Photo by Jirsak
Time and time again, retaining customers through lasting relationships has shown to be significantly beneficial for businesses.
Take the financial service industry, for example. Bain & Company reports that even a small improvement in customer retention, such as a 5% increase, can result in a considerable rise of at least 25% in profits. This figure alone emphasizes the importance of acquiring new clients and nurturing existing ones throughout their customer journey.
Implementing innovative customer retention strategies has become essential to maintaining competitiveness, especially as consumers become more critical of the businesses they support. Let’s delve into customer retention and some strategies you can implement to strengthen client relationships.
The Importance of Customer Retention for Companies
Customer retention engages existing buyers by providing exceptional products and outstanding support that builds lasting relationships between business and client.
Retention is also critical to increasing profits and minimizing costs. As mentioned, returning patrons are more likely to spend than new ones. Did you know that, according to research, acquiring new customers can be up to five times more expensive than keeping existing ones? Therefore, businesses looking to maximize their revenue should improve their retention strategies.
The root of retention lies in understanding your clientele. Here are some ways to identify their needs, preferences, and behaviors to boost their experience with the brand.
1. Collecting data on customers
Collect information about existing customers, including their demographics, psychographics, and purchasing behavior. You could also leverage website cookies to track their activity more efficiently and aid personalization and engagement strategies.
2. Analyzing customer data
The collected data provides critical insights into customer behavior and preferences, which can help you strategize retention tactics and optimize them for each buyer or segment. For instance, many patrons may be budget-conscious, which is valuable information to help you anticipate demands.
3. Identifying customer needs and preferences
Strategize based on your findings. Following the previous example, knowing that existing customers prefer economical options, consider offering vouchers and promos to encourage repeat business.
4. Engaging with customers directly
Communicating with your clients on social media, email, and other customer service channels can be valuable to gain insights and understanding of their needs and preferences. It also enables you to build and nurture relationships for the long term.
5. Collecting customer feedback
It’s important to figure out why customers abandon your company in the first place. Use feedback forms and surveys to gather this information and help you take measures to prevent buyers from switching to competitors.
Customer Retention Metrics
The key ingredient to keeping customers is data as the foundation of your tactics. Knowing which numbers to track is vital to ensuring your implementation’s success. Here are some essential metrics to help you formulate optimized retention strategies.
1. Customer retention rate
Customer retention rate is the percentage of buyers supporting your business even after their initial purchase. According to Forbes, the top reason people leave a brand is company apathy, followed by inconsistent information, poor support, and bad customer service experience.
Formula: To calculate your retention rate, you can start by subtracting the number of patrons you acquired during a period from the number you had at the end. Next, divide the result by your initial customer count, then multiply by 100 to get the percentage value. A low retention rate may indicate any of the above, emphasizing the value of tracking and improving this metric.
2. Customer churn
Customer churn is when clients stop doing business with a company over time, considering the loss of buyers and revenue. High churn numbers indicate poor customer retention, which could stem from satisfaction issues or ineffective marketing strategies.
However, it’s important to note that losing customers isn’t always bad. On average, businesses tend to retain roughly 72.5% of their customers, which leaves room for losing approximately 25%. However, losing above your industry or historical average signals a problem. You must start taking proactive measures to retain customers.
Formula: Subtract the number of patrons you have at the end of a set period from the number you had at the start. Then, divide it by the initial number of clients to get your final output. It’ll provide valuable insights into whether your business is losing more customers than it can afford.
3. Existing customer revenue growth rate
Existing customer revenue growth refers to a company’s profit increase from buyers over time. A rapid growth rate indicates successful marketing and sales efforts, encouraging existing clients to spend repeatedly.
Formula: Compare the revenue generated from customers at the beginning and end of a period. For monthly growth, deduct the revenue generated at the start of the month from that at the end. Afterward, divide the output by the initial revenue for the final result. To express the growth as a percentage, multiply it by 100.
4. Loyal customer rate
The loyal customer rate is the number of buyers who’ve made repeat purchases within a period. Returning clients spend 67% more than new ones—they’re the most valuable members of your clientele, so keeping this figure up is crucial.
Formula: Before calculating the loyal customer rate, you must establish your criteria for defining a “loyal” or “repeat” customer. Some businesses consider buyers who have made at least two purchases, while others might look at the frequency of purchases. Once you’ve established this, divide the number of repeat customers by the total size of your customer base to get the loyal customer rate.
