Increasing sales is obviously important, and acquiring new customers is the key to growing a small company into mid-sized and beyond. That being said, as companies grow, it is crucial to understand the importance of customer retention and maximizing customer lifetime value.
This is because acquiring new customers costs, on average, 5-25x more than retaining existing ones. This makes it extremely important for firms to turn more of their attention to customer retention as they grow. It doesn’t mean that it has to be “customer acquisition vs. retention” in an either-or sense, but it is vital that businesses learn how to prioritize each of them individually, as the strategy for each differs in several ways.
To give businesses some clarity, we are going to cover:
- The benefits of customer retention
- Customer acquisition vs. retention strategies
- How to improve both simultaneously
Let’s dive into each and get a better idea of how businesses can improve their bottom line by increasing the value of each customer.
The Benefits of Customer Retention
There are many more benefits to customer retention than just being cheaper than acquisition. Businesses will see many downstream effects of better customer acquisition and the strategies that help increase it.
For an idea of what businesses stand to gain, let’s lay out some numbers.
A 5% increase in customer retention rates increases profits by 25%-95%.
The monetary benefit of customer retention is exponential.
68% of customers say they are willing to pay more for a product sold by a company known for good customer service.
A better reputation for customer service and retention gives firms more freedom to price aggressively and maintain healthy profits.
72% of customers will share a positive experience with others.
Customer retention strategies can actually act as customer acquisition strategies by creating a magnetic customer experience as happy customers refer friends and family.
It is plain to see all the ways that focusing on customer retention can improve the health and sustainability of a business. Let’s discuss how companies usually accomplish this and how it differs from sales-focused strategies.
Customer Acquisition vs. Retention Strategies
While there is some crossover between the benefits of customer retention and customer acquisition, the strategies used to attract new customers usually don’t serve customer retention equally—and vice-versa. Therefore, it is important to know the difference between customer acquisition vs. retention strategies.
Customer acquisition strategies often look like:
- Better marketing programs, like Google ads and email newsletters.
- A more streamlined website to make purchasing easier.
- Free trials and intro discounts.
While these give customers good reasons to work with a company once, they don’t do much to keep them coming again and again.
The most effective customer retention strategies are:
- Improving the customer service experience.
- Offering rewards programs.
- Offering consumer financing to give customers more buying power.
Each of these dramatically improves customer retention, but not all of them do much to get customers to buy the first time.
There is one strategy on that list that does, though, and that is offering POS financing. Not only does it provide unique value that will bring customers back, but it also reduces friction and provides an opportunity to increase the value of their first purchase. This makes it the best way to attack both customer acquisition and customer retention at the same time—and Skeps offers a platform that will allow you to retain existing customers and acquire new ones by offering POS financing.
Improve Both Customer Acquisition and Retention With Skeps
Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. Working with a whole network of established lenders, we go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
- Installment financing payment plans
- Co-branded credit cards
- Consumer loans and leases
If you’re looking to partner with a forward-thinking fintech company that will keep consumers' eyes on the purchase while offering best-in-class financing, Skeps is the perfect fit.
Do you have more questions about improving customer acquisition vs. retention? Request a demo or contact us at firstname.lastname@example.org.