If you ask a business owner how they are going to grow their business, most will tell you by attracting new leads and acquiring more clients. Now don’t get me wrong there is a need for businesses to acquire new clients, but this is costly as a growth strategy. It also ignores one of the business’ most valuable assets, its existing clients.
Research by Invesp shows:
- Acquiring a new client costs five times more than retaining an existing client;
- The success rate of selling to an existing client is 60-70% while the success rate of selling to a new client is 5-20%; and
- Increasing client retention rates by 5% increases profit by 25-95%.
Focusing on client acquisition is a less cost-effective way to grow your business. You’ve already invested marketing and sales resources in your existing clients and have built the know, like and trust with them. They’ve purchased your products and/or services and started to develop a relationship with you and your business. Existing clients are 50% more likely to try new products and spend 31% more.
As these clients get to know your business and make more purchases, they are more likely to share your products and their experience with others. Thus, becoming both loyal clients and advocates for your business. Existing clients can become a lead generation source for your business as they refer family, friends and colleagues. Studies show 92% of potential leads trust personal recommendations more than any other kind of marketing.
Your existing clients can also be your best source of information on the clients you are targeting since they have already bought your product or service. Their shopping habits and purchasing patterns can help you better understand why and how leads become clients, enabling you to refine your marketing and targeting efforts. At the same time these clients can provide you with feedback on how to improve your products and services plus spot opportunities for new products to add to your current offerings. Cross selling, which can increase profits up to 40%, is easier with existing clients than with new clients.
The importance of client retention on your business growth is clear. It leads to:
- Spending less on marketing and advertising;
- Lower cost of acquiring new clients as your business gets more qualified referrals;
- Sales with higher margins as existing clients are less price conscious and value your business; and
- More repeat purchases because existing clients believe you offer superior products and/or services.
The benefits of client retention not only impact your revenue and profit, it can also impact your employee retention. Focusing on client retention allows your employees to spend less time trying to acquire new customers, more time developing meaningful relationships with your existing clients leading to higher morale. Work becomes less about sales and more about people.
Client acquisition is important, but don’t make it your business’ sole priority. Don’t neglect your existing clients. A satisfied, loyal client is worth more than one who is not. Don’t have a client retention strategy, let VirtuArte help. Contact us here or give us a call at 866.228.3497 to set up a complimentary strategy session to discuss options for your client retention efforts.
