The Importance Of Customer Longevity & Loyalty
Customer longevity doesn’t just increase your sales. It’s a fantastic opportunity to grow your business, increase your ROI and boost your profits. Read on to find out how…
We’re so focused on getting as many customers as possible through the door that we often neglect something important: customer longevity.
This is how long a customer stays with your company. Generally, the longer they stay with you, the more they’ll buy from you. That’s loyalty right there.
But customer longevity is about more than just increasing your sales. It also increases your ROI (Return On Investment) and gives you better overall profits.
In fact, just a 5% increase in customer retention can bring a 25%-95% increase in profits.
That’s an incredible amount. Just think about it – even the slightest increase will improve your profits by a minimum of 25%.
This alone shows why your business should be paying attention to customer longevity. But it’s also important to understand customer longevity ≠ customer loyalty.
There’s a lot of choices out there for consumers and it’s getting easier to switch. Longevity equates to staying with a business without a clear alternative or reason to change. Loyal customers stay through thick and thin. It’d be risky to hedge your bets on solely long-standing customers but you might not get the constructive feedback to improve with loyal customers either.
It’s all about balance. To illustrate that further, here are the top three reasons why customer longevity will grow your business and improve your profits.
1. It Increases Your ROI
Focusing on customer longevity means selling your products and services to them.
Unlike new sales, these customers are already in your system.
That means you don’t need to spend money making them aware of your brand and services, building trust and converting them into customers.
They’re already there. They know your brand and they’re happy with your products. All you have to do is get them to purchase again.
What’s more, if they’re already happy with your brand, it will also be a lot easier to sell to them again. In fact, you have a 60-70% probability of selling to an existing customer compared to 5-30% for a new customer.
So, you’re making new sales while saving money – improving your ROI drastically.
2. You’ll Increase The Value Of Your Orders
Loyal customers aren’t just easier to sell to.
It’s also easier to increase the value of your customers and upsell them with newer or more expensive products.
For example, repeat customers are 50% more likely to buy new products and spend 33% more than new customers.
This is because they already have trust in your brand. They’ve had good experiences and know that your product works – so they generally don’t mind paying a little bit more for the same high-quality they already use.
So, they’ll spend more money with your company, which means better profits for you.
3. You’ll Increase Customer Lifetime Value
Lifetime value is fundamentally how much a customer will spend with you over their lifetime.
You can find out more about it, and how to increase lifetime value in our post here.
Generally, the better customer loyalty you have, the better their lifetime value will be.
Let’s say, on average, it costs about £50 to acquire a new customer.
If your customer just buys one £150 product and then leaves, you’re making a profit of £100.
On the other hand, you’ve got a repeat customer who spends £1000 with your company over the years. That gives your business a profit of £950 and shows a much better lifetime value than new customers.
Knowing, and increasing your lifetime value doesn’t just improve your profits. It also helps inform your marketing and advertising when getting new customers.
If your average customer lifetime value is £500 – how much are you willing to spend to acquire them? If your current budget can be increased, you’ll be more likely to get more, high-value clients through the door and watch your profits soar.
4. You’ll Naturally Get More Customers
Happy, long-lasting customers are more likely to tell others about your business.
It’s not just a the odd few either. 60% of customers will tell friends and family about a brand if they feel loyalty to them.
Customer referrals can be a powerful thing for your business. In fact, 92% of people trust recommendations from family and friends more than other forms of marketing.
For some industries, referrals are key. For B2B businesses, 84% of decision-makers start their buying processes with a referral.
Once referred, people are 4x more likely to buy from your business.
This not only increases your sales but also widens your customer base without any extra expense to your marketing.
Top Tips To Increase Longevity
Increasing your customer longevity is fantastic for boosting your sales, increasing the lifetime value of your customer, getting more customer referrals and improving your ROI.
It really is a win-win situation.
There are many different things you can do to increase your customer longevity.
One of the core factors is to ensure that you’re always providing positive customer experiences and responding to your customers.
It’s a simple concept.
If they have a good experience, they’re more likely to stick to your brand. If they’ve had a bad one, they’ll go elsewhere.
You can also introduce schemes that reward their loyalty. This can include points systems that reward them the more they purchase with you – or special discounts or offers if they order through your company again.
You can also increase customer longevity through referral schemes. This scheme works in two ways for your business.
Firstly, you’re getting new customers and sales through your door with increased referrals.
Secondly, you’re increasing customer longevity by rewarding existing ones for their loyalty – giving them an incentive to carry on being a customer of yours.
Dropbox is still one of the best examples of the power of referral schemes. Back in 2008, they started offering free storage to anyone that referred new users to the company. This resulted in the business growing 3900% to 4 million registered users in just 15 months.
That’s an incredible amount of growth and something your business could benefit from investing in.
Increase Your Profits With Better Customer Longevity
Your business will never stop still.
You’re never going to reach a certain amount of customers and think “that’s enough now! Let’s stop here!”.
You’re always going to widen your customer base and bring more people in.
But, by focusing on customer longevity – you’ll increase the lifetime value of your customers and be able to watch your profits soar.
The better your longevity, the more you can invest in acquiring new customers and the more likely they’ll become loyal customers.
And so the same cycle will start again, allowing your business to grow.
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