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Customer Retention Is King: Four Steps to Secure the Throne

by Jerry Jao  |  
December 19, 2013
  |  5,085 views

Blogs and communities are always buzzing about one form of marketing or another. And if you listen closely, you'll notice that most of the marketing conversations going on—whether they're about inbound marketing, SEM, affiliates, or mobile—emphasize the importance of getting new or more customers, as opposed to keeping the ones you already have.

The same trend can be seen in the way companies reward their sales and marketing staff. Those who acquire new customers are rewarded with generous commissions and recognition, whereas the ones working to retain current customers get a lukewarm pat on the back.

Now, to be clear, there's absolutely nothing wrong customer acquisition. However, it's unfortunate that customer retention isn't getting the same (if not more) attention from marketers—because retention usually brings in more revenue, at lower cost.

New Business Is Great, but Repeat Business Is Even Better

It's time for marketers to shift their focus to customer retention and loyalty, instead of putting all their eggs in the acquisition basket. The good news: doing so may actually be easier and far less costly than you think.


Not only is it more expensive to acquire new customers than to keep existing ones (acquisition costs five times more than retention, according to Lee Resource Inc.), but current customers actually tend to spend more than new ones.

And if that weren't staggering enough for you, consider the Harvard Business School study that found "increasing customer retention rates by 5% increases profits by 25% to 95%."

Why not crunch the numbers in your own business and see for yourself just how important repeat customers are for your company? Quantify your customer acquisition spend vis-à-vis retention, and take note of the revenue that new customers bring in versus how much your existing customers are spending.


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Jerry Jao is a co-founder and the CEO of Retention Science, which provides customer retention solutions to some of the country's largest online retailers.

Twitter: @jerryjao

LinkedIn: Jerry Jao

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Comments

  • by Isabel Myburgh Thu Dec 19, 2013 via iphone

    Another approach is to look at how much time can be spent on a customer. Calculating the lifetime value of a customer can mean the difference between making a phone call and a personal visit. In my opinion, apart from knowing the rough $ value of a customer it is also useful to know how much time to spend on them.

  • by Qasim Eisa Tue Dec 24, 2013 via web

    "Remember, your sales and marketing team can perform a stellar job in bringing in new people, but if your support reps aren't doing enough to keep those customers, you're just wasting your resources"

    Really true...
    We should do much work on our repeated customer.


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