Many businesses focus on customer acquisition for income but tend to forget about the importance of retaining the customers they’ve already acquired. Semrush reports that:
While nearly half of businesses (44%) prioritize customer acquisition, only a meager 18% focus on retention.
As many as 58% of companies cannot accurately measure their customers’ lifetime value.
The average U.S. company loses up to 30% of its customers every year due to lack of loyalty.
As a sales leader at Televerde, I’ve found that the customers we retain tend to have more confidence in our company than newly acquired customers. Newly acquired customers are taking a risk that everything they learned about us through the sales process is actually true, while customers who have stayed with the business understand the flexibility, scale and partnership from their own experience. Let’s explore why customer retention is so important and how to do so.
Why Customer Retention Matters
Customer retention is the ability to keep customers buying from you. This is different from lead generation and customer acquisition, which are focused on attracting potential first-time buyers. Customer retention takes this process a step further and seeks to convert existing customers into repeat customers.
It’s simple: customer retention is great for your ROI.
In 2001, Frederick Reichheld, who invented the net promoter score, and Earl Sasser of the Harvard Business School, published a now-classic study in which they showed that a mere 5% increase in customer retention rates could boost profits anywhere from 25% to an astounding 95%.
Multiple subsequent empirical studies and models have confirmed these findings. According to the Pareto Principle, or more commonly, the 80-20 rule, 80% of your revenue will come from just 20% of your customers. It is therefore more cost effective to put a deeper focus on the relationships with that 20%, many of which will be repeat customers.
9 Proven Tips to Boost Your Customer Retention Rates
Here are nine strategies you can leverage to increase your company’s customer retention rates.
Build Strong Customer Relationships
The key to repeat business – other than offering high-quality products or services of course – is relationships. You want to get to know your customers and show them you care. To do that, collect insight from customer surveys and marketing research to develop personalized services, offers, and experiences. You should also focus on infusing all customer interactions with a sense of genuine empathy, from your website copy to one-on-one meetings.
Create Seamless Experiences
Consumers today expect seamless buyer experiences, both on and offline. To give your customers what they want, make sure your website and any applications you may be using have a user-friendly interface, load fast, and are easy to navigate.
You should also invest in your customer service. Consider offering omnichannel support and be sure to acknowledge and resolve all queries as quickly and professionally as possible.
Collect Feedback Regularly
Customer feedback is one of the most effective ways to understand your customers’ wants and needs. Customer satisfaction surveys, feedback forms, and insight from your customer support staff can help in getting that feedback. Don’t be afraid to ask about your shortcomings. As you create your surveys, include specific questions such as “What are some things that would improve your experience with us?”
Offer Incentives to Repeat Customers
Show your customers how much you appreciate them and incentivize them to keep coming back. Incentives to consider include special offers, discount codes and loyalty programs. Loyalty programs specifically can be a great way to collect more detailed information about your customers. This can enable you to create more personalized experiences.
You should always aim to be at least one step ahead of your customers. 77% of customers say they are more loyal to brands that offer a good customer experience if they have an issue, and 72% are willing to spend more if a company offers good customer experiences.
With this in mind, anticipate your customers’ needs and provide them with solutions before they even realize they have a problem. Post answers to frequently asked questions, share guides and other informational materials, and consider implementing chatbots so that people can ask for help 24/7.
To keep customers coming back, it’s not enough to offer them one good experience and then hope for the best. Aim to provide a consistently high level of service every time. This is key to fostering brand loyalty and word-of-mouth marketing.
Hand Out Freebies
Customers always appreciate it when they get something for free. However, make sure to give them something of actual value – something they would have purchased on their own.
High-quality, in-depth, and relevant educational content can go a long way in this regard. It’s a great way to keep customers engaged and position yourself as an authority on the subject.
Get Involved in Causes Your Customers Care About
According to Zendesk’s 2021 Customer Experience Trends report, 54% of customers want to buy from businesses that support inclusion, diversity, and equity in the workplace and their local communities. A further 63% want to buy from socially responsible companies.
In light of this, you may want to consider supporting a charity or an NGO whose mission aligns with what your customers care about.
Know What Metrics to Measure
You won’t be able to find out what your customer retention is if you don’t know how to measure it.
The key metric you’ll want to monitor here is your customer retention rate, or the percentage of existing customers that remain loyal to your company over a period of time. Here’s how to calculate it:
- Choose a time period you want to measure.
- Identify the total number of customers at the start (CS) and the end (CE) of that period.
- Identify the number of new (CN) customers over that period.
- Use the formula ((CE-CN)/CS)*100=X to find your customer retention rate.
Another indicator to keep an eye on is your churn rate, or the percentage of customers you have lost over a given period. First, pick a time period. Then, take the number of customers you started with and divide it by the number of customers you lost. Multiply that number by 100 and you have your churn rate.
Benefits of Customer Retention
Focusing marketing efforts on existing customers is not only more effective than targeting new customers, but also significantly cheaper. You can also showcase the customers you’ve retained because of their experience with your product or service when reaching out to leads. While it can definitely take some work to convince customers to keep buying your products or services, it will prove to be a huge boost in profits when you successfully do so.