7 Tips to Increase Profitability by Retaining Customers
Pareto’s principle is that businesses get 80 percent of business from 20 percent of their clients, meaning that retention of these customers is crucial to success. According to a study conducted by Harvard Business School, “The high cost of acquiring customers renders many customer relationships unprofitable during their early years. Only in later years, when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. The bottom line: increasing customer retention rates by 5% increases profits by 25% to 95%.”
Research conducted by the U.S. Chamber of Commerce and the U.S. Small Business Administration revealed: “Businesses could greatly improve their customer base if they focused more on retaining customers than spending marketing budget funds to get new customers.” Numerous studies have shown it takes more money to acquire a new customer than it does to retain a current client. Here are some additional statistics:
