Understanding Customer Retention
What Customer Retention Is Really About
All the successful businesses sooner or later discover one thing – it is easier and more profitable to retain the customer rather than to find new ones all the time. The term “customer retention” describes a business’s efforts to make customers stay with the brand and buy the offered goods and services again and again. In comparison with acquisition, customer retention pays attention not to finding new buyers but developing a strong and stable connection with customers in order to satisfy their needs better and make them feel comfortable.
For example, imagine your preferred coffee shop or online store. There is no doubt that you will keep coming back since you can trust the brand, are satisfied with it and know what to expect from it. Companies that succeed in creating such relationships do not need to pay too much for advertising and still get plenty of repeat purchases.
Why Retention is More Important than Acquisition
Acquisition is always exciting but there is a cost involved in it. The expenditures on advertising are growing every day. Competition is becoming harsher and consumers have lots of options to choose from. Attracting a new buyer often takes several marketing steps and much more time.
It is usually cheaper to retain an existing customer as it involves developing the relationship which already exists. The returning buyers purchase more often, spend more money and usually do not need too many persuasions. Moreover, they become the advocates who attract more clients without any additional expenditures.
Imagine yourself filling up a bucket of water with holes at its bottom. Getting new customers while having retention problems is just the same as doing nothing. The companies which fix the holes create a steady stream of money.
The Business Benefits of Customer Retention
Why Retention Increases Revenue
In order to grow revenue it is necessary not only to attract more clients but to make the best use of them. The loyal customers prefer to buy premium goods, use the offered services and are responsive to recommendations.
Even a minor improvement in retention rate will have a cumulative effect. The increased number of repeat purchases leads to increased value of customer lifetime which gives an opportunity to invest money in the development of a product, improvement of the customer service and innovations in marketing.
Customer retention also increases predictability of the income as the recurring purchases become more predictable and it becomes easier to plan the expenses and development.
Important Customer Retention Metrics
It is impossible to improve something without measuring it. Measuring retention metrics is the key to discovering strengths, weaknesses and possibilities for improvement.
Metric What Does It Say?
Customer Retention Rate Customer loyalty
Customer Lifetime Value (CLV) The predicted income from customers
Churn Rate The proportion of customers leaving
Repeat Purchase Rate The tendency to purchase again
Net Promoter Score (NPS) The degree of customer satisfaction and advocacy
The regular monitoring of these indicators allows making reasonable decisions and correcting the strategy before customers start complaining widely.
Proven Customer Retention Strategies
Provide Excellent Customer Service
The customer service is still the most important competitive advantage in the modern market. The product can be copied but not the excellent experience of interaction with the client.
Customers expect a quick and knowledgeable reaction and empathy. It does not matter whether the interaction is made via phone, email, live chat or social media – everything affects the client’s image of the brand.
The company should try to solve the problem of its customer quickly and easily without sending him through a complicated process of customer service. Sometimes mistakes happen but honest communication and fast solution of the problem can save the customer’s trust.
Excellent customer service turns ordinary buyers into loyal advocates of the brand.
Personalize Your Interactions with Each Customer
Nowadays the consumers expect personalization and do not want to hear the generic marketing messages. By knowing the client’s preferences the companies can make appropriate recommendations, offer him promotions and communicate with him in the right way.
Personalization starts with the collection of information about the customer: his purchase history, the products he is interested in, his demographic data and his feedback. Emails greeting the customer by name and offering him the products he has previously purchased perform much better than general emails.
The personalization of the experience is not limited to marketing activities. A customer support agent who knows the purchase history solves the problem faster and better. Personalized onboarding, loyalty rewards and content recommendations also affect the relations with customers.
The aim is not the gathering of information but the using of it in the right way.
Develop a Customer Loyalty Program
The loyalty program stimulates repeating purchases and reward customers who stay with the brand for a long time. The good program offers meaningful rewards to its members instead of complicated point system which does not bring any profit.
The customers appreciate such rewards like exclusive discounts, early access to the new products, birthday gifts, free shipping and VIP experiences. They create emotional connection with the brand.
It is important to develop a loyalty program that will be clear and simple to use. Complex rules do not encourage the participants and the rewards provided by the company should be available from the mobile applications or customer account.
