list, we can afford to truly invest in daily attention for each of our clients. 

The Real Value of Customer Retention 

When people feel valued, they return loyalty. And that loyalty plays out in different ways: 

  1. Referrals: Big companies need to have affiliate marketers or referral codes. Small companies get referrals naturally. Has anyone ever just gushed to you about a product or service? Not because they were getting any benefit, just because they were that thrilled? This is the golden ticket of referrals that huge companies can’t touch. 
  2. Honest Feedback: When you have happy clients and you start doing something they don’t like… they tell you. And telling you the issue so you can fix it is 1000% better than them leaving for a competitor.
  3. Larger Lifetime Value: Fly by night scam artists are only interested in that first sale. Because they know their product isn’t that great. But customer retention is keeping customers happy for the long haul. So whether they come in every week, month or once a year the lifetime value of your customers grow. 
  4. Better Marketing ROI: You aren’t spending money on advertising for current clients like you do for people who haven’t used you before. Now you should put some money into making the current clients happy, maybe a loyalty discount or special sale or something. But the point is over time the person is spending more money and all of your advertising to them over that time has a positive ROI. As opposed to the non-customer you have been mailing discounts or spending payroll on a sales force. 

Does Customer Retention Relate to My Business? 

Great question! And yes, it does. We work with a lot of lawyers and while you might think people only get divorced once or have a personal injury claim once, etc the reality is people can use lawyers throughout their lives. And most lawyers perform more than one type of law. So someone can reasonably use the same lawyer for an adoption, civil case, divorce and maybe some estate planning. 

But what if your product or service is very limited? Keeping with the lawyer example, maybe they only perform Family Law? Then you can leverage your relationship for referrals. In both directions. You might not do estate planning but because of your relationship, you can refer current clients to other lawyers. And vice versa, your current clients will tell others how great you were for their divorce. 

Customer Retention is the Ultimate Growth Strategy 

As your business grows, your growth strategy evolves. When you first start you must spend the money or sweat equity on straight advertising. Nobody knows about you yet so your marketing dollars go to completely cold leads. By year one or two, you will start seeing a growth that wasn’t targeted. This is when referrals come in. Or people you made happy in year one are coming back for more. 

If you make the most of your first clients, you might not have to spend any marketing down the road. Of course you might want to keep expanding and there’s nothing wrong with that. BUT, the point is by making your first 10 clients into passionate brand ambassadors, you could very well stop needing to advertise. 

And that’s why customer retention is the ultimate growth strategy. Happy clients spend more themselves and then provide exponential growth through referrals. 


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