The basic definition of customer retention is very straightforward. It means that the company is good at keeping its customers and not losing them to other companies. In this case, less is more. However, making it work in reality requires a lot of thinking. Customer retention is the goal of every company. Competition is what drives companies to constantly improve their product quality. If a competitor has a better product, customers will flock to them, so companies must always be improving their offerings to make sure they don’t lose business. A high customer satisfaction rating is a good way to measure the quality of your customer relations. Despite what some might say, a high retention rate is a good sign that you are on the right track. You will need to do some serious planning and brainstorming. It is easier to make a sale than to keep a customer. In today’s highly digital market, no company can afford to just have a good sales rate. You won’t get anywhere if the customer you gained this month pays your competitor next month. Revenue generation is usually linked to making new sales, so companies often forget how important it is to keep the clients they already have. A company will lose more business by losing existing customers than by not gaining new ones. Nowadays, customers have a lot of different companies and products to choose from. They are truly spoilt for choice. Acquiring the initial interest of your audience can be a challenge in and of itself. It will be hard to keep them for even six more months. This is why companies invest in customer retention strategies. Developing a strong brand is just as important as generating leads or doing digital marketing.
How to calculate customer retention rate?
The customer retention rate is the percentage of customers who remain with a business at the end of a given period.
Formula to calculate customer retention rate
Customer retention= ((CE-CN)/CS)x100
Where,
. CE= Number of customers at the end of the measured period. beginning customers = ending customers
CS= Number of customers at the end of the measured period The number of new customers over the period is the difference between the number of customers at the start and end of the period. Number of new customers= CE-CS
CN= number of customers acquired during the period
How to improve customer retention?
- The game of loyalty – Things like a simple point-based system or an elaborate rewards scheme works to delight your customers.
- Address the feedback – Listen to your customers and act on their queries. You need to show them that your business cares about them.
- Customer feedback loop – Close the feedback loop with an NPS questionnaire, an email survey, or a similar mechanism.
- Corporate social responsibility – Show that your business cares about the environment in which it lives and works.
- Use groups and communities – Build belonging and a sense of ownership with user groups, forums, and communities, be it online or offline.
- Personalization of offerings – Personalized customer support, product suggestions, and even compliments can make the customer feel special and stay loyal to your business.
- Subscriptions – A subscription-based payment system will make it easier for customers to stick to the business than switch vendors from time to time.
Fewer than one in five businesses invest in customer retention marketing. Now, let’s take a closer look at the methods which results in high customer retention rates:
Set a Doable Rate to Fulfill
It is important to set a goal for your employees and yourself to work towards. This topic is about setting goals, which means finding out your current customer retention rate. This involves calculating the difference between the current number of customers and the initial number of customers, using the new number of customers as the current number.
If you have a particular number in mind, it will be easier to figure out how to increase it. But be very careful while setting a future target. Many companies set goals that are too difficult to achieve.
For example, if your current rate is 20 percent, it is neither practical nor reasonable to set a goal of 60 percent.
Instead of trying to achieve large goals in a long period of time, try setting smaller goals to be achieved in shorter periods of time. Why not try to achieve 30% in two months instead of 50% in a year?
The size of your customer base can help you set a goal for customer satisfaction. If your products are regularly used household items or personal care products, people will keep coming back to you even if you don’t put much effort into keeping them as customers.
If you can afford it, you can target higher rates. If you are selling non-essential or luxury products, you need to set realistic targets.
Retain a Customer or Get a New One?
We are constantly facing the choice between old and new customers. Multiple surveys have shown that customers who already exist always win the fight. It costs less money and is simpler to keep a current client than to find a new one. This rule does not change over time, and it is recommended that all companies follow this rule for their own benefit.
The Harvard Business Review states that it can be 5 to 25 more expensive to gain a new customer than to keep an existing one. According to recent studies, a five percent increase in customer retention rate can lead to a 25-50 percent increase in profits. This means that if you have loyal customers, they are more likely to try a new product that you release. Also, they are more likely to spend 31 percent more in general.
Selling new products to old customers is easier than selling them to new customers. Your company’s existing customers trust your company and product, so they continue to do business with you. But this is not the case with potential clients. You’ll need to sell them on the idea, but even then it’s likely they won’t go for it. Research indicates that it is 60-70 percent more likely to be successful when selling to existing customers as opposed to new ones, where the success rate is only 10-20 percent.
Feel Free to Create a Separate Team
Smart work is more important than hard work for businesses that are serious about getting ahead. One way to improve customer satisfaction is to create a separate customer retention team.
This policy results in more expenses for the company in the form of salaries. However, it has benefits that last long after the initial investment. Several studies have found that most sales come from existing clients rather than new leads.
A team of experts can easily come up with new strategies and techniques to increase the retention rate. When one team is solely responsible for an outcome, it becomes easier for company owners to identify areas in need of improvement.
