Customer retention is the collection of activities a business uses to increase the number of repeat customers and to increase the profitability of each existing customer.
Customer retention strategies enable you to both provide and extract more value from your existing customer base. You want to ensure the customers you worked so hard to acquire stay with you, have great customer experience, and continue to get value from your products.
In short, the acquisition creates a foundation of customers while your retention strategy is how you build customer relationships and maximize revenue for each one.
Before you begin to even consider a retention strategy, you need to understand what your current customer retention rate is. You’ll first need to define a period — whether that’s quarterly or yearly. Then, follow this formula:
Customer Retention Rate = ( (# Customers at End of Period – # Customers Acquired During Period) / # Customers at Start of Period) ) X 100
For example: Imagine you start the year with 20 customers, gain five new customers in the first quarter, and have one customer churn.
( (24 – 5) / 20 ) ) x 100 = 95% retentionGet a call back
Customer retention–the act of keeping current customers that you have already spent money acquiring–is extremely important for any business. Attracting a new customer costs five times as much as keeping an existing one, and depending on the industry you are in, it can cost up to 30 times as much! Increasing customer retention rates increase profits. Many companies don’t realize how important retention is, focusing more on the acquisition and sometimes leaving their current and loyal customers unsatisfied. Customer retention helps increase the profitability of your business in several ways that you might not realize. Here are the reasons why customer retention is key to your business’ success.
Save Money On Marketing
As we mentioned above, it costs significantly more to acquire a new customer than it does to retain an existing one. So save your money and reduce your marketing expenses by keeping your old customers who are already familiar with your products and services. Familiarization with your products and services also means your business needs to spend less time on customer support.
Repeat Customers Means Repeat Profit
Loyal customers will use your business regularly for purchases and tend to spend more money. Existing customers are 3 to 10x more likely to buy than a cold lead (MarTech). They are 50% more likely to buy new products and spend 33% more than new customers. A valued customer trusts your business and believes that you offer a superior service compared to competitors. This customer believes that your company listens to their needs and requests, so you must do so! Pay attention to which brands, products and purchases this customer prefers, as they are more likely to make additional purchases at your business.
Free Word-Of-Mouth Advertising
We’ve said it before, and we’ll say it again: word-of-mouth is the most cost-effective advertising you can have and only comes from your loyal, happy customers. Repeat customers are more likely to tell their friends and family about your business and its products, and customers respect the opinion of those close to them. Customers are happy to tell people about the excellent service they received or a product that they enjoyed.
Just look at some of the numbers.
A successfully retained customer is much more likely to refer to other customers. These referees cost less to acquire and have a higher lifetime value than customers gained from other ways.
Retained Customers Will Provide Valuable Feedback
Customers that you retain provide valuable feedback, and it’s important that you listen.
97% of consumers said they are somewhat likely to become more loyal to a company that implements their feedback, while 55% of consumers said they are not likely to continue being a customer of a company that ignores their feedback (Apptentive).
Customers who make frequent purchases from your business will know which areas of your business could be improved. How can you improve your business if you are only dealing with new customers? Ask your repeat customers how your business can serve them better. This will lead to new opportunities that you may have overlooked, and lead to increased retention rates and sales.
Loyal Customers Will Pay Premium Prices
Long-time, loyal customers are far less price-conscious than new customers because they value your company already and, thus, are willing to pay the price for your services. Many customers associate higher prices with quality service and retained customers trust that your company can deliver this quality over competitors.
For a businesses, customer loyalty is king. It typically costs 5 times more to acquire a new customer than to keep an existing one. Existing customers can be worth more, too—they are 50% more likely to try new products and 31% more likely to spend more than new ones. But despite these telling statistics, customer loyalty is underrated.
So the question today is: Why do customers leave, and what can you do about it?
Your customer service isn’t good enough
Take a deep breath for this one: a staggering 75% of customers say they’ve left a business because of bad customer service experiences. When it comes to retention, providing great customer service is the single most important thing you can do. While we won’t go into the most obvious and easy ways to make your customers happy here, one aspect that is often overlooked regarding customer loyalty is employee churn.
Keeping the same friendly faces that your customers are used to, and that know them, can have a significant impact on retention. After all, people buy from people. So if you look for ways to keep your employees loyal and you’ll indirectly also be keeping your customers loyal.
If a customer has had a bad experience, all is not lost, but make sure to rectify the situation as best you can. A personal connection is key here, so reach out and provide them with some incentive to give you another chance, like a hefty discount off their next purchase.
Their loyalty isn’t rewarded
No one likes to feel they aren’t treated as well as others, and existing customers feel the same about offers designed to entice new business. Never lose sight of the fact that your long-term, loyal customers are your most valuable.
