According to Gartner Group, 80% of your company’s future revenue will come from just 20% of your existing customers. Yet the focus tends to be on acquiring new customers, simply for the reason that looks better on paper. 

Positive numbers for new customers is always a fun thing to see on your desk. Yet there’s also real excitement and opportunity in focusing on retaining your existing customers. When building a loyal base of customers, you should also implement customer retention strategies.

Why Customer Retention?

Let's be honest. Despite the fact that acquiring new customers is far more costly than retaining new ones, somehow customer retention tends to slip out of focus.

One reason is because it’s harder to measure. You can calculate return on investment for acquisitions by simply comparing the amount spent on marketing against the number of new purchasing customers. Customer retention takes more time. It analyzes the long-term value of a customer by using past purchase behavior instead of focusing on the result of a single transaction.

Since customer retention requires greater in-depth study into the consumer spending habits, retention strategies require greater customer personalization. The key is the ability to accurately analyze data and then implement targeted offers and ads based on consumer behavior. Target made targeted coupon and sales ads to newly-expectant mothers using historical transaction data and their knowledge of consumer shopping trends.

Loyalty And Retention

So how do loyalty and customer retention fit together? Aren't they the same thing? 

Not quite.

Loyalty programs serve to incentivize and reward customer habits. Properly designed loyalty programs recognize when a customer demonstrates the right behavior and rewards the customer for that behavior. Loyalty programs also provide the ability for the customer to engage with the brand beyond transactional.

Customer retention focuses on educating the customer about the value of the company and provided services. It focuses on customers' potential lifetime value by making company benefits – like faster shipping, better prices, targeted offers -- readily available.

In more simple terms:

  • measuring customer retention = tells you the frequency in which a customer shops with you.
  • measuring loyalty = tells you how predisposed a customer is to shop from you.

So, retention strategies help build loyalty within customers and loyalty programs provide methods for investing in customer retention.

This is why you should make customer retention one of your main loyalty program goals. 

Think about it this way. You can build a loyalty program to acquire new customers, but you will not see any reliable growth or successful utilization if old customers are departing as fast as new ones are signing up. True loyalty is built from long-term consumer engagement, not one-time transactions.

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