5 Reasons Your Business Why Should Invest in Customer Retention

  • April 24, 2020

This is one famous business quote that every successful entrepreneur will agree with. 

“Don’t make a sale, make a customer.” 

In this internet era, customers are spoilt with countless options. A simple online search will help them find an alternate product or service. In other words, losing your customer to competition takes less than a minute if you are running a business.  

Customer Retention
5 Reasons Why Customer Retention is key

That makes customer retention crucial to the business’s long-term growth and sustainability. Whether you are a small-scale business that deals with customers in person or an online business that counts on virtual interactions, customer interaction is crucial in all aspects. 

What is Customer Retention?

In a straight line, customer retention means retaining your existing customers from churning. Customer retention rate is the metric used to measure how successful a business is in retaining its existing customers from the beginning of a period until its conclusion. 

A positive and higher customer retention rate shows business growth, excellent customer service, and customer loyalty.  If you think new customer acquisition is a better strategy than customer retention, think again. There are also several benefits to customer retention that no business can turn a blind eye to. 

How Investing in Customer Retention Can Benefit Your Business? Top 5 Reasons

1. Saves costs

Studies ¹ suggest that it costs 5 times as much to acquire a new customer than to retain an existing one. In fact, 60% to 80% of customers return to the same company to do business that initially satisfied them. 

The primary benefit of customer retention is that it saves costs incurred for marketing, customer onboarding, maintenance, and even after-sales support. Let’s take a closer look at how it works. 

a) Onboarding

Every new customer needs an onboarding journey that will introduce them to the product or service process. This requires trained and experienced resources, as well as their valuable time. To save on costs and ensure consistency, it can be beneficial to create an onboarding template that can be used for all new customers. This template can be customized and maintained by an onboarding specialist, reducing the need for hiring and maintaining multiple onboarding specialists, especially if the customer acquisition rate is higher than customer retention.

Since retained customers do not need much in transacting with the business, so it helps reduce the reliance on onboarding specialists. Even if they need support, it would be minimal and can be taken care of with an intelligent live chat tool. In fact, such a live chat tool can also substitute for new prospects landing on the website or existing customers looking for instant support.  

b) Marketing 

Marketing is not a spray-and-pray activity. It needs a strategic approach, long-term planning, defining a social media workflow, and dedicated resources to make it work. Also, there is a target audience to be identified, marketing channels like SEO and PCC to be explored, and even budgeting is required to increase sales. In fact, for an average small business, marketing can cost anywhere from 4 to 12% of its total revenue. If you want to avoid costly marketing mistakes, you can search online for articles like the most common SEO or PPC mistakes to avoid.

If the business has to acquire new customers regularly, that is, if their customer retention is poor, the marketing department will have to work extensively. Demand generation can be an effective strategy for businesses to generate interest and demand among potential customers by creating engaging and informative content, running targeted advertising campaigns, and building relationships with prospects. Another tactic that can be employed is broken link building, which involves finding broken links on other websites and offering to replace them with working links to the business’s website, thereby increasing visibility and driving traffic. Opportunities are endless here, from using an SEO with less keyword difficulty content strategy for the best results to working on an entirely new social media campaign. And to overcome this difficulty and improve audience retention, and SEO content strategy, the business should focus on using business plan templates that resolve customer engagement issues.Moreover, by integrating a well-researched keyword strategy into our SEO efforts, we can effectively reach a broader audience, drive more organic traffic, and significantly enhance our overall customer engagement. As a result, it will incur more expenses, reducing its ROI. On the flip side, when the customer retention rate is higher, it keeps marketing costs at bay. The marketing department can continue with its existing nurturing campaigns to ensure the upkeep of existing customers. To do it, you can create regular content on your blog or social media with AI article generator tools and keep educating them about your products of service.

c) Support

Despite the best efforts to onboard new customers, they encounter difficulties when using the product or service in their everyday lives. During such instances, it is the responsibility of a customer-centric business to provide adequate after-sales support. And that incurs additional costs.  

Can such costs be avoided or best reduced? Customer retention can ensure that customers remain loyal to the business and become super-users. At the business formation stage, it is crucial to include customer retention as a priority for the company and work toward it. That reduces the need to provide support to them. This results in indirect cost savings. 

2. Boosts Brand Image

Have you heard of H.O.G? It is the short form for the ‘Harley Owners Group.’ It is a close-knit group of Harley-Davidson motorcycle owners. One that is considered to be the most elite and prestigious and is often referred to as ‘the granddaddy of all community-building efforts. 

