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8 Reasons Customer Retention Increases Profitability

customersthatstick recently released an infographic illustrating customer retention by the numbers, which you can view here.

After reviewing the infographic, we can highlight the key reasons why customer retention leads to increased profitability.

These are as follows;

  1. The cost of acquisition occurs only at the beginning of a relationship: the longer the relationship, the lower the amortized cost.
  2. Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue).
  3. Long term customers tend to be less inclined to switch and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume.
  4. Long term customers may initiate free word of mouth promotions and referrals.
  5. Long term customers are more likely to purchase ancillary products and high-margin supplemental products.
  6. Long term customers tend to be satisfied with their relationship with the company and are less likely to switch to competitors, making market entry or competitors’ market share gains difficult.
  7. Regular customers tend to be less expensive to service because they are familiar with the processes involved, require less “education”, and are consistent in their placement.
  8. Increased customer retention and loyalty makes the employees’ jobs easier and more satisfying. In turn, happy employees feed back into higher customer satisfaction in a virtuous circle.

CXRM is customer experience and relationship management software. CXRM helps you improve the experience your customers have with your business. Read more about the business benefits of using CXRM.

Published: 03-02-14 by Rob Lampard

customer retention, increasing profitability, customer experience, cxrm