Customer retention refers to the activities and actions merchants take to keep customers engaged and interested in their products. The goal of customer retention programs is to retain as many customers as possible, often through customer loyalty and brand loyalty initiatives.
Customer retention begins with the first contact a customer has with a store and continues throughout the entire lifetime of the relationship.
Most merchants spend more money on customer acquisition even though, on average, it costs up to seven times more than customer retention. Selling to customers with whom you already have a relationship is often a more effective way of growing revenue because you don’t need to attract, educate, and convert new ones.
Companies that shift their focus to customer retention often find it to be a more efficient process because they are marketing to customers who already have expressed an interest in the products and are engaged with the brand, making it easier to capitalize on their experiences with the company. In fact, retention is a more sustainable business model that is a key to sustainable growth. According to studies done by Bain & Company, increasing customer retention by 5% can lead to an increase in profits of 25% – 95%, and the likelihood of converting an existing customer into a repeat customer is 60% – 70%, while the probability of converting a new lead is 5% – 20%, at best.