What if I asked you what you value more, “getting a new customer” or “keeping an old customer”? Hold that thought for a moment. There’s so much talk and fancy strategies to get new customers. The marketing efforts, sales targets, branding, and advertising reveal the lengths businesses can go to bring in new leads. With all these activities going on, a business may make the terrible mistake of neglecting existing customers. Paddle’s study of over 500 SaaS companies shows that customer retention and monetization bring more money to a business than customer acquisition.
This article will teach you the concept and helpful strategies for customer retention. You will learn important tips you can apply to improve customer experience and strengthen your customer base.
What Is Customer Retention?
The processes, actions, strategies, and whatever you do to keep your existing customers are part of your customer retention effort. Customer retention is also the ability of a business to retain its customers over a certain period of time. Good customer retention practices will increase a company’s repeat customer rate, thereby increasing revenue from existing customers. In addition, these strategies reduce the number of customers who leave a company during a given period, otherwise called the customer churn rate.
Companies take various approaches to customer retention. Many traditional and novel methods are adopted by businesses to retain their customers. Primarily, companies seek to ensure that existing customers are satisfied with their products and services. Taking it up a notch, some companies develop creative ways to foster customer loyalty and keep them away from competitors. Whatever the retention approach a company takes, the goal is always the same; to ensure a customer keeps coming back for repeat purchases.
You can measure your customer retention rate by tracking the number of customers you have over a given period using the formula:
Customer Retention Rate = (Customers at the End of the Period) – (New Customers Acquired) / Customers at the Start of the Period
You can also track other metrics like the repeat purchase ratio, customer churn rate, and existing customer revenue growth or churn rates.
Why Retention Is So Important
Your best effort to acquire new customers will go to waste if you cannot retain them. There are a lot of reasons why you must make customer retention a priority. I will highlight a few of them:
It is Easier and Cheaper to Retain an existing Customer
Harvard Business Review (HBR) finds that acquiring a new customer could cost a business up to 25 times more than it would take to retain an existing one. A customer retention strategy will improve your return on investment (ROI). Come to think of it, these customers already know your brand and probably love it.
It Reflects the Health of Your Business
If you are not delivering value to customers, they leave. When you focus on customer-retaining strategies, you can observe critical issues before they negatively affect your bottom line.
It Increases Your Profit
HBR reports a positive correlation between customer retention and business profits. Return customers are more willing to buy other products from you since they already trust your brand.
It Reduces Your Marketing Spending
A company that retains more customers will typically spend less on marketing. Satisfied customers become your ambassadors and refer other people to you. This reduces the need for aggressive top-of-the-funnel marketing efforts like cold calling and email marketing.
It Earns You More Value From Your Customers
Every good business wants to maximize each customer’s lifetime value (LTV). Existing customers need to feel satisfied before you can get more business from them. With a good customer retention approach, you can resell, cross-sell and upsell to get the most value from them.
Its Keeps Your Customers Away From Your Competitors
Finally, every customer retained is a loss to your competition. Satisfied customers will not defect to a competitor. Hence customer retention efforts will help shore up your market share.
Customer Retention Strategies
Let’s discuss some essential strategies and best practices that will help you retain more customers.
Create A Delightful First Experience
Customer retention efforts start the moment a new customer interacts with your business. First impressions matter. Make the customer onboarding process as seamless and exciting as possible. Ensure your apps are intuitive and new users get all the help they need.
Customers who enjoy a smooth onboarding process are more likely to remain loyal to your brand. In addition, website and mobile app user experiences could determine if customers will renew their subscriptions or repurchase your product. Integrate emerging technologies to make your app more intuitive and personalized feel in line with modern ecommerce software development principles.
Improve Your Customer Care & Support
Customer care plays the most significant role in customer retention. Studies show that nearly 90 percent of customers are likely to return and make another purchase after a positive customer service experience. Conversely, 61 percent will not come back after poor customer service. Make sure your customer support team gives new and existing customers the help they need when they need them. You can integrate a live chat tool on your platforms and leverage social media to make customer care more assessable. Communication is key.
Prioritize Customer Feedback
Seek out customer feedback and promptly act on them. When you acknowledge and work on their feedback, customers get a sense of belonging. Make it easy for customers to make complaints and leave suggestions. Always track reviews on comments on your e-commerce product pages. Keep communication lines open to assure customers that their feedback was received and is receiving due attention.
Engage Customers with Creative Communication
Use emails and social media content to keep customers engaged with your brand. Remember that out of sight is out of mind, so stay in their faces. However, be creative, so your brand doesn’t appear boring and unbidden. Focus on building a good relationship, starting with a thank you message after a purchase. Shopify suggests some effective ways to promote a product on social media.
Personalize Shopping Experiences
Use customer accounts to understand each user and offer a personalized shopping experience. Accounts and AI let you personalize product recommendations, messaging, and service delivery. It makes repurchasing easy for customers and helps you manage loyalty programs.
Rethink Your Customer Loyalty Programs
Get creative with your brand loyalty offers. Use your understanding of each customer to craft effective customer retention programs.
Discounts and Promotions
Customers are pleased to get discounts, especially after the first purchase. Once you are able to get them to make that second purchase, it is easier to retain them. Use discounts to encourage them to spend more on your store.
Good timing of valuable promotions during customers’ lifecycle boosts retention rates.
Allow existing customers to profit from recommending loved ones to your store. Identify the right incentives and the best way to implement them.
Exceed Customer Expectations
Quality Product and Services
Customers want to come back for a great product and service experience. Ensure top-notch quality of your products, services, delivery, and after-sales support. Identify ways to impress customers to keep them coming back.
Speed of services is a crucial determinant of excellence these days, and that’s why same-day delivery has gained popularity. Waiting long to get a product or service sours the customer experience and may hurt your customer retention rates. These customers may abandon their carts due to delays.
Customer-friendly Return Policy
An easy, seamless, pain-free return experience delights every customer. It is bad that they have to return a product; why make it harder for them? Customers who enjoy a seamless return will trust you and likely purchase from you again.
Customer retention should not play second fiddle to your company’s acquisition efforts. A thoughtful and well-implemented strategy will retain your customers, establish your market share, and improve your bottom line.