Retaining existing customers is much more valuable than acquiring new ones. Some say it costs five times more to acquire a new customer, and other says it costs seven times more. The numbers might be a little fuzzy, but the point still stands’; customer retention is cheaper, more profitable, and more effortless than customer acquisition. Here, we will learn all about customer retention and some of the best practices companies use to retain customers. Let’s dive in.
What Is Customer Retention?
Customer or client retention is turning that one-time buyer into a regular customer. So, customer retention’s endgame is to keep hold of your existing customers. The methods and strategies of customer retention vary in each sector. For example, an e-commerce store can have different customer strategies than a software store. But in all industries, the goal is the same: to provide quality services that will keep the customer coming back.
Customer Retention Formula
Before you consider your customer retention strategy, it’s essential to know your current customer retention rate. First, you need to define a period, whether it’s yearly or quarterly, then follow this formula;
Customers at The End of Period – Customers Acquired During That Period / Customers at Start of Period x 100.
For example, if you had 20 customers at the start of the year, acquired five more in the first quarter and have one customer churn, your retention rate will be:
24-5 / 20 x 100 = 95% retention rate.
Knowing your retention rate will help you audit churned customers and analyse the similarities on why they left or the type of customers that leave.
The Importance Of Customer Retention
It’s Cheaper Than Acquiring New Customers
There has been tons of research on customer retention vs acquisition, and even though the data may vary, customer retention always comes out as a more economically viable option.
Your Brand Will Stand Out
We see tons of marketing ads every day, but only a few people engage with them. They engage with those they feel an emotional connection with on some level. The best brands that stand out have a unique customer retention program.
It Will Boost Word-Of-Mouth Referrals
Your best source of new customers or clients is your loyal customers. Despite all the marketing done by companies on social media platforms, most people are still strongly influenced by referrals from friends and family. Millennials, in particular, are 90% more likely to share their brand preferences on social media.
It Will Boost Customer Feedback
Feedback is essential to the success of any business. When customers provide feedback, they are willing to give you the benefit of the doubt. If you resolve a complaint from a customer, they are more likely to stick with you, and they are less likely to decrease their spending.
It Makes It Easier To Try New Things
Loyalty is unpredictable, and too many changes can chase your customers away. But once you have established a core customer base, it’s easier to explore other boundaries. You can change the logo or introduce a new product, as long as you maintain the basic foundation that keeps your customers, they will stick with you through thick and thin.
Customer Retention Strategies
We’ve learned that customer retention is more economically viable than customer acquisition. But it’s also important to note that even though customer retention is cheaper, it’s not necessarily easier. You need to take specific steps to make your customer retention successful. Some of the strategies include:
Set Reasonable Expectations
Setting realistic expectations can significantly impact retaining your customers and boost business growth. For example, your online store can’t compete with Amazon regarding fast delivery. What you need to do is make sure you keep your customer informed. If a customer knows from the beginning that their package will take much longer to arrive, then it is unlikely to be a problem.
Establish a Loyalty Program
A customer loyalty program is an essential part of your customer retention system. Once you enrol your customers in the loyalty program, you can make them feel special by hooking them up with offers, exclusive deals, and a sneak peek at new products. Offering value to your customers without cloaked agendas will go a long way toward boosting customer loyalty and retention.
Pay Attention To Questions
Paying attention is a simple customer retention technique and can often be overlooked. As a business owner, you know the ins and outs of your business, which could be why you can’t see where you went wrong, but a customer can. For example, if a customer asks an obvious question, it’s very easy to dismiss it, but maybe it was not that obvious. If a customer requests an already explained question, perhaps you didn’t explain it well enough. Also, make customers feel comfortable asking questions. The more comfortable they feel around you or your employees, the higher your retention will be.
Listen To Complaints
You should treat every received complaint as a customer satisfaction survey that you can use to boost your customer retention rate. Essentially, once you get a complaint, it’s best not to ignore it and instead ensure you’ve taken care of it as soon as possible to meet your customers’ needs. Complaints are insights to make your new and existing customers feel better.
Participate In Social Responsibility
Social responsibility involves activities that make the world a better place. By engaging in social responsibility, you make your customer feel good because they feel they are part of something that can change the world. If your business or brand is seen as doing something good for the world, the customers will back you.
Customer Retention Tools
Not all customer retentions can be automated through an app, but there’s lots of nitty-gritty stuff that can be automated. Apps such as Mobile, Qualitrics or Zoho are good customer relationship management software. Loyalty program apps include S Loyalty, Smile.io and Retention. Social media apps you can use include Instagram shop, Auto Post and Kodobuzz. Other email apps include Spin-a-Sale and Happy Email.
Many business owners focus on customer acquisition, and while you need new customers, retaining existing ones is still essential. Instead of using your marketing budget to acquire customers, you can put some money and effort into building potential long-term relationships with your existing customers. A high customer retention rate will increase sales and boost your business growth.
If customer retention is all about finding out customer habits/likes/dislikes – then customer data is the key. Enquire today to find out how Unaro can turn your business broadband into a game-changing data collection & marketing tool.