As well as rewarding them regularly for that loyalty, make sure that you know what these customers want, and continue to focus on those products. If you have a product or service that no one buys, except for the handful of customers that comprise a few percent of your sales, you best keep offering that!
You don’t focus on value
Business is a tough, competitive world. Whatever loyalty your customers have, they’ll be tempted by some other business who is offering them a similar product but undercutting you on price. The key is therefore not to focus on price, but on the value you deliver.
Make it worth their time to stick with you, through offering tangible features and rewards, as well as intangible benefits like your outstanding relationship with them and a deep understanding of both what they do and what they need.
You can have the best product in the world and a wonderful team selling it, but if your checkout process takes half an hour instead of the two minutes it should, you can bet no one will be buying!
Technology is an enabler, and in the modern world, that means it can make almost anything quick, easy, and painless. Review all the steps customers have to go through to give you their money, and then work out how to make it faster and smoother.
If you’re bringing in new ways of doing things, from accepting more payment methods to offering a ‘click and collect’ service, let your customers know what’s happening and how they’ll benefit. And never take away a feature they use and love without consultation and explanation aplenty.
Of course, acquiring new leads is great, but retaining existing customers should be your primary focus. Because several studies found that 68% of sales come from existing customers.
Customer retention is a byproduct of customer service and experience. If you create a good experience, that is consistent and predictable, then you have a right shot at improving and setting good customer retention examples.
Everything you do impacts your customers’ perception and their decision to return back to your business or not. Customer experience comprises all the touchpoints with your business starting from website navigation, customer service interaction to the final purchase.
Thus, great customer experience is your key to customer retention.
Here are a few tips:
The unforgettable customer experiences are the ones that create an emotional connection with customers. Businesses that use emotional connections outperform their competitors by 85% in sales.
The primary reason for the bad customer experience is “longer response time”.
Implementing live chat can be one of the best customer retention strategies and significantly reduce the impact of the factor that adversely affects the customer experience.
59% of customers are more likely to buy when brands answer their queries in under a minute.
Customers become loyal towards your brand and retain for a long time period.
How live chat can be a good customer retention idea?
Businesses that empower their customer support team with live customer engagement tools such as co-browsing and video chat can deliver faster solutions in the first contact. The live engagement tools reduce the number of customer touchpoints and deliver effective solutions in the first go.
By using the visual tools, you can guide them through the complex form fill process, make onboarding seamless, and provide a virtual in-person experience.
Customer engagement tools can be one most preferred client retention strategies. Let’s see how.
Create a well-tailored customer retention program
Loyalty programs help your customers feel valued and appreciated. By delighting your customers with special offers and rewards, you make them feel good about purchasing and motivate them to keep coming back.
Motista says, “Customers with an emotional connection to a brand have a 306% higher lifetime value, stay with a brand for an average of 5 years, and will recommend brands at a much higher rate.”
In order to foster better customer relationships, loyalty programs can be highly beneficial in giving frictionless experience.
“Your most unhappy customers are your greatest source of learning.” -Bill Gates
And the easy way to know your customers are happy or unhappy with your products and services is by having regular customer feedback. Customer feedback is vital for every business and an important factor that determines the growth of your business.
Customer complaints or feedback provide you with the customer’s perceptions about your overall business. They also give a clearer view of how you are performing. Collecting feedback requires asking customers to share their feedback about the product, service, or about their overall experience.
The best time to ask feedback from customers is right after a customer service conversation. Collecting feedback becomes effective when you analyze and act upon it.
Hire a well-trained customer support team to ask feedback questions at the right time, choose the right channel to ask feedback to customers, tailor the feedback questionnaire, direct the feedback questions to the right team.
Customers expect contextualized engagement and seamless transitions between channels like phone, social channels, website. Businesses that engage their customers by understanding their journey and needs can deliver a personalized service experience.
When you understand how customers interact with your brand across multiple channels, you can optimize your processes to reduce customer frustration and bridge the gaps in the process. It increases customer satisfaction and acts as a great customer retention solution.
When you can engage customers seamlessly by being where they are and provide consistent service across channels, you deliver the best omnichannel customer service.
Map your customer journey
Mapping your customer journey or buyer journey mapping helps to identify, structure, and improve the complex interactions that customers experience across their journey. This makes your business customer-centric and builds customer loyalty.
Analytics helps you to understand the steps customers go through while interacting with your company to reduce the operational and communication gaps.
