This might sound like a trick question, but the answer isn’t, ‘acquiring two customers!’ On the flip, it’s actually retaining one existing customer. While a certain allure comes with capturing new customers, keeping customers coming back, again and again, will continually result in a greater ROI.
If you’ve yet to market to current customers after the sale, now is an excellent time to build a cohesive strategy to keep them returning for more. But how do you create a customer retention strategy that keeps your customers engaged and happy?
In this blog post, we’ll define customer retention, how to calculate it, and uncover the strategies that inspire long-term customer loyalty.
How Do You Calculate Customer Retention?
To improve your customer retention strategies, you must first calculate how successful you’re currently doing in this department. You might have a feeling about how you’re doing, but you need an objective measurement to take the emotions out of it. Measuring your customer retention rate goes something like this:
Let’s break the formula down:
You start January with 500 customers
Over the next three months, you acquire 400 customers, totaling 900
By the end of the quarter, you have 800
In total, you’ve retained 300 new customers
Using the above formula, subtract 400 new customers from your total of 800, and divide that by the 500 customers you started with. Then, finally, multiply by 100. This gives a customer retention rate of 80%.
Is 80% a good retention rate? That depends. In some industries, 80% is incredible; in others, it could indicate something is seriously wrong. So at this point, you have to bring context into the matter and evaluate this number against your long-term goals.
Nobody wants to lose a customer, but just how important is having a high customer retention rate? According to Harvard Business Review, onboarding a new customer is 5x to 25x more expensive than retaining a customer you already have. With just a 5% increase in retention rates, you can grow profits by 25 to 95%.
Customers who stick around tend to be happy with your product or service, making them a walking billboard for referrals (and excellent opportunities for positive reviews & being online champions). Recurring customers don’t need to be ‘won over’ by a marketing campaign. You already won them, and having that collection of satisfied customers can make your entire business cost-effective and efficient.
Customer Retention Strategies
Ask for feedback- FREQUENTLY!: When you understand customer sentiment and what they like/dislike, you can take action on their feedback, refine your approach, and meet their needs. Rather than being reduced to a number on a spreadsheet, when pressed for feedback, your customers will feel appreciated and heard and hopefully more loyal.The important thing to remember here is to be sure you close the loop. For example, sending out a customer survey is the first level of requesting feedback, but don’t stop there. Be sure to send a customized thank you message that includes purchase links to related items/services to those who responded to the survey. Now your customers are feeling satisfied and heard, plus there’s brand new products delivered right to their fingertips.
Start a referral or loyalty program: Brand loyalty programs are an effective way to increase purchase frequency because they motivate customers to purchase more often in order to earn valuable rewards. Whereas a referral program attempts to do the same thing, just in a different way. A referral program uses your existing customers to refer new customers to check out your company. Usually, that includes some sort of incentive, like a discount code or value match deal, but it will keep them coming back.
Build your target audience through shared values: Is your company eco-friendly? Do you donate a portion of your earnings to a specific charity? Is your brand associated with wealth and affluence? Or is it more linked to youth and TikTok trends? Not only should your company have its own easily identifiable values, but you should also aim to share them with your customer base. When customers understand and relate to your values, it helps them identify with you and feel connected. The key here is simple – humanize your brand!
Make the return process smooth: While mistakes happen, one way to assure a customer never buys from you again is to make returns even remotely difficult. . The returns and refunds process is the most significant branch of customer service and retention. Therefore, making the process pain-free and reasonable is crucial. If customers know they can count on you to treat them fairly beyond the sale, rather than disregarding them after receiving their money, they will trust you with future purchases.
Deliver unexpected surprises: Emotions are the most significant driver of loyalty. That’s why 60% of customers use emotional language when describing their connection to their favorite brands, so this is a great approach for increasing customer retention. Your business can generate positive emotions by surprising buyers with exclusive gifts and special offers that enhance the customer experience. Consider these ideas:
- Customer service doesn’t get more personal than a handwritten note written specifically for each customer, creating a good unpacking experience.
- Be the brand that makes your customer feel loved and appreciated on their special day by sending them a birthday gift or discount code to purchase one themselves.
- Treat loyal customers to special features or upgrades that others need to pay for.
- Share their social media posts. When you unexpectedly repost their photos and stories on your brand accounts, your customers feel recognized and appreciated.
- Invite them to exclusive events.
Offer stellar customer support: Support systems help you effectively communicate with your customers and provide them with the right level of support. Having a live chat or help desk tool available can turn a customer question into a sale or a customer complaint into a resolution, whether they come in on-site, through email, or via social media.
Whether you build a profile, lean into gamification, or vastly overhaul your customer service, these steps are essential for improving customer experience. Why? Satisfied customers come back; dissatisfied customers do not. It truly is that simple. The other important thing to note here is that these are just a few examples of items you can include in your strategy, as the opportunities are endless – some that haven’t even been brought to life yet!
Bringing it All Together
Without retention, your product is a leaky bucket; you can pour in as many dollars as you like into marketing, advertising, and other means of customer acquisition and still wind up with a failing business because you failed to capture and retain customers. .
And we get it: competition is high, regardless of your industry, and companies that know how to keep their existing customers happy are at the forefront of success. Not sure where to start when creating a retention strategy that gets you to the front of the line? Contact one of our experts today – we can discuss your needs and customize a plan that supports your acquisition and retention needs.