5 killer customer retention stats
Customer retention is so important to the modern retailer. Supply in places to shop is outstripping demand. This increase in retail competition plays into the hands of the Googles and Facebooks of the world, as it ultimately means an increase in Cost-per-Click. So holding on to those you've spent hard-earned money to acquire is a no brainer to us. If you disagree, here are some retention stats which back up our stance:
5 stats that prove why customer retention is so important
- According to the research leaded by John Fleming and Jim Asplund, engaged customers generate 1.7 times more revenue than normal customers.
- According to Gartner Group, 80% of your company's future revenue will come from just 20% of your existing customers.
- Increasing customer retention rates by just 5% increases profits by 25% to 95%. Source: small biz trends.
- In apparel, the average repeat customer spent 67% more in months 31-36 of his or her shopping relationship than in months zero-to-six. And in groceries, customers spent 23% more in months 31-36 than in months zero-to-six. Source: Bain study
- On average, an apparel shopper refers three people each to an online retailer's site after their first purchase with the retailer. After 9 repeat purchases, that same shopper will have referred seven people to the site. For consumer electronics and appliances, initial referrals are just over four, while total referrals after 9 repeat purchases were 13. Source: Bain study
And some stats on current spending attitudes towards retention...
- According to a study by Adobe, online retailers spend nearly 80% of their budgets acquiring new customers, leaving on 20% on retention. We believe more is spend on acquisition now. This Adobe study was produced in 2012 before the advent of Paid Social Media Marketing, which has grown in popularity as an acquisition channel.
- An average of 14% of online retailers marketing budgets go towards email marketing, despite it generating some of the lowest costs per order placed.
Having a targeted and relevant communications programme will help you keep customers engaged. We think retailers should certainly spend more time on retention strategies than they currently do. They should also use data about existing customers to acquire new ones in a more cost-effective manner, ensuring that they save money by avoiding having to "re-acquire" customers through deep discounts.
We also think that every online retailer should have a systematic way of re-engaging customers at key points in their lifecycle. This means putting in place the right data integration, segmentation and analysis software, which enables targeted communications across marketing channels. And having a clear and simple plan of how to engage customers, when, with what call to action.