Managing customer retention is an essential part of growing a sustainable business. According to Harvard Business School research, a mere 5% increase in customer retention can increase company profits by 25-95%.
Customer retention is akin to filling a leaky bucket: while replenishing may temporarily compensate, it’s wiser to identify the underlying causes of the holes and take corrective measures.
What is Customer Retention?
Customer retention is a variety of activities aimed at retaining customers over the long term and converting them into loyal buyers. The primary objective is to transform initial customers into loyal patrons, amplifying their lifetime value (LTV). This pursuit enhances word choice, structure, readability, and eloquence while preserving the essential meaning.
Why is Customer Retention Important?
Keeping the importance of customer retention in mind is very important as it can help you understand customer loyalty and satisfaction, the strength of your customer service, and if any red flags might turn off a potential customer:
Less expensive than acquiring customers
According to an Econsultancy report, 82% of companies say retaining customers is much cheaper than acquiring them. Still, many companies spend far more on acquiring customers than developing existing ones.
Not only is it more cost-effective to retain existing customers, but these shoppers also expect to spend more money over time. Research shows that loyal customers are 23% more likely to spend with you than regular customers.
Customer care and retention will positively impact your bottom line over time. Research indicates that a mere 5% boost in customer retention can lead to a remarkable surge in profits ranging from 25% to 95%. Additionally, it is noteworthy that existing clientele contributes to 65% of a company’s overall business.
Loyal customers’ biggest benefit is that they share their positive experiences and thus become ambassadors for your brand. This is priceless. According to Yotpo, 60% of consumers talk to family and friends about the brands they are loyal to. With word of mouth growing exponentially, customer retention is critical to your business.
How to Calculate Customer Retention Rate?
Customer retention rate (CRR) shows the percentage of customers a company retains over time.
To determine the Customer Retention Rate (CRR), subtract the number of new customers acquired from the total number of remaining customers at the end of the specified period. To calculate the percentage, divide this by the total number of customers you started with, then multiply by 100.
CRR = ((number of customers at the end of the period – number of new customers during the period)/total number of customers at the beginning of the period) x 100
Customer retention is the flip side of customer volatility and represents the percentage of customers a company loses.
5 Effective Client Retention Strategies
Retaining a customer costs less than acquiring one, which increases a company’s bottom line. So before embarking on strategies to bring new leads into your sales funnel, consider using one of these 16 research-backed customer retention strategies to increase revenue by retaining existing customers.
To stand on something
Few customers feel they have a relationship with the brands they buy and use. A study of 7,000 consumers across the United States by the company’s executive committee found that only 23% of consumers have an affinity for a brand.
Interestingly, 64% of consumers who say they have a relationship with a brand cite shared values as the main reason for the relationship.
Most people prefer products and companies that are similar to them in some way. This cognitive bias, known as implicit egoism, is an important issue.
Customers are likelier to ignore you if your company doesn’t make sense. To cultivate loyal customers, it is crucial to establish a genuine connection by effectively communicating the shared values between them and your brand.
As Nick Francis writes:
“There’s no such thing as ‘above politics’ or brands not supporting either side. It would be nice if companies didn’t have a political agenda, but they certainly do. If companies are inevitably political, we need to be careful what they do thing.” We defend it. “
What is your company’s positioning? If you define your values and highlight them as part of your brand, retaining customers who share them will be easier.
Gather Feedback Through Customer Surveys
The best way to determine what customers think of your business is to ask them. Using customer surveys to gather feedback and diagnose potential dissatisfaction is a great starting point for understanding what must be addressed in the online experience.
Customers appreciate it when you ask them for their opinion. It means you care and will go the extra mile to keep them.
Capture product momentum
Everyone in the company feels motivated when exciting improvements are made to your product. But do your customers feel the same way?
They won’t unless you take the time to share your work.
Get your existing customers excited by showcasing the latest features that help them achieve their goals.
For example, as we prepared to make major improvements to the Beacon product in 2018 (such as adding live chat), we published a series of preview posts (such as this and this) to get excited about what customers could achieve. Use new tools.
This not only establishes momentum for upcoming releases but also serves to promote new features that existing customers might overlook.
Not just selling but educating
The last thing you want is to let your customers fend for themselves after signing up. It is critical to provide resources that make it easy for new customers to learn how to use your product.
There are many different ways to train new customers on how to use your product:
- Learn about products with tips and tutorials to help new customers get started.
- Send a series of lifecycle emails designed to walk new customers through learning how to use the product.
- Offer one-on-one training sessions with a customer support, sales, or onboarding specialist.
- Create an academy of online training resources for new clients who prefer self-service training.
- Create a community of product experts to whom new and existing customers can ask questions.
Communicate with customers
Ongoing customer communication through their preferred channels is key to retaining customers online. Today, there are 4.2 billion email users worldwide, and despite the popularity of social media, email remains the preferred communication tool for customers. It was also the top-performing channel, with an ROI of $44 for every $1 spent.
No matter where you communicate with customers, it’s important to be consistent and leverage personalization wherever possible to achieve accurate relevance.
Customer retention is a balancing act.
There are many strategies for retaining customers, but there are no shortcuts. You can’t hack a personal relationship, so why should we assume work relationships differ?
Hopefully, the strategies above have given you some fresh ideas for resolving retention issues, but they’re not a panacea. Your products and services will do most of the heavy lifting to keep customers loyal, and there are no shortcuts.