Creating long-standing customer relationships has always been a key objective for businesses spanning every sector, but achieving this becoming an increasingly important operational necessity. Consider some of the following reasons why being able to cultivate customer loyalty has come to be so determinative to companies’ ability to sustain growth and profitability
The Cost of Getting New Customers Is Higher
Companies that have to work hard to set themselves apart from their competitors have encountered higher customer acquisition costs than they are accustomed to seeing. Getting each new customer to make a purchase entails expending considerable resources.
The net profit that businesses derive from these sales can shrink because of the expense that goes into generating those sales. In contrast, getting repeat sales from an existing customer does not represent nearly the same financial burden.
This is especially significant in an era when corporations are contending with increases in their overhead attributable to inflation, much of which is driven by the large corporate actors rather than changes in consumers’ spending power. Mega-corporations that have recently attained record profit margins have continued to charge their customers even higher while still managing to keep their business.
Customers Are More Discerning About Who They Give Their Business To
The tactics that businesses use to engage customers with personalized experience substantially shortens the arms’ length that has traditionally stood between them. At the same time that businesses are looking at their customers with enhanced scrutiny, their customers are doing the same. They are well aware that companies are using their data, and they are understandably wary about the means by which those companies have acquired it and what they are going to do with it.
Notable current business trends indicate a heightened level of concern among consumers about how companies are reconciling their use of personal information with their aim to present people with personalized marketing communications. In addition, there are justifiable fears about how companies will use data in their outreach activities as the vehicles that they use become exponentially advanced. Using AI in managing outreach and engagement campaigns, for example, is a great opportunity for companies but it has also put customers’ guard up.
Companies Are in Dogfights for Airtime and Screen Time
Within the past several years, a resurgence in the rapid growth of ecommerce has made a lot more options available to anyone who is shopping for just about anything. There are a greater number of places for people to look for deals on the things that they need. Theoretically, this should be an entirely positive development for the average consumer. However, this is not always the case.
Bear in mind that when people go onto the internet for any purpose, the landscape looks different from everyone’s vantage point. Analytics about individuals’ usage, interests, and demographics drive what they see and steer various marketing interests towards their direction. Without a comprehensive view of the full lay of the land, people are not always as well-equipped to find what they are looking for as they believe themselves to be. They are continually bombarded with exhortations about what they need to buy, which online merchants to check out, which apps to get.
The companies that are willing and able to put forth the greatest amount of resources to capture space on people’s aggressive tactics that companies use to make their way onto people’s screens take up a lot of their resources. The companies that spend the most on learning about potential customers before they’ve made a single purchase are going to be in the best position to attract new customers.
Undoubtedly, a lot of companies’ increase in marketing costs tend to get pushed onto new and loyal customers alike. However, the newer customers might be more likely to receive compelling promotional offers than the loyal customers who companies are confident about being able to hang onto.
Ultimately, customer retention needs to figure prominently into companies’ growth strategies. Keeping customers is just as important if not more important than acquiring new ones.