The year 2020 shed light on the significance of customer retention and since then, it has been the talk of the town! While everyone stresses the importance of adopting this strategy, there isn’t much speculation about why and when you should focus on retention.
In this article, we will learn about when you need to concentrate on retention, retention tactics during crisis, important metrics, and the average retention rate per industry to help you design better customer retention tactics and strategies.
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Customer retention is the process of engaging your customers to turn them into repeat purchasers. Repeat purchasers are a direct indication of the company and the brand’s health and market value, and also acts as a success metric.
Retaining customers can help businesses in more ways than one. Not only do customer retention tactics help improve purchase probability and frequency, but it also reduces the sales cycle. With a high number of retained customers, you also save on marketing and advertisement costs. Retained customers also show a high probability of turning into loyal customers and eventually brand advocates that help with lead generation.
When Should You Concentrate on Customer Retention Tactics?
The ‘when’ of customer retention strategies is a very important question, which companies often forget to ask themselves while relentlessly pursuing new clients and struggling to retain the existing ones.
If you are a start-up or new brand, you cannot focus on customer retention tactics simply because you don’t have any customers, to begin with. The first cycle of a newly launched business is crucial: this is when you need to focus on customer acquisition. In the second cycle, you need to focus on building your brand’s identity while consistently pursuing new customers. After you have officially introduced yourself and acquired a decent-sized cluster of customers, you can combine your acquisition strategies with retention tactics. From here on, you can start seriously focusing on retention techniques and once you have acquired a sizeable share of the market, you can persistently focus on retaining your customers. According to Gartner Group, “As much as 80% of your company’s future revenue will come from just 20% of your existing customers.” The latest statistics of Capterra’s July 2020 Digital Transformation survey of over 500 small business owners, where respondents indicated customer retention as their top short-term and long-term business goals, also point out the significance of retention strategies.
The idea is to understand your position and standing in the market, then analyze the current market situation. Consider competition, target group demographics, investments, and budget to sufficiently work out strategies that are best suited for your business, at that particular time.
Customer Retention Tactics for Crisis Management
Loyal customers are the most vital asset, especially in times of crisis. When you do not have time, resources, or capital for customer acquisition, during times of emergency, it is your retained and loyal customers that will keep your brand afloat.
Taking inspiration from brands that have not only successfully retained their customers but emerged victorious with a stronger brand following and customer loyalty during the recent coronavirus crisis, here are some important customer retention tactics that we have learned:
- Stay True to Your Brand Value and Identity – In times of unprecedented crisis, it is important that your brand stay true to its value and purpose. Reiterate through your campaigns what your brand stands for. It offers certainty in times of uncertainty and resonates better with your customers.
- Team Effort– In normal circumstances as well, customer retention requires a coordinated effort from the sales, marketing, and product development team. However, their synchronization matters even more during a crisis. All your departments must be well-coordinated and work together to achieve the marketing objective; additionally, your product, sales team, and marketing strategies must concentrate on a unified approach for high efficiency.
- Focus on Communication – A crisis is a difficult time not only for the employer but also for your customers and employees. Communication can help you bridge gaps and offer reassurance. Be open about your predicament, offer assistance if required, and most importantly, request support and cooperation. Customers and employees feel privileged when bestowed with such responsibility, often reacting positively and with gusto.
- Rethink Strategies – Crisis is also a good time to rethink your strategies. Analyze what works and what doesn’t. It will help you with cost-cutting and design strategies that are more responsive and lucrative.
- Adopt Loyalty Programs – Loyalty programs offer high ROI but keeping customers engaged with the brand through the means of reward and incentives. Rewards could be a great way to attract customers, retain them while simultaneously improving brand loyalty. To know more about how loyalty programs can boost your brand value, connect with Annex Cloud.
Metrics You Need to Track
Gauging the effectiveness of your campaign is just as important as diligently executing your strategies. Listed below are some important metrics that will help you gauge the effectiveness of your customer retention tactics.
- Customer Churn Rate – To analyze the effectiveness of your retention strategy, you need to calculate the rate of customer attrition. With the help of the simple formula below, you can calculate your customer churn rate:
number of churned customers at a given period
total number of customers at a given period = Churned Customers
- Purchase Frequency – Another metric is to identify how often or how frequently customers shop from your brand.
- Website Visitors – You can also identify the number of repeat visitors on your website. This might not be an accurate metric because not everyone that revisits a website is a repeat purchaser, but it gives you a decent idea of ‘interested’ customers.
- Net Promoter Score – Perhaps one of the easiest ways to identify repeat purchasers along with customer preferences is the Net Promoter Score. It helps you gauge customer satisfaction level, their purchase frequency, and helps identify your brand and product’s weaknesses.
Average Retention Rate Per Industry
Customer retention rate is subject to many factors and also differs from sector to sector. However, having a basic understanding of the average retention rate of your respective industry will help you analyze the effectiveness and strengths of your retention strategies.
Listed below are average industry retention rates according to a 2020 report by Statista:
- Retail – 63%: Compared to other sectors, the retention rate in retail is quite low, considering the competition and constant influx of newer companies in the market.
- Banking – 75%: Generally, people do not migrate from one bank to another very often. It is a rare scenario that makes the retention rate in the baking sector reasonably high.
- IT – 81%: Engaging with a software or IT company is a commitment. Most B2B companies that hire the services of an IT firm stick with them, because of the magnitude and the seriousness of the undertaking. Trust and loyalty play a major role here, along with customer satisfaction.
- Insurance – 83%: Insurance, again, is a long-term commitment between the client and the company, hence it has a high retention rate.
- Media – 84%: Media is a competitive industry and to retain customers, media companies offer high ROI, which directly impacts the company’s revenue, thereby increasing the retention rate.