Why SaaS Businesses Must Retain Customers?
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Why SaaS Businesses Must Retain Customers?
Customer Loyalty
Customers that are retained tend to spend more and purchase more often as compared to novel customers. This is because
the retained consumers understand the value of a service or product and continue to visit repetitively.
Word-of-Mouth Advertising
One of the most effective ways of increasing brand awareness is through word-of-mouth advertising. When customers share
their satisfactory experiences with their friends and relatives, there is a higher chance these people give the products or
services a try.
Through this kind of advertising, the companies acquire new consumers, and that too, without spending.
Higher Return on Investment
Companies that have high customer retention have greater ROIs. If you are thinking about the extent to which this can
increase company revenues, here is your answer:
"5% increase in customer retention produces more than a 25% increase in profit." -Fred Reichheld
The major reason for such high returns is that return customers tend to purchase more products from a business over time.
Concerning the profitability of SaaS companies, the expected revenue generation is even higher. Based on research
by Swagata Kumar, “Boosting B2B customer retention by 5% increases profits by up to 95%.”
More Affordable
As stated earlier, acquiring novel consumers requires high investments in advertising, which is an expensive process. On
the other hand, retaining an existing customer requires lesser expenditure. If you do not believe this, let’s see what Kate
Silver said:
“Most of the research shows that it costs between 6 to 7 times more to get a new customer vs. keeping the
customers you already have.”
Higher CLTV
CLTV or Customer Lifetime Value refers to the overall revenue that an organization expects to earn from every customer.
Since return customers are likely to avail of more services from a company due to their love for the services and hands-on
experience, a company with a higher customer retention rate is likely to have greater CLTV.
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