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.
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.
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.
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:
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 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: