Many small and medium business owners and managers believe they need to keep getting new customers to grow their sales and become more profitable. However, customer acquisition is one of the most expensive investments a business can make and usually leads to a negative profit margin.
Successful brands like Sephora and Starbucks understand that profitability and business growth don’t come from getting more new customers daily. For both brands, more than half (80% for Sephora; 53% for Starbucks) of their annual revenue comes from customers enrolled in their respective loyalty programs.
Moreover, many studies support the idea that nurturing repeat customers is more valuable in growing your business than getting more new customers. Here are some of the most compelling insights gathered about the actual value of your repeat customers.
What are repeat customers?
These people have already bought your products and services at least twice. Currently, these people are satisfied with your products and services but have yet to be loyal to your brand.
How valuable are repeat customers?
They spend more than first-time customers
Repeat customers spend approximately 70% more compared to first-time customers. This is because of their positive experience when they initially purchased your product or service.
They tend to buy again and again
On average, first-time customers have a mere 13% chance of buying from the same store again. But repeat customers have a 70% chance of repeat purchases and are unlikely to switch and try a different brand, increasing your business profitability.
Getting repeat customers to buy is a lot cheaper
Getting new customers for your business is 5x more expensive than encouraging repeat customers to buy again (or buy more) from you. Surprisingly, you will have to spend 16x more to get first-time customers to pay the same amount as your existing ones! So, imagine how much more you could save by nurturing your current customers.
Repeat customers bring in more customers
Happy customers tend to refer you 50% more often than first-time customers. The more satisfied your customers are with your services and product offering, the more likely they would refer you to their peers, which would lead to more considerable marketing savings and more sales for your business.
More repeat customers can grow your business drastically
Studies show that by increasing your customer retention by 5%, your revenue can increase by up to 75% — or even more. That’s because repeat customers tend to buy more often, spend more, and bring in new customers — all at no additional cost to you.
Repeat customers fuel small and medium businesses
61% of small and medium businesses report that more than half of their revenue comes from repeat customers. For many companies, customer retention is the lifeblood of their business’ survival. Even the largest brands in the world attest to this.
Reducing your customer attrition/churn can make you highly profitable
The average customer churn rate of businesses is around 20%. By reducing customer attrition by 5%, you can boost your profitability by up to 25%.
Globally, over 80% of managers and business owners agree that customer retention is cheaper than customer acquisition. Statistics also show that nurturing repeat customers is more productive and profitable.
Small and medium businesses would greatly benefit if they worked harder on customer retention by having more Customer Loyalty Programs and Customer Relationship Management initiatives. By acquiring a suitable customer loyalty program, small and medium businesses would be able to nurture their customers and eventually increase their sales and profitability.