Customer Retention: The Fundamental Pillar Of Startup Marketing – Forbes
Startups are forced to work hard on customer acquisition by their very nature – you need to find … [+]
According to a statistic by Marketing Metrics, you are from 3 to 14 times more likely to convince an existing customer to make a repeat purchase than you are to convince a totally new customer to make their first purchase.
This is only one among many statistics that indicate that working on engaging your existing customers to continue buying and using your products is one of the most important parts of building a financially healthy startup.
Another commonly known fact is that 80% of your profits come from the top 20% of your customers. This means that it makes a lot of sense to pay extra attention to these top 20% and that it is very important to try to motivate your other customers to join this group by building brand loyalty and working on retention.
Moreover, a study on customer loyalty suggests that repeat customers spend 33% more than existing customers and that a 5% increase in customer retention yields a 25% to 95% increase in profits.
Although not focusing on customer acquisition is simply not an option for startups (you need to find your first customers from somewhere in order to have a business), it is likely a mistake to focus purely on acquisition and to ignore retention, as the second half is what impacts the bottom line the hardest.
Customer acquisition is expensive, and it makes economic sense only if the lifetime value of the customer is enough to support the acquisition cost and any other direct costs at the very minimum. This means that having a good customer retention strategy, which in turn increases the lifetime value of your customers, is a key part of making your acquisition efforts worthwhile.
The drawback of focusing on customer retention is that building brand loyalty is hard, which means that it takes time for your investment in customer satisfaction and retention to bring fruits. That said, for a startup, this is not necessarily a big drawback.
If you are in the process of finding product-market fit (which is something that all early-stage startups inevitably go through), then your most valuable commodity is feedback from the market. Getting into a regular conversation with your first customers is an absolute must if you want to avoid building something nobody needs.
Conveniently, getting into such conversations inevitably shapes a relationship between you and your first customers, which builds brand loyalty and is likely to turn them into repeat customers.
Of course, building personal relationships with every customer is not a scalable strategy, so you can’t afford to do this when you enter the growth stage of your startup. Nonetheless, this doesn’t mean you should abandon customer retention – it simply means you need to use other methods to help them build a relationship with your brand.
For example, performance marketing focused on retargeting or a loyalty program offering early access to new features, content, and discounts are two startup marketing strategies that can help you retain your existing customers at scale.
In summary – paying intimate attention to your clients and trying to make them repeat customers is a fundamental part of making your startup project a profitable business. Ignore customer retention, and you risk building a business that runs on very thin margins.
