How Much Are Loyal Customers Worth to Your Business?

Working on building your loyal customer base is one of the most profitable strategies you can put into effect at your business. Customer acquisition is always essential, as you can’t grow without taking on new customers, but what we often miss out on are the profitable rewards that loyal customers bring. How much are loyal customers worth to your business?

Did you know that most businesses put 80% of their marketing budget toward customer acquisition? That’s troubling because nearly half (40%) of an online store’s revenue comes from just 8% of customers – repeat or loyal customers.

Why continue devoting so much of your marketing budget to acquire new customers when such a small chunk – 8%, of your loyal customers – is creating nearly half of your revenue?

There are more reasons and statistics that say loyal customers create more profits and revenue for businesses. Check them out below.

How Much Are Loyal Customers Worth to Your Business?

If you’re wondering “How much are my loyal customers worth?”, the answer in short is “A lot.” The numbers don’t lie – let the following statistics be your wake-up call.

Loyal customers are more likely to convert

Marketing Metrics author Paul Farris found that a loyal customer has around a 60-70% conversion rate – this is the stuff of marketing dreams. Adobe did a similar study and found that loyal customers who have purchased from you twice before are 9 times more likely to convert than first time customers.

Compare that conversion rate to one of a newly acquired customer – 1-3% on average – and it’s easy to see why loyal customers are worth more in the conversion department.

Loyal customers come back more often

Sure, the fact that they’re loyal customers at all means that they are repeat shoppers at your business. But loyal customers come back more often to buy from your business, and the more times they’ve shopped with you in the past only increases their odds of making another purchase!

After making one purchase, a customer has around a 27% chance of coming back to make another purchase. If they do make that second purchase, their likelihood for making a third jumps to 54%. Convinced that loyal customers are the key to boosting profits yet?

Loyal customers spend more

The top 1% of your loyal customers end up spending more than 5 times more than the lower 99% of your customers. Your top 10% of loyal customers spend almost 3 times more per transaction than the lower 90% of customers. Loyal customers spend more in general, and the amount they spend tends to increase with the number of times they’ve shopped at your business.

Loyal customers keep you afloat during the busy season

On average, customers spend about 17% more than usual during the holiday season, but there’s more to get excited about – the amount your loyal customers spend. Repeat customers spend around 25% more per order than new customers during the holiday season. Your loyal customers are a big part of what keeps your business afloat during the busy holiday season.

Loyal customers become brand ambassadors

One study found that the likelihood of recommending and referring others to a business increases exponentially with the number of purchases a customer has made. For example, after 10 purchases, a customer is more than 50% more likely to refer others to the business or engage in word of mouth advertising (“You’ve got to check out this great little bookstore on Main Street, I shop there all the time!”).

So, how much are loyal customers worth to your business? Not only do loyal customers shop more often, spend more when they shop, and convert more readily, they also help you acquire new customers. It’s time to start diverting more of your acquisition budget to keeping your loyal customers and building better retention tools.