Every business out there wants to attract more customers. By having more customers, you will acquire more revenue, and by acquiring more revenue you can afford more employees to provide new and better services/products, which hopefully will attract more customers, and voila, your business grows exponentially. In other words, more customers equate to growth. But retaining customers is equally as important, if not sometimes more important than having new ones. Good customer retention is one of the fundamental factors which makes a business successful. What is it all about and how can you improve it? Well, grab your beverage of choice, and let’s find out, shall we?
The importance of customer retention and why is it so crucial for your business.
As you’ve probably heard or know by now, it’s more expensive to acquire new customers than to retain them. Acquiring a new customer can be five to 25 times more expensive than holding on to an existing customer, according to the Harvard Business Review. Charming your customers and making them come back again, and again over time is what it’s all about. A small change in customer retention leads to big results. Maintaining a healthy relationship with existing customers can benefit your business in numerous ways.
A higher customer retention rate means that your customers trust your company, therefore they are more likely to come back for another purchase. According to a study conducted by Bain & Company, the longer the customer’s relationship with the company, the more he is willing to spend. For example, in apparel, the average repeat customer spends 67% more in months 31-36, than in months 0-6.
The same Bain & Company study also found that loyal customers are more likely to try out different products from the same company. For example, almost 70% of Gap’s online customers said they would also consider buying furniture from Gap.
Word of mouth is still considered to be one of the best marketing tools. Longtime customers tend to act as your brand ambassadors, spreading the word to their social circle as well as vouching for your service/product. It wasn’t easy to explain the importance and value of cloud storage back in 2008. By adopting a referral program, Dropbox managed to increase its user base from 100,000 to four million in only 15 months.
There are plenty of studies and examples which we can pull out but we hope these did the job to highlight the importance of customer retention.
How can you increase customer retention?
Before sharing ways to improve your customer retention rate, first, we need to measure it. The first thing to do is to define the period. This number differs from a month to a whole year or a few years. Other factors to include to determine the retention rate are:
- The number of customers at the start of the period (S);
- The number of customers at the end (E);
- The number of new customers acquired over the same period (N)
Once these metrics are recorded the formula applies as follows:
E-N/S * 100 = CRR (Customer Retention Rate)
Simple, right? The higher the CRR the better. (No more math, we promise.)
Now that we know how to measure it, let’s explore ways to improve it. Here are seven strategies that can increase your customer retention rate.
- Improve user onboarding
It is crucial to explain how your product and its features work as easily and smoothly as possible to your new customers. Training sessions, explainer videos, and teaching best practices can do wonders for new clients.
- Use client feedback
Acquiring user feedback is paramount when trying to improve customer retention. Businesses should gather accurate feedback from their customers. This can be accomplished in a lot of ways – 1:1 emails, surveys, a feedback platform on the website, etc.
- Create user journey maps
By using a detailed user journey map you can easily identify potential turning points or “chokeholds”, which can negatively influence the interaction of new and existing customers with your product/service. Improving the overall experience of your users will lead to an increase in customer satisfaction.
- Provide immaculate customer support
Having 24/7 customer support, which offers resolutions on time is key to making customers happy, and happy customers increase your customer retention rate.
- Create personalized loyalty programs
Giving back to your most loyal customers is a chance to build a personal connection. As we mentioned before, they are your brand ambassadors, so treat them like one.
- Encourage inactive users
A simple automated email or a targeted campaign can prompt an inactive user and “revive” his incentive to interact with the product/service. An example is to give a promo code/discount to people who still have products in their online shopping carts but never committed to buying them.
- Reduce churn rate
The churn rate is the opposite of the retention rate. It shows the number of people who stop using your product/service for one reason or another. Defining those reasons and designing solutions around them will reduce the churn rate, which will indirectly increase your retention rate.
How does an omnichannel solution benefit customer retention?
We already highlighted the importance of how customer support can influence the interaction with your product/service. According to Trends Report, only 50% of high-performing brands had taken advantage of omnichannel contact center solutions by 2021. By empowering your clients to use whichever channel they see fit, to interact with your business, you likely will increase the customer retention rate. This is because you’re minimizing your client’s effort to make and complete a purchase or to give feedback. We, at talkt, provide omnichannel solutions which are tailored specifically to your needs. With omnichannel, customers are more likely to have a positive interaction, which directly correlates to your customer retention rate. If interested, you can learn more about our product here.
Acquiring customers, building customer loyalty, and improving customer retention is a process that requires time and effort. You won’t be able to build a strong relationship with your clients overnight, but by providing great services and products, and making your customers’ lives easier, they will likely be inclined to trust your business and become an advocate for your brand. Extraordinary end-to-end customer experiences are a sure way to earn customer trust and increase customer retention.
This article barely scratches the surface of the topic. Still, if you want to know more about customer retention, we want to leave you with an awesome video, from the powerful Brian Balfour, who goes more in-depth with beautiful examples to explain the importance of customer retention.