What is customer retention, and why does it matter to your business?
Countless companies invest heavily in attracting new customers through marketing and sales strategies. However, while filling your pipeline with new leads is important, it’s crucial not to overlook the importance of retaining your existing customers.
The more revenue you can generate from long-term loyal customers, the less you’ll need to invest in attracting new leads. While selling to a new customer is difficult, you have a 60-70% chance to convert an existing customer. What’s more, your loyal customers will form the backbone of your referral and advocacy programs, boosting your ability to find new customers.
So how do you improve your retention rate?
Let’s start with the basics. Customer retention is a metric businesses use to measure the loyalty of their customers over time, and their ability to earn repeat clients.
In an ideal world, companies would be able to retain repeat customers 100% of the time. However, average retention rates vary by industry. Most small businesses retain around 20% of their customers. However, by investing in the right strategies for customer satisfaction and engagement, you can grow this number, and your potential revenue.
Customer retention management strategies are the actions you take to encourage your customers to stay loyal to your business. They can involve everything from making sure you’re focusing on the right audience with your customer acquisition strategy, to enhancing customer experience.
The core components of customer retention management generally include:
The first step in developing a good customer retention management plan, and boosting your retention rates, is understanding your customers. Customer retention analysis involves using various metrics and strategies to learn about your customers behavior, and their reasons for churning.
Ecommerce brands, SaaS company leaders, and other businesses use everything from cohort analysis to state-of-the-art analytical tools for retention analysis. Most of the time, an effective strategy will involve calculating a few key metrics, such as:
Ultimately, the key to improving customer retention rates is improving the customer experience. 77% of customers say they’re more likely to stay loyal to businesses who deliver great experiences. Additionally, 72% of customers say they’d pay more for a guaranteed good experience.
So, how do you deliver a good experience?
Creating a fantastic customer experience and improving customer retention rate starts with introducing customers to your business in the best way possible. When a customer makes their first purchase, companies have an excellent opportunity to make a lasting first impression.
Rather than teaching sales professionals to ignore customers after they get a sale, pass those converted customers over to a success team. The success team can guide the customer through the process of setting up or using their new product or service. They can also provide consistent education and guidance, and follow up with leads to address any problems they might have.
99% of marketers say personalization helps them to improve their relationships with customers. Every customer has their own distinct needs, and tailoring your strategy to the requirements of each “segment” you target will help you to retain customers for longer.
Rather than creating one-size-fits-all solutions for customers, create strategies for success that cater to all different preferences. Make sure you can connect with customers on their channel of choice, from email to social media. Research your segments and deliver customized content to them when they need it, based on their interests and goals.
It’s easy to assume that customers trust your business after they purchase something from you. However, this isn’t always the case. Building trust takes time, and it requires business leaders to invest in constantly supporting and engaging their customers.
Commit to connecting with customers and consistently building rapport, even after you close a deal. Learn from your target audience, and make sure you’re delivering on the brand promise you make. It’s also worth investing in transparency. Sharing honest insights with your customers will make you appear more credible and reliable.
It isn’t easy to improve customer retention if you don’t know what causes your customers to churn. To ensure you’re delivering the experiences and services your customers need, you need to collect as much feedback as possible. Request reviews and testimonials, send out regular surveys, and connect with your customers as often as you can.
Implementing a feedback loop will help you to deliver better customer experiences, build stronger products and improve your onboarding strategy. It’s also an excellent way to gather information for metrics like Net Promoter Score, or Customer Satisfaction rate.
Many customers churn because they believe companies lose interest in them after they make a purchase. Even if your customers aren’t reaching out to you with questions and concerns, your team should be proactive in communicating with them.
Adopt a communication calendar to manage all of your customer engagements, ensuring your team follows up regularly with your target audience. Your communication calendar will also ensure you’re reaching out to customers at the right time with upsell and cross-sell opportunities.
Your value as a business shouldn’t be linked entirely to the products you offer, but also the support and services you can provide. Implement a customer education program, so you can empower customers to get more out of your solutions. You can create your own knowledge base, host webinars, share blogs, and even post guides and articles.
Consider offering your loyal customers access to additional services whenever they might need them. For instance, you could provide access to account managers, technical teams, and community forums where people can connect with other users.
It’s much easier to retain customers who feel they benefit from being loyal to your brand. Showing customers you appreciate their business, with rewards, gifts, and special offers, is a great way to increase customer satisfaction and retention rates.
Create loyalty programs that deliver unique benefits to customers who purchase from you regularly. You could give special discount codes to your VIP customers, or host events for repeat customers. You might offer some of your customers early-access benefits to new features, or provide them with special offers they can take advantage of.
As mentioned above, an important part of customer retention management is finding ways to activate and engage your loyal customers. Your existing customers can be excellent advocates for your brand, helping to draw in new customers and opportunities.
Referral programs allow you to encourage your existing audience to drive new people to your business with rewards. You can offer cash incentives, access to discounts or free merch, or even provide store credit to people who drive referrals. Some companies even ask their loyal customers to become affiliates, and pay them a commission for referrals.
Filling your sales pipeline with plenty of new leads is important, but it’s essential to ensure you’re giving the right attention and care to existing customers too. Your loyal customers not only purchase more products from your brand, but they also help your business to grow.
The customer retention strategies above should help you to boost your number of loyal customers, and take some of the pressure off your customer acquisition teams.
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