According to the Harvard Business Review, the average business loses 50 percent of its customers every five years.
According to the Harvard Business Review, the average business loses 50 percent of its customers every five years. This is the first article in an eight-part series to help you build customer loyalty.
This stat suggests there is a need to nurture existing customers to avoid this costly proposition. Every company strives for higher customer retention, but often focuses more time and energy on gaining new customers.
The facts are there to prove why keeping existing customers is so important. Authors Emmet C. Murphy and Mark A. Murphy made several notable statements in their book, Leading on the Edge of Chaos.
- Acquiring new customers can cost as much as five times more than satisfying and retaining current customers.
- A two percent increase in customer retention has the same effect as decreasing costs by 10 percent.
- Depending on the industry, reducing customer defection rate by 5 percent can increase your profitability by 25 percent.
- Customer profitability tends to increase over the life of a retained customer.
Many businesses simply focus too much energy on the task of winning new customers or they invest in the wrong customers. Experience shows us that 80 percent of sales come from 20 percent of customers – the 80/20 rule. Too many businesses neglect that top 20 percent of their customer base in pursuit of new customers.
But there are a number of steps you can take right now to keep your customers.
Next: Change your perspective.