Retaining your existing customers is like printing your money. Alright, that might sound a little far-stretched. Nevertheless, from a business economics point of view, customer retention can boost your profit margin significantly and also contribute to expanding market share.
In fact, studies have found that increasing your customer retention by a meager 5% can actually inflate your profitability anywhere from 25% to 95%. Well, we can easily assume customer retention to be the ninth wonder of the world.
Now that you know the true power of customer retention, it is necessary to understand what it really is.
What is customer retention?
Customer retention can be defined as the ability of a business to retain its existing customers as repeat buyers by reducing the chances of them switching to a competitor.
A high customer retention rate means more customers remain loyal to the brand and are able to perceive value out of your offerings.
The formula for measuring customer retention rate
Customer retention is measured with the help of a well-defined formula.
CRR = ((E-N)/S)) X 100
Where CRR is the Customer Retention Rate.
- E is the number of customers you have at the end of the week/month/year or another period
- N is the number of new customers your business made a sale to or acquired in some other way during a given period
- S is the number of customers you had at the beginning of the period
The pressing need for customer retention
It costs five times more to acquire a new customer than to retain an existing customer (Bain & Co). To acquire a new customer your marketing machinery has to run on full throttle, the sales motion should play its part, and there should be enough customers to go after. Whereas with customer retention, it is easy for the business to continue serving its customers in the best fashion possible and maximize their earnings. This one reason proves why customer retention is crucial for any business’s growth.
Unfortunately, not every business succeeds with retaining its existing customers. It is necessary to run the extra mile to keep customers from quickly forgetting loyalty and switching over to competitors.
Fortunately for businesses, there are customer retention strategies that can help. Here are 5 of them.
- Start onboarding on the right note
- Deliver real-time customer support
- Foster relationships with loyalty programs
- Build a customer community
- Analyze churn reasons
1. Start onboarding on the right note
Product onboarding is the first interaction that customers will have with your brand. It creates the first impression and also the subconscious decision of whether to remain with the product or churn in the short term.
If the onboarding journey is designed to help the customer complete their tasks on time and with relative ease, their chances of sticking to the product are higher. In a product marketing environment, this is referred to as ‘stickiness of the product. If onboarding begins on the right note, rest assured that it is easier to retain the customers.
If you want to take things a step further, after initial onboarding is done consider offering an online course showcasing various use cases of your product. Or, if you want to try to add another revenue stream, consider creating a course that teaches a skill that’ll resonate with your product’s audience.
2. Deliver real-time customer support
It takes months of pursuit and cross-functional collaboration to onboard a new customer. However, such a customer can be lost in the span of few seconds. In fact, PwC found in its study that even loyal customers will leave a brand after few negative experiences. Customer loyalty is no longer reserved for the long term.
Hence, the need to deliver exceptional customer support at all times. In the virtual world, it means that you should serve your customers through every available channel. On the website, it could be with the help of an Artificial Intelligence-based chatbot. On social media, you can leverage bots and dynamic responses. For phone support, you can leverage Interactive Voice Response (IVR) and self-service menus to deliver real-time customer support.
3. Foster relationships with loyalty programs
Customer loyalty is not built overnight. Theta rebuilt over time, just like any other human relationship. Today, in the digital era where face-to-face customer interaction is minimal, it is necessary for businesses to develop specific customer loyalty programs.
These programs can act as tools that will gamify every interaction that the customer has with the brand. For instance, the Starbucks rewards programs give the customer one-star point for every purchase. The stars so collected can be redeemed in the future for buying Starbucks products.
4. Build a customer community
Be it in brand building or customer retention, the power of communities is too often overlooked. A community can bring strangers together and make them feel like they are part of a group of people who share the same interests, likes, and also opinions.
Imagine the propulsion it can give to a brand when customers come together as brands? Let’s take the example of Apple. Apple fandom is at a level that not even Hollywood franchises can match. This community of Apple fans itself acts as a launchpad for the brand to introduce new products into the world with relative ease.
Similarly, communities can be used to address issues or concerns that customers could be having while using the product. It can help prevent churn due to the non-availability of information.
5. Analyze churn reasons
A drowning ship can be saved only if the leak in the hull can be located. Similarly, for any business, customer retention can be improved, so it is necessary to understand why customers churn. Once the reasons for churn are identified, necessary changes can be made from the product side to suppress churn.
Most often, customers churn because they are not aware of how to use the product effectively. Situations like these can easily be fixed with customer training and support.
Final thoughts on improving customer retention
Customer retention in any industry is a tough challenge to conquer. Although it is possible for businesses to use steep discounts and price reductions to retain customers, they will prove to be ineffective and difficult to sustain in the long run. Customer retention needs a strategic approach. The five strategies described above can help with that.
Apart from these, does your business use any customer retention strategies that are delivering results? Share the knowledge!
Savan Kharod is a Digital Marketing Professional at Acquire. He loves to share his knowledge and experience in digital marketing, social media marketing, customer service, and growth marketing. In his free time, Savan likes to backpack and explore new places. You can reach out to him on LinkedIn or Twitter.