Once you’ve acquired a customer, it’s easy to think it’s a done deal, they’ll stay with you forever. But what is the likelihood that a customer will stick with you if they’re offered a better deal elsewhere? There is a significant focus on marketing to grow brand awareness and gain new customers. The same effort must be invested in retaining customers too; long after their initial onboarding.
What is customer retention?
Customer retention is a business’ ability to retain a customer over time. Customer retention is often viewed as a percentage of the customer base that has been retained by the end of a specified time period. It can be measured using a rate calculated by the following formula: Customer Retention Rate = ((Customers at End of Period – Customers Acquired During Period) / Customers at Start of Period)) x 100.
Your customer retention rate is a great indicator of the quality of the customer experience you provide. A high retention rate indicates you have low customer attrition meaning you’re doing something right to keep your customers delighted with your service. If you have a low customer retention rate, there are clear gaps in your customer experience that are turning customers away from your business.
Once you’ve calculated your customer retention rate, it’s wise to conduct an analysis of the customers you’ve lost. There may be patterns in their reasoning for leaving your company that you can improve. You may find that it’s a certain type of customer that is leaving your business, in which case you should reconsider your target audience and the customers you’re trying to acquire. If there is a certain type of customer that is being retained successfully, look at your communications and how you can best target their characteristics to keep them satisfied.
Why are retained customers important?
Did you know it’s 5-25x more expensive to acquire a customer than it is to retain one? The amount of money and resources spent on campaigns, merchandise, events and advertising to generate awareness and promote your products and services is much larger than any other stage of the customer lifecycle. Retaining customers requires a lot less spend as your customers already know about your brand and your offering. There’s less need to impress them with your marketing efforts.
This doesn’t mean you don’t have to spend money on your customers once you’ve got them, you should. Retained customers can increase profits by 25% to 95% than newly acquired customers. They greatly value your product and want to keep coming back for more.
You have to work on nurturing and building relationships to generate brand loyalty. Loyal customers spend more and buy more often than newer customers who still need to earn your trust. Investing resources into this stage of the customer lifecycle will ensure your customers continue to do business with you without being swayed by a competitor.
How do you retain customers effectively?
You need a robust customer retention strategy to manage and maintain relationships with your current customers. This isn’t simply issuing a few feedback surveys and offering discounts on a second order. You have to continually delight your customers long after they purchase your product or service to ensure they aren’t turned by another brand’s offering. With nurturing and positive relationship building, you encourage your customers to remain loyal to your business.
1. Building trust with consistency
Building trust is an ongoing process that can’t be won overnight. Trust is earned by providing value and consistently great customer experience. It’s important to break down your customer experience into the touchpoints across your online and offline channels. Look at the communication you have at each stage of the customer journey and how it impacts your customers. This includes seemingly small details like the language you use in emails or how you update clients on project progress. You have to advocate for your customers and work in their best interests to achieve their goals. Customers will reciprocate loyalty and become advocates for your brand.
2. Educate customers about your value
Loyal customers should, ideally, be able to explain your product or service to someone else. Referrals are one of the perks of retained customers. Satisfied customers will naturally recommend your product or service to others which brings in new customers without your outreach efforts. Less spend and more ROI, win-win! You have to educate your customers about your mission, values and benefits regularly. Positive reinforcement of the value you provide ensures your customers shout about your brand to friends and family.
3. Provide social proof
Customers are often sceptical about a business if they can’t compare their experiences to others’. Providing social proof ensures your customers know that you provide consistently great customer experience and that others love your product or service. Include testimonials on your website to showcase why your customers choose your brand. Publish case studies that go into more depth about how you’ve helped customers. You can show the products or services you provided and how this benefited your customers.
4. Communicate results regularly
Customers don’t see every result you achieve. You have to regularly communicate the results you’re yielding for your customers so they know you’re doing your job effectively. If your customers can clearly see where you provide value and how you benefit them, it’s hard for them to say goodbye. Customers would lose a lot by leaving you and taking up another brand’s offering. You have to track and measure performance metrics for this to work. Ensure you understand what your customers want to know from you so you can report on them and communicate the results.
5. Build excitement and aspirations
You want your customers to be excited about the future of your brand. This improves the likelihood of retaining customers if you have a clear roadmap for what they can expect to see from you. Continuous positive reinforcement ensures you’re never letting your customers forget about what you can do for them. Keep letting them know what you provide that your competitors don’t. Tell them about the exciting partnerships, releases and events coming up. This will encourage them to stay tuned to your growth and engage with your offering over the long-term.
There are many benefits to customer retention that companies may overlook or regard as too much effort to implement in their marketing strategies. By implementing these five ways to improve customer retention, you can benefit from loyal, generous and long-lasting customer relationships.