What is Customer Retention and Why is it Important?


Sep 23, 2019 • 3 min read

loyalty program dan customer retention

Just like the name suggests, customer retention is about retaining customers. What do we mean by retaining customers and why is it important for your business's growth?

Let's explore this in-depth and look at a few examples that you could use in your business.

Do not confuse Customer Acquisition and Lead generation with Customer Retention

The latter is customers that you have already converted at least once. Simply put, Customer Retention is a business taking care of their existing customers.

Here we will talk about if spending on existing customers is more worth as compared to spending on new customers.

Every business's main goal is to increase sales, the usual thinking would be, this means that there must be more products sold, meaning the acquisition of more new clients.

Well, let me tell you, that is not the case. The key to your increasing sales is right under your nose. Your existing customers, yes them.

Still not convinced on the importance of customer retention? Here are 3 benefits.

3 Benefits of Customer Retention

Customer-Retention-dan-Customer-Loyalty  (1)

1. Cheaper than acquisition 

Research has found that acquiring a customer is 5 times more expensive than retaining a customer.

The total cost needed to source for leads, evaluate and then bring them on board compared to the cost of using appropriate strategies in appreciating your existing customers, you do the math.

2. Better profit generation

Loyal customers are more likely to spend more and explore the different products that your company has to offer. A

s long as they are provided with outstanding service, they would come back for more. Repeat customers = Repeat profit.

3. Free Advertising 

With loyal customers, come free advertising, why do we say so? Generally, when a customer is blown away by a product/service they would share it with their social circle.

People are 4 times more likely to buy a product if it was referred by a friend. (Nielson)

Wrap up!

Customer retention has always been around, just that businesses were too pre-occupied with generating more sales, getting more customers and increasing profits the traditional way that they didn't realize the easiest and most predictable way of generating profits was just right under their nose, their existing customers.

However, as much as customer retention guarantees profits, this does not mean you can fully ignore customer acquisition, give both a good balance and you would be on the right path to higher profits.

If your business hasn't yet implemented a retention strategy, Tada is here to help guide you through the entire process of building one. Don't hesitate to request a demo from us today!

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Kerenjni is a writer from Singapore who writes articles...considering that you are reading this, it makes perfect sense, doesn't it? Other than writing, she is pretty much obsessed with bubble tea, just like any normal person would be...right?