Back in 2001, the marketing firm Bain & Company released a study showing that just a 5% increase in customer retention can lead to a 25% increase in profit. More than two decades later, marketing gurus are still quoting this statistic.
So, does this old nugget of wisdom ring true in 2024?
Though 23-year-old findings don’t always hold up in the age of ecommerce, in this case, the answer is a resounding yes.
Repeat customers bring more value to your business than new customers, and while every customer counts when you’re growing your brand, it’s the loyal ones who can make or break your success. Here’s why the repeat customer is the best customer—and how you can acquire some of your own.
Table of Contents
- Understanding the customer types
- New customers
- Repeat customers
- The value of repeat customers
- They cost less to acquire and retain
- They will champion your brand
- They drive business sustainability
- Strategies to encourage repeat business
- Deliver an exceptional customer experience
- Develop a loyalty program
- Personalize your marketing materials
- Engage in consistent communication
Understanding the Customer Types
When it comes down to it, there are really just two types of customers: new customers and repeat customers. The differences between the two may seem obvious at first glance, but for the sake of clarity, let’s compare each type.
What Are New Customers?
New customers are your business’ first-timers. Maybe they’ve never bought the product you’re selling and decided to try your brand; maybe they’re not happy with a competitor’s version and are looking for something different.
Either way, these are people who, through your ad campaigns, a Google search or word of mouth, have found your company and made a purchase.
Of course, new customers are the foundation of your business—without them, you’d have no customers. But too often, new customers remain one-time customers. And what you’re really after is repeat customers.
What Are Repeat Customers?
Repeat customers are the new customers who come back for more. They’ve tried your product or service and liked what they saw. For some, the journey from new to repeat customers is almost instant—after one purchase, they’re hooked on your quality, customer service or story.
For others, developing trust in your brand takes time and reassurance.
But no matter how a customer becomes a loyal supporter, they’re an enormous asset to your business.
The Value of Repeat Customers
Look at metric after metric, and you’ll see that the sheer value of repeat customers can’t be overstated. For example, existing customers punch well above their weight. Even though repeat customers make up just 21% of the average business’s customer base, they generate 44% of total revenue.
That’s because, on average, repeat customers spend 67% more on orders than new customers. Couple that with their likelihood to shop with you more frequently, and you have a recipe for revenue.
However, higher profits aren’t the only reason to love your repeat customers. Let’s look at some of the other benefits of building a loyal fanbase.
1. They Have a Lower Acquisition Cost
To put it simply, acquiring new customers is expensive. A 2022 study found that 66% of direct-to-consumer (DTC) brands believe customer acquisition costs are increasing.
And, well, they’re right. Today, acquiring a new customer costs five to six times more than "reactivating” an existing one.
Why is that? In the hopes of catching an untapped consumer’s interest, you might be spending money on various strategies, including:
- Pay-per-click (PPC) ads
- Affiliate marketing
- Content marketing (blogs, videos, etc.)
- Search engine optimization (SEO)
And through all these efforts, you’re relying on educated guesses and trends from previous buyer data to say what will encourage them to purchase. Sure, you can craft ads that should resonate with your target market in theory, but yet-to-be customers still come with various unknowns.
With existing customers, every step is simpler. You already have their email addresses, so you can reach out to them directly. Plus, you know their habits and preferences from past orders, so you can personalize your marketing efforts to appeal to them.
While turning a one-time customer into a lifelong supporter isn’t a piece of cake, ultimately, repeat customers save you time and money.
2. They Become Brand Champions
Repeat customers save you money in more ways than one. Not only do they cost less overall to advertise to, but they also promote your products to new customers for free—without you even asking.
As buyers fall in love with your brand, they start telling their friends and family about you. This word-of-mouth marketing from your most fervent brand advocates can do wonders for your bottom line. Think of it as an influencer campaign that you’re not paying for.
As a bonus, your biggest fans become your biggest critics. That may seem like a negative, but in reality, these are the people you want to hear from.
Converting a shopper into a repeat customer is like building any relationship—you need to build trust and transparency by listening. Your most loyal supporters will gladly share feedback about your new products and services—which they’re 50% more likely to try—and it’s in your best interest to consider implementing it.
Not only will you keep your repeat customers satisfied, but you’ll also enjoy genuine improvements to your offerings, which will help you impress new customers.
That’s a textbook definition of ‘win-win.’
3. They Drive Business Stability
To top things off, repeat customers also contribute to predictable revenue streams. Because they shop regularly, you can count on them to be a more consistent source of revenue.
This is especially true with a subscription model, where customers are all but guaranteed to be repeat buyers, month after month. But even if you’re running a standard, subscription-free retail operation, you can rely on your repeat customers. Their continued support can even help you weather economic downturns.
Strategies to Encourage Repeat Business
It should be clear by now that repeat customers are invaluable to your business’s growth and success. So, how do you captivate this elusive category of consumers?
Well, you have to win them over with strategies like:
- Delivering an exceptional customer experience
- Developing a loyalty program
- Personalizing your marketing materials
- Engaging in consistent communication
Deliver an exceptional customer experience
From the first touchpoint to checkout and beyond, shopping with you should be quick, easy and enjoyable. Problems should be few and far between—and when they come up, your support team should be able to solve them immediately.
Develop a loyalty program
Is there any better way to retain customers than to reward them for their devotion? By offering discounts, exclusive products and more to members of your loyalty program, you can quickly increase your number of repeat customers. A referral program is equally beneficial.
Personalize your marketing materials
Because customer retention is all about relationship-building, putting a personalized spin on your emails and order confirmations can help you forge stronger connections. Plus, 71% of consumers now expect personalization.
Engage in consistent communication
Don’t let your customers forget about you! Stay top of mind through frequent, value-driven interactions via social media, email newsletters and more.
For inspiration on how to utilize these strategies and others, look to brands known for their loyalty, such as:
- Lululemon Athletica
- Domino’s Pizza
Even if you don’t have the massive marketing budget of these corporations, you can still emulate some of their strategies and slowly assemble a legion of repeat customers.
Invest in Customer Retention and Success Will Follow
Today, just like in 2001, repeat customers are the cost-effective key to thriving as a business. With every strong, long-term customer relationship comes increased revenue, reduced marketing costs and so much more.
So, while there are a million things for a business owner to focus on, we highly suggest prioritizing your customer retention strategies. It will take time to develop a loyal customer base, but the results will be worth it.
If you’re not sure where to start—or if you’ve got ideas you want to implement—connect with us today. Our ecommerce experts would love to help you turn your one-time buyers into loyal, engaged, support-you-till-the-end customers.