The Art of Retention: How Businesses Can Maximize Profit By Keeping Their Customers

Most Nigerian businesses are failing because they haven’t mastered how to retain customers, and this gap is costing them profit and long-term growth.

 

“DealDey, what kind of useless customer service do you guys run? You don’t reply to emails, you don’t answer calls, you don’t reply to DMs.”

This was a post made by one of DealDey’s unsatisfied customers on December 31, 2018. By the first week of 2019, DealDey, one of Nigeria’s early e-commerce startups, would officially shut down.

As is often the case when businesses of such caliber fold, various interpretations were offered. Some argued that DealDey, which was founded by Konga founder Sim Shagaya, did not conduct adequate market research to understand the dynamics of Nigeria’s e-commerce. Others opined that Nigerians were hesitant to trust e-commerce platforms. Logistics—the process of purchasing and receiving goods—was another challenge analysts highlighted.

While it could be one or a combination of these factors, there is a deeper, often overlooked reason why promising businesses fail.

First, DealDey was founded by Shagaya in 2011, who would launch Konga the next year. Konga has gone on to become what is regarded as Nigeria’s largest online mall, reportedly valued at $3 billion. Hence, one could make the case that DealDey had the backing of a founder who understood the fundamentals of running an e-commerce business, which might explain why in 2015 DealDey attracted an investment of $5 million from Kinnevik.

The Often Neglected Factor of Why Businesses Fail

According to a recent report by Moniepoint, which now provides banking for over 10 million people and businesses across Nigeria, more than 50 percent of Small and Medium Enterprises (SMEs) fail within just 12 months of starting operations. By the fifth year, the research shows that a staggering 95 percent of SMEs would cease operations. To put this into context, out of the reported 136,961 new businesses registered in Nigeria in 2022, fewer than 6,900 would be expected to still be in operation by 2027.

What analysts often fail to factor in their analysis of why businesses fail is how businesses acquire and retain customers, and the cost they incur while managing these two vital processes.

Ingressive Capital, a venture capital firm that invests in early-stage, tech-enabled startups in Sub-Saharan and North Africa, estimates that African startups allocate between 20 to 40 percent of their operating budgets to marketing and customer acquisition.

With such high expenditure going to acquisition, it is often disastrous for businesses that fail to master the art of retention.

The 5-25-95 Rule of Retention

The 5-25-95 rule argues that a 5 percent increase in customer retention rates can lead to a 25 to 95 percent increase in profits.

Why is retention incredibly profitable?

Bain & Company, a top management consulting firm, observed that “return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline.”

But there’s more to why prioritizing retention is crucial for businesses. Returning customers are far more likely to recommend your business to others, and they are even more willing to pay a premium than to switch to a competitor with whom they are neither familiar nor comfortable.

This logic is further justified by data: a recent study by BIA Advisory shows that retained customers spend 67% more than new customers.

What we’ve seen in Nigeria, sadly, is businesses trying to extract value from their existing customers rather than nurturing and engaging them.

Hence, the pertinent question is: how can businesses protect and grow their customer base?

How to Keep Customers and Maximize Profit

1. Personalize Customer Communication

Customers respond to businesses that understand them. Sending relevant offers, reminders, or updates makes a customer feel valued. Marketing automating platforms like Yournotify now enable businesses to send personalized notifications across multiple channels—email, SMS, and WhatsApp—helping brands stay connected with customers without being intrusive.

2. Be Prompt and Responsive

A slow response can quickly erode trust. Businesses must ensure that inquiries, complaints, and requests are handled swiftly. It is crucial that businesses invest in SaaS (Software‑as‑a‑Service) platforms that provide automated alerts and reminders to ensure their team never misses a customer interaction. This will improve response time and reliability.

Also Read: How Rewards and Referrals Can Boost Enrollment and Retention

3. Create Tiered Loyalty Programs

Encourage customers to engage repeatedly by offering tiered loyalty systems. Reward repeat purchases or consistent activity with points, milestones, and exclusive perks at every stage. As customers progress through tiers, they can unlock greater rewards such as early access to offers, premium discounts, personalized experiences, or VIP-only events. This approach not only motivates ongoing engagement but also fosters brand loyalty, turning one-time buyers into lifelong advocates.

4. Reward Systems for Instant Delight

Retain your customers by giving them immediate rewards for engagement. Delight them with incentives such as airtime, data, gift cards, vouchers, or cashback. Seamless, direct delivery of these rewards builds trust, strengthens your relationship with the customer, and keeps your brand top of mind. Platforms like Yournotify help businesses to create an automated and scalable reward system that ensures that every interaction counts towards retention.

5. Gather Feedback and Act on It

Customers like to feel heard. Conducting surveys and acting on feedback improve products and services while showing that the business cares.

Since customer acquisition is expensive, it implies that existing customers should be treasured and incentivized to remain loyal. Moreover, ensuring that your business retains already acquired customers yields immense profit rewards.

Hence, by focusing on personalized engagement, prompt service, loyalty rewards, transparent communication, and feedback loops, businesses can reduce churn, maximize customer lifetime value, and increase profit.

Also Read: How to Automate Follow-Ups & Reminders for Better Customer Retention