Meet Maya. You have spent $20 on Instagram advertising in order to acquire Maya as a new customer in your candle-making empire. Maya is excited about your product and came to buy $20 worth of candles. Great. You just broke even. Not bad, but you did not make any profit.
Does this situation sound familiar? Higher customer acquisition cost has been the reality for many small business and startup owners for a while now. Just within the last 5 years, the average customer acquisition cost has more than doubled! (source: CB Insights) Larger companies spend more and more money on digital advertising which in most cases is auction-based.
Now, imagine that as the result of your retention efforts, Maya comes back again and buys another set of candles for $20 while you have not spent any additional money on advertising. You are now $20 above break-even. Cha-ching.
Your profit directly depends on the number of repeat customers (a.k.a. loyal customers) and recurring revenue you are able to generate with repeat visits.
On top of this, Maya’s loyalty will also make her appreciate the benefits of personal touch and consistent outcomes she receives with her purchase. Win-win.
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