The well-designed loyalty program makes the customer choose your company instead of competitors with the same price of the products.
Gather and Act Upon Customer Feedback
Feedback gives the companies direct information about customer expectations. Each review, suggestion, complaint and survey is an opportunity for improvement.
It is important to ask for the feedback soon after the customer has interacted with the company. Brief surveys usually give more responses than lengthy ones. Then the collected customer’s insights should be used in the development of a product and improvements of the marketing strategy.
Public response to the reviews, both positive and negative, shows the company’s transparency and readiness to fix mistakes. The customers are glad to see companies which do not ignore their concerns.
It is useless to collect the feedback if it is not implemented in practice. Taking into account the customers’ opinions strengthens their trust to the brand.
Keep Customers Engaged with Email Marketing
Email marketing is one of the best performing digital marketing techniques as it allows interacting with customers who have already shown their interest in the company.
Good retention emails should not be limited to some offers. Welcoming emails, newsletters, recommendations, season-specific materials, cart abandonment emails and exclusive membership updates should be sent regularly.
It is important not to overwhelm the customer with email newsletters but to send him interesting information. The segmentation will improve the result by sending relevant emails.
Effective email communication improves relations and brings repeating purchases.
Make Sure You Reward Your Long-Term Customers
Many companies invest money in attracting new customers ignoring the long-term loyal customers who have chosen the company for many years. Appreciating the long-term customers will improve their emotions and loyalty to the company.
Some simple steps will make a long impression on the customer. Some anniversary rewards, surprise gifts, handwritten letters of gratitude, access to the preview of the products and special events with the customers’ recognition show real appreciation.
Unexpected gifts work much better than discounts. The customers remember the brands that appreciate them instead of treating them as numbers.
Showing the gratitude turns the customers into loyal advocates of the company.
Improving Retention Using Technology
Customer Relationship Management and Marketing Automation
The Customer Relationship Management (CRM) platform stores all the information about customers, making the personal communication possible. It allows the sales team, marketers and customer support agents to have the same customer history and provide consistent experience.
Moreover, the marketing automation delivers relevant messages depending on the behavior of the customer. The automated emails of welcoming, renewal, birthday offers and re-engagement keep the customers in touch with the brand without any extra efforts.
Companies which use CRM platforms have more information about purchasing patterns and can engage customers before losing them.
Technology is not the alternative of personal relations but the tool that enhances them.
Customer Support with the Help of AI
The AI improved customer service providing the company with an opportunity to provide the client with the instant support 24/7. The AI chatbot can answer the questions of the client, advise him in buying something and solve the simplest problems.
If the AI is used effectively it decreases the response time and allows the support agent to deal with more complicated questions. With the help of the predictive analytics the company can predict the risks of losing the customers and take preventive actions.
The most successful companies combine the efficiency of the AI with human empathy. The client appreciates the quick reaction but still wants to have a human being to solve complicated problems.
Common Customer Retention Mistakes
Failing to Take Care of Existing Customers
Sometimes companies concentrate so much on acquisition of the new customers that they ignore the existing relations. The result is decreasing of customer satisfaction, increasing of the churn rate and loss of revenue.
The existing customers expect the continuation of the communication after making a purchase. It can include valuable information, useful resources, product updates and appreciation.
The customer retention should not become an additional task. The loyal customers need consistent investment as they usually bring the highest value to the company.
Ignoring Customer Satisfaction
Without measuring the satisfaction rate it is difficult to have enough information about customers’ demands and expectations. These expectations are changing rapidly and regular feedback is the only way to succeed in the future.
The surveys of customer satisfaction, NPS, online reviews, customer interviews and behavior analytics provide useful insights. The monitoring of these metrics allows detecting emerging problems before losing the customers.
The companies which work with the goal of continuous improvement consider customer satisfaction as the process and not the single event. Continuous listening brings better products, experiences and more retention.
Conclusion
Customer retention is one of the most powerful tools for improving revenue. Instead of investing all the efforts in the customer acquisition it is better to develop the relations with the existing customers. Personalized experiences, excellent customer service, loyalty programs, communications and technology-based engagement improve the performance of the company.
The companies which always exceed customer expectations not only get repeating purchases but the trust of the customer. It turns him into a loyal advocate of the brand.