Do You Know Customer Retention Is More Profitable Than Attracting New Customers?

  • February 17, 2022
  • Blog
No Comments

I know, I know, that sounds wrong. Why should you care more about keeping your old customers when there are millions of new people out there who should be buying your product? Why not just keep moving and hoping for more? And do you think “How to increase the customer lifetime value”

If you have found yourself wondering something along these lines, then you’ve come to the right place.

What Do You Mean By Customer Retention?

That is an excellent place to start with.

You’ve probably guessed it by now: keeping your customers. Or, if you’d like a more official definition, it defines the activities and actions a company takes to keep customers coming back for the same and more. 

Do I Have To Keep My Customers? Why Can’t I Move Onto New Consumers?

It seems like a lot of work, ensuring that the people who have already bought from you continue to buy from you. And there is no shame in wanting new customers. 

But what’s the use of trying to get new customers when the ones who already buy stop coming to your business? After all, it is their patronage that keeps your business running.

You’d lose the loyal customer base you’d already have that you could rely on to keep purchasing, as well as those new customers who would either like what you’re selling or won’t.

It seems like something out of a nightmare that all of the hard work you put in is going down the drain because of something like this.

What Are The Benefits Of Customer Retention?

Well, I’m glad you asked!

The benefits of keeping your customers include, but are not limited to, a lower exponential cost compared to getting new customers over time, the fact that loyal customers bring more customers in, in addition to being easier to upsell to.

In any case, since we have now moved past the need-to-know questions, it’s time we dig a little deeper into the topic as a whole. 

Let’s talk about customer lifetime value!

What Is Customer Lifetime Value?

Customer Lifetime Value refers to how valuable a customer is over the total time they spend with a certain company. In other words, how much profit can you make with the help of one specific customer throughout your relationship as buyer and seller?

Once you know that, you should start to apply it. But first, of course, comes the reason why you should care.

Why Should I Bother With Customer Lifetime Value?

Well, you should take customer lifetime value into consideration because it gives you an idea of what your company is worth to a regular customer and the overall profit that you can make from your customer base.

This means you can easily budget and shape your marketing plans accordingly and see if retaining that customer is worth the effort.

Why Is Customer Lifetime Value Important To My Online Business?

Just like for an offline company with customers physically coming on-site for purchasing, you want to keep a loyal base to rely on for repeat sales.

In a world where information is available to us in the blink of an eye (and some creative research), people rely more and more on what previous customers have thought about a website before they would think about investing their hard-earned money.

By having a loyal customer base, you pave the way for new consumers to join.

What Value Does Customer Lifetime Value Add To A Company?

The value of your profits depends on how high your customer lifetime value is the greater profits you are making.

To possible investors, the customer value can help them decide to provide you the valuable funding you may need to keep up with increasing demands for your product, in the form of skilled labor, extra capital, or even a bigger location to process orders.

How Do I Measure Customer Lifetime Value?

There is a formula to measure it. The easiest version of the formula is just multiplying the average of all orders throughout a customer’s time with the company, the average of purchases made in a year, and how long the particular customer has been with the company, using all the data gathered so far.

While the process may be long and tedious (depending on how large your current customer base is), you don’t have to work out each formula manually. You can find calculators online—or, you know, a friend who enjoys mindless equations and doesn’t mind spending time on them for you!

There are some things you have to add in, though, before you can get to this final answer: 

  • Customer Acquisition Costs (CAC)
  • The Cost Of Current Sales
  • The Money You’re Spending On Marketing
  • Operating Expenses
  • And the VIP of it all; What It Costs You To Make Your Product Or Service.

You’ve Told Me All This, But How Do I Improve My Customer Lifetime Value?

There’s no set method to get all the buyers you can hoard and then some, but here are a few tried-and-true methods that have worked for other people. So Do you think “How to increase the customer lifetime value”? Let’s get ideas from Shopify experts.

Customer Experience

Make the purchasing process and the actual product something that the customer will remember. You like to keep ordering things from that one candlemaker because they come in pretty packaging, and the candles themselves smell and look good. 

Keep what you would like to have in a seller. It’s the little things that customers like.

Email And Messaging

Think about it. 

Your food delivery app keeps you regularly supplied with coupons and vouchers. Clothing shops and other retailers keep their buyers coming back through sales and discounts. Even banks provide special offers to satisfy their current users and bait new consumers. 

Why shouldn’t you?

Loyalty Programs

Take an example from Netflix and Patreon. They both charge monthly fees for a wide array of services!

Other businesses use loyalty programs, too. Coffee shops and Cafes (And McDonald’s!) have point systems where points are collected with every purchase, and you can exchange them for certain items after a certain amount.

And if you look at Amazon Prime, they have a partner system where their consumers can benefit from other businesses after a certain number of purchases. 

You can easily apply the program that best fits your business and make it your own to convince customers to continue buying from you.


Well, there you have it. We chronicled quick and easy answers for you regarding customer retention and its importance. And now you know “How to increase the customer lifetime value”. If you’ve ever been curious about why companies are successful and have wanted to make your own business just as well-off, this is the answer!

This article is the one-stop guide to learning why customer retention is much more profitable in the long run!

Subscribe to our newsletter!

More from our blog

See all posts