Many companies place a strong emphasis on attracting new clients. And that is significant.
But acquiring customers is just the beginning.
The good news is that if you were able to get the acquisition section right, you have scaled through a portion of the difficult part. However, it is simpler to satisfy and service your current customers than to find new ones. Customer retention is essential for businesses at all times, but in times of crisis or economic recession, it becomes even more important.
Due to a drop in sales, many companies find it difficult to meet their target during a recession. However, if you concentrate on keeping your current clients, you will probably see purchases even during the current recession.
According to Harvard Business School study, raising customer retention rates by just 5% can boost a business's revenue. Here are some reasons why customer retention matters in a downturn:
- Cost-effective: Acquiring new customers can be expensive, especially during a downturn when people are more cautious with their spending. By retaining existing customers, businesses can save on the cost of marketing and sales efforts needed to acquire new customers. Your best customers will buy from you again and again and you don’t need to spend more money to attract them.
- Stable revenue: In a downturn, businesses may experience a decline in revenue due to reduced consumer spending. By retaining existing customers, businesses can ensure a more stable revenue stream as these customers are more likely to continue purchasing their products or services. When a business has a strong base of loyal customers, it can be confident that it will continue to generate revenue even if the new business is slow. A higher customer retention rate leads to greater profits and lifetime customer value (LCV)
- Referrals: Satisfied customers can become powerful advocates for a business, referring new customers and generating positive word-of-mouth. By retaining existing customers, businesses can increase the likelihood of receiving referrals, which can help drive new revenue during a downturn. Satisfied customers become brand ambassadors, and their referrals to friends can lay the foundation for growth when the economy rebounds.
- Customer Loyalty: Customers who have had positive experiences with a business are more likely to remain loyal, even in difficult economic times. When a business can retain its customers during a downturn, it strengthens its brand loyalty, which can have long-term benefits.
- Competitive Advantage: In a downturn, businesses are often competing for a smaller pool of customers. By retaining its existing customers, a business can gain a competitive advantage over its rivals. When customers are loyal to a business, they are less likely to be swayed by the competition's marketing efforts.
- Upselling and Cross-Selling Opportunities: Existing customers are often more receptive to upselling and cross-selling efforts. By retaining its customers, a business can continue to generate revenue through these methods.
Customer retention is critical for any company, but it becomes even more so during a downturn, to put it simply. Businesses can cut expenses, ensure a steady stream of income, increase customer loyalty, gain a competitive edge, and take advantage of upselling and cross-selling opportunities by putting their attention on customer retention.
You should act quickly now that you are aware of how crucial client retention is to your company.
Check out our blog for tips on how to stay ahead during a recession.
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