Once a Harley owner becomes a part of HOG, they become a part of all community activities, including member-only rides, events, factory tours, and similar exclusive activities. Similar to HOG, there are also separate fan clubs for Apple devices, Android, music bands, etc.

Now, there is a reason why user or customer-based communities like these are popular. They are created by loyal customers. In a way, it is free marketing that customers are doing for the brand.
If a business is good at retaining its existing customers and successfully creating a community feeling within them, it automatically boosts its brand image. The benefits of a positive brand image need no further explanation. 

3. Assured Future Income

Do you know of the two recent business models that have taken the world by storm? They are SaaS and subscription-based business models. Both of these business models work similarly. The customer pays or subscribes to the services for a definite period of time with an advance payment. Most often, this period is one year. This ensures that the business has assured income for one year.  

When the subscription period nears expiry, the business can pitch for renewal, thus ensuring that the customer continues to be associated with the company. In other words, both SaaS and subscription business models rely on customer retention for survival.  

The global SaaS market share is in the range of $134.44 billion. It is expected to grow by an impressive 13%. Now, if such a market is counting on customer retention to grow, every business should also rely on it. So, a solid need to regularly improve SAAS products using a  conversion rate optimization tool to maximize profit.  

SubscriptionFlow is part of the ever-growing subscription billing software market that is currently valued at approximately $1B and growing at a CAGR of 13.19%. SubscriptionFlow helps its users increase their revenue, decrease customer churn, increase customer retention and allow them space to grow and expand substantially.”

To put it in another way, customer retention assures the business of a future source of income. That kind of assurance spares the company from worrying about immediate revenue. It can start planning for the future, where more customer-friendly features and services can be rolled out.  

4. Keeps Competition at Bay

Loyal customers become habitual in terms of using and choosing only one brand. They do not consider other brands because they have finally found a choice that works fine for them. They remain in the habitual loop of preferring one topic as the default choice above every other alternative. In this way, customer retention ensures the competition is kept at bay. 

Also, loyal customers are great sources of learning for the business. They would explicitly interested in suggesting improvements that would make the product or service better than what it already is.  

If a business is to spend on research and development to find such insights, it will take very long before any substantial findings can be unearthed. Also, it may not be as clear and authoritative as the suggestions given by the customer, who is the first-hand user.  

As a result, it creates a unique competitive advantage. If the effort required to fend off competition can be reduced, it spares the business so much time and effort that it can be dedicated to improving existing business offerings.  

5. Gives Word-of-Mouth-Marketing

Traditionally, word-of-mouth marketing spreads from one person to another through personal interactions. In today’s digital world, it takes the form of virtual communities, social media posts, online reviews, and so on.  

A single recommendation can be the final nudge to make a prospect sitting on the fence take the final decision. The benefit of customer retention is that it turns loyal customers into mouthpieces for the business. These customers are willing to share with their near and dear ones why they think a specific brand or product is a good choice. 

No amount of marketing can replace that voluntary word-of-mouth marketing. You can have the best Instagram viewer feed aesthetic and perfect social media management tools, but word-of-mouth remains robust.”In fact, studies by Nielsen² have found that 92% of people trust recommendations from friends and family over any other type of advertising.

“Trust, encouraged by social media, significantly affects intention to buy. Therefore, trust has a significant role in eCommerce by directly influencing intention to buy and indirectly influencing perceived usefulness.” 

M. Nick Hajili , Internataional Journal of Market Research ³

This indicates that customer retention, which causes word-of-mouth marketing is essential for a business.  

Customer retention: Why it is the best bet for your business 

“Loyal customers, they don’t just come back, they don’t simply recommend you, they insist that their friends do business with you.” .

Chip R Bell – author of several books on marketing

You can only grow your loyal customer base if you retain your existing customers. Once you create a solid loyal customer base, it would be challenging for your competitors to take them away. That makes running a business so easy.  

Customer retention is crucial not just for the short term but also for the long-term growth and sustainability of the business. It brings to the table several benefits that otherwise would cost a fortune to gain.  

And that is why your business should invest in customer retention.


  1. hbr.org
  2. nielsen.com
  3. semanticscholar.org

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Srushti Shah is an ambitious, passionate and out of the box thinking woman having vast exposure in Digital Marketing. She is working as a Digital Marketer and Content writer at Acquire. Her key focus is to serve her clients with the latest innovation in her field leading to fast and effective results.
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