Listen & empathize with your customers
One-time customers aren’t going to fuel the continued growth of your business. Retaining customers is crucial to your long-term business success. Businesses that put efforts to understand that what customers are looking for, helps them to offer the right product, service, or solution. Practising listening culture is a great retention strategy for customers.
Thoroughly listening to customers helps you to develop empathic abilities. An empathetic statement has a good impact on customers and the feeling that you can understand their problem. But it is difficult to help customers who are not receptive.
What should you say to customers who express dissatisfaction?
While such situations are quite sensitive to handle, using well-designed chat or call scripts for different scenarios can help to deal with all kinds of customers. The consistent response helps to resolve the customer issues and settle him down to normal.
Provide transcripts to the support team to use during customer service interactions.
Consistent communication are one of the best ways to stay connected with customers and build lasting relationships with them. It proves to be one of the best customer retention strategies and help businesses to attract new prospects and also retain them with your business.
Thus, you can show customers products or news on what they may be interested in. Following such ways to engage customers can be the best retention tactics, any business can follow. They prefer choosing your brand over others and stay linked with you for a longer period.
Keep a track of customer retention metrics
To maximize your efforts on customer retention strategies, you need to understand how to track and measure some key retention metrics. When you know how to calculate the key metric, you can begin to put them to work in your store for lasting, profitable results.
Key customer retention metrics are as follows:
Measuring the retention metrics can help you to identify, which are the strategies that are performing well and the ones that need improvement. Tracking the metrics help you to retain your customers before they become your ex-customers.
Assist proactively to improve customer retention
You can proactively assist your website visitors and customers by using all the customer data you have. Analyzing the data will help you to understand your customer needs and assist accordingly to improve customer retention.
For example, if you are a SaaS business and you know that customers are constantly getting stuck at a certain point. You can create triggers that will automatically send them messages to walk through that issue they are facing.
Leverage employee engagement
As a part of their client retention programs, businesses have to go beyond products and prices. What they need to do is leverage their most under-utilized assets i.e. employees base. When the employees are engaged they deliver personal customer experiences that create customer loyalty.
Gallup study about employee engagement says, a U.S. workforce with only 30% of employees engaged in their work, with active disengagement costing the American economy an estimated $450-550 billion per year.
With well-designed client retention strategies, you can understand your customer needs and improve loyalty. You have to deliver extraordinary customer service and develop interpersonal courtesy to treat customers positively.
Make your customers feel they are part of your business by taking their opinions. Implement their suggestions and acknowledge them to achieve the customer success they deserve.
Set Customer Service Standards
Employees and customers alike need to know what the expectations are. Customers need to know what your business is willing to do for them and employees need to know how you expect them to provide your products and/or services to the customer. Just telling them is not enough; you need to create a document that lays out what you consider to be acceptable customer service standards.
Put the Right Staff and Processes in Place
There is no way that the quality of customer service can exceed the quality of the people who provide it. So your small business needs to have the resources in place to provide the kind of customer service that will meet or exceed customers’ expectations. Whether those resources are front-line counter staff or efficient product distribution systems that will get your product delivered to the customer on time.
Customer service software that provides a help-desk solution or customer relationship management (CRM) can simplify and streamline many of your customer service interactions. You can also provide your employees with apps that will enhance customer service
Train Your agents
Employees who are dealing with customers need to do more than just be friendly if they are to deliver good customer service. Get over the idea that enthusiasm and a smile are enough, although they are a great start; effective customer service training must be reinforced and taught regularly.
Treat Your Employees as Your First Customer
No one enjoys being served by a grumpy disgruntled person. Unhappy employees will never create happy customers. So keep your employees happy. When your employees are happy they will look forward to work because they are valued and appreciated, says Laura Lake — the kind of employees who are ready and willing to value and appreciate your customers.
Solve Customers’ Problems Quickly and Easily
Customer problems are the best opportunities to create loyal customers.
Research by the Customer Contact Council found that exceeding customers’ expectations had surprisingly little effect on customer loyalty; it was the amount of effort a customer had to make to resolve problems that correlated strongly with customer loyalty.
Create a Customer Loyalty Program
Customer loyalty programs can not only help create loyal customers but help you gain new customers. Successful loyalty programs can also boost your small business’s bottom line as they motivate for loyal repeat customers to buy more. It is always a more cost-effective and easier way to increase sales than attracting new customers.
Assess Your Customer Service Regularly
Customer feedback is a great tool for improving customer service and customer loyalty. Your customers are telling you what they like or don’t like about your products or services regularly in person, through email, by phone or through social media. Use these interactions to identify consistent issues and act upon them.
You should make sure that you also seek the opinions of your less vocal customers, by conducting customer assessments and/or using customer surveys.