This team is responsible for communicating and coordinating with the sales, customer service, and marketing teams. A company can increase its success rate by implementing several methods through this exclusive team. Potential programs that a company could invest in include ones that focus on educating customers, being socially responsible, and increasing customer loyalty.
If you want this team to generate better results, you should invite them to specific sales and marketing meetings. The sales department will introduce them to the company’s existing VIP and potentially loyal customers.
The digital marketing team is responsible for managing the company’s social media accounts and providing information on the company’s performance on different platforms. Retention teams can communicate with clients using these platforms.
Encourage Customers to Open an Account
This tool will help you keep a good grip on your customers. But this comes with its own set of risks. This is something that a company should think about when they are developing their website.
For existing customers, this might be a doable step. However, for new customers who are just browsing through your website, this might seem like a big commitment. Business insiders suggest a loophole to overcome this difficulty.
After someone makes their first purchase, give them the option to create an account. When there are fewer obstacles in front of them, they will come back to buy more.
The company can remind first-time buyers to register and open an account through the communications calendar.
Get the most from retargeting
Customers have different journeys. We all know that.
While some customers convert right away, others need regular reminders to finish their purchases.
Retargeting is a type of online advertising that helps businesses keep their name in front of interested customers after they leave a company website.
Most advertisers set up their campaigns only once, at the beginning.
The Google Analytics platform is used to collect email addresses and other data.
Different customers in different journeys are targeted by the same ads.
You see why that’s a problem, don’t you?
Ads that are targeted towards a specific audience are more likely to be successful than general ads. Ads should be updated regularly, based on when someone clicks on the ad or takes other desired actions.
Here’s how you can structure ads for better customer retention:
For new customers, set product discovery ads. You should keep potential customers on your website for 7 to 14 days in order to convert them.
For customers who have visited your website and added something to their cart, make an offer. A discount, freebie, or incentive may encourage customers to finalize their purchase more quickly.
Once a customer has converted, encourage them to make another purchase. You should try to upsell or cross-sell to your customer, and use social proof to make it more likely that they’ll say yes.
Drive the DIY Factor
For the last few years, do-it-yourself appeal has been very popular, with brands becoming more involved in activities such as gamification, community engagement, and unboxing experiences, as well as products that customers can build themselves.
And it works.
IKEA’s success is partly due to their engagement with customers throughout the experience.
The Harvard Business School conducted a study which found that customers are more likely to value a product when they have contributed to it in some way. This also helps boost customer retention.
Don’t just be aware of your competitors, build an edge
What are some ways to find out if your product or service is satisfactory for your customers?
In a competitive market, how do you keep your customers?
How do you stay ahead of the competition?
By taking them on head-strong.
We’re not encouraging you to start fights with your competitors online.
We are suggesting that you create a brand that will inspire repeat sales, is relatable to your audience, and puts you in a human light.
Niche down and expand
Xerox. Thermos. Spandex. Jello. Band-Aid.
Do you know what they all have in common?
They have become so successful in their niche that their products are known by the brand names.
Small, specialized brands help keep customers coming back.
Over the last five years, niche brands have had a lower CAC (Customer Acquisition Cost) than more conventional brands.
They have a lot of repeat sales because they are niche and limited.
Build cult loyalty (easier said than done, we know, but not impossible)
Cult brands are created from a strong determination and unwavering belief.
The two refers to being a customer and being a fan. You can find yourself belonging to a special club of people who are more than customers, they’re fans. They’re guaranteed to offer repeat sales.
These customers become like an extension of the company by promoting the brand in their two-way conversations. This gives both your brand and customers a good image.
Some good examples of this are Apple and Google, but even smaller brands have benefited from this.
Here’s how you can make it work for your brand:
Building a human appeal for your brand on Instagram will make your customers love and cherish your brand.
Great brands don’t sell products, they sell an experience. Think about your customer, not your product, to build a persona and get more repeat customers.
To build a committed customer base, offer content that is radically different from what is available from your competition. This will ensure that your customers keep coming back.
Only Consider Interested Customers
Remember that it costs money to retain customers. When deciding how to allocate your budget for retention marketing, you need to figure out who will receive the money.
So how to retain customers?
The most important thing is to keep the customers who are most profitable to your business. Goes without saying, they’ll offer a higher ROI.
You can figure out which of your clients are most valuable to your company by looking at metrics such as customer lifetime value (CLV), average order value (AOV), and purchase frequency.
funnel analytics allows you to see the different steps that a customer takes before they make a purchase on your site. Heatmaps show you where people are clicking on your site, so you can see what parts of your page are most popular.
After that, you should focus on your dormant or inactive customers. This step is important to ensure that
- You can retain them before they leave.
- You don’t waste money on customers who aren’t interested.
This means that eCommerce businesses can expect to have between 25 and 60 percent of their customers fall into this category. The first step is to identify the people who are not active.