5. Customer lifetime value
Customer lifetime value measures the profits a business generates from each buyer over their relationship. The longer you retain clients, the more likely they’ll make repeat purchases. They also become more familiar with the company, becoming loyal patrons who can advocate for the brand.
Formula: First determine customer value, which is the product of multiplying the average purchase value by the number of purchases. Then, multiply it by the average customer lifespan to get the lifetime value. Ultimately, this metric helps you understand the worth of your relationships over time.
Customer Retention Strategies for Companies
Now that you know some essential metrics to track, it’s time to develop strategies to improve those figures. Here are some effective tactics to help boost your company’s customer retention.
1. Creating a customer-centric culture
Metrics and data help understand your business performance, but it’s important not to lose sight that your customers are real people with real needs and preferences. Build and maintain loyalty by empathetically delivering excellent experiences that meet expectations.
Take artificial intelligence, for example. While AI-powered chatbots go a long way to providing consistent customer support 24/7, they only offer objective responses to inquiries. Meanwhile, human agents provide personalized assistance and answer questions directly, even through voice or video calls, improving customer experience.
A customer-centric culture demonstrates that you value your clients as people, not as mere sources of revenue. As a result, they’d be more inclined to support your business since it prioritizes their well-being.
2. Improving customer engagement
Engagement is a critical element of an effective retention strategy. Without it, clients might become disinterested in your brand and opt for competitors that provide an exceptional experience. So, employ various tactics to grab your patrons’ attention and reward them for interacting with your business.
An effective engagement strategy is implementing a loyalty program incentivizing repeat purchases to encourage clients to buy more. Such programs often include discounts, early access to sales, and personalized product recommendations exclusive to repeat buyers.
Starbucks’ rewards program is a great example of how to keep customers happy. When customers make a certain number of purchases within a year, they get freebies!
Moreover, consider sending post-purchase emails to build engagement after their first purchase. A “Thank You” email after their first purchase works as well as discount coupons for following transactions.
3. Enhancing customer experience
Invesp reports that 89% of companies acknowledge customer experience as a primary driver of loyalty and retention. Ensuring your customers have a positive experience is essential to keeping them loyal and helping your business thrive.
Providing excellent shipping services, especially in retail, is a straightforward approach to improving customer experience. Shopping cart abandonment can significantly impact sales, with studies revealing that 46% of shoppers leave their carts due to slow shipping times. Thus, you should assess your courier services and ensure your products’ prompt and secure delivery to your customers.
Moreover, your team must be able to answer inquiries and accommodate comments immediately to demonstrate that you genuinely value your clients’ time and input.
4. Leveraging technology
Consider taking advantage of technology to elevate customer retention strategies. Chatbots can enhance customer support operations and provide 24/7 assistance, even during off-hours and holidays. Customer Relationship Management (CRM) software can also help manage customer interactions, track behavior, and personalize experiences.
These systems let you automate tasks that improve retention and reduce business expenses. Most of these tools are budget-friendly and can be adjusted to your business’s growth, saving you from hiring more staff.
5. Building customer confidence
Consistently delighting patrons with excellent services and high-quality deliverables lets them build confidence in your business. Satisfied customers are likelier to recommend your brand to others through word-of-mouth, product reviews, or social media, boosting your reputation and competitiveness. After all, most people tend to go for brands they’re already familiar with.
Marketing your brand is about creating that warm and fuzzy feeling for your potential customers. You want them to feel good about choosing you over the competition. Share customer testimonials on your website and social media platforms to emphasize your brand’s quality and support. In turn, existing clients will realize you’re a company they wouldn’t want to leave.
Nurture Lasting Customer Relationships
Keeping existing customers on board has become essential to maintaining the profitability and competitiveness of your business. Retaining customers is more beneficial than acquiring new ones. Fortunately, you won’t have to develop approaches for customer retention from the ground up. The above-mentioned points have been tried-and-tested and can help you secure customer loyalty.
Enacting retention strategies may be burdensome, especially if you lack the staff to support these efforts. Look no further than Executive Boutique Call Center for assistance! We provide outsourced customer service in the Philippines to strengthen customer relationships and keep them with your brand for the long term.
Contact us to learn more!