Strategic Advantages and a Playbook to Improve Customer Retention
Imagine collecting seashells from the shore, putting them in your beach bag, then returning home to find the bag was torn, and you were left with nothing!
As a company, if you have faced a similar predicament of securing new customers through expensive marketing strategies and failing to retain them, you’ve wasted important time and resources to obtain new clientele and then didn’t receive the anticipated ROI since these customers never returned!
This is precisely why retaining the people who buy your goods (or services) is crucial for any business to flourish. Customer retention is the ability of a company to retain its acquired customers; such strategies are designed to urge customers to consistently transact with the brand and repeat their purchases.
Let’s look at the strategic benefits of customer retention and how it can help businesses.
Benefits of Customer Retention
- Increase in Revenue – According to Altfield, “The probability of selling to an existing customer is 60-70%. For new customers, that figure drops to 5-20%.” Consistently strategizing to retain customers results in repeat purchases for a prolonged period. Increasing revenue and brand credibility are among the many benefits of customer retention.
- Economical – It is a known fact that customer acquisition costs more than customer retention. It is five more expensive to sell to a new customer. Also, a study by Bain & Co. reported, “Increasing customer retention by 5% can result in 25-95% increase in profit.” Cost efficiency is one of the main benefits of customer retention.
- Fosters Brand Loyalty – Customer retention has a direct impact on brand loyalty. A customer that repeatedly purchases from the company begins to develop a positive association with the label, thus forming the groundwork for a long-term brand-customer relationship. A successfully retained customer often turns into a strong brand loyalist.
- Improves Brand Advocacy – Retained customers are happy customers, and a customer that is satisfied with his overall experience with the brand is likely to recommend it to his network of family and friends. Referrals and word-of-mouth marketing are among the prime benefits of customer retention.
Identifying Loopholes and Steps to Improve your Customer Retention
- Measure Churn Rate – The churn rate is the measure of customers that have stopped purchasing from you for a specific amount of time. Measuring your churn rate is important to gauge how well your business is doing, along with how effective your marketing plan is. A high churn rate obviously can be significantly detrimental to your business. A simple way to calculate churn rate is
(Inactive or Cancelled Customers in a given period of time ÷ Active Customers in the given period of time) x 100 = Churn Rate
This calculation will give you an exact idea of your churn rate and how aggressively you need to focus on client retention.
- Identify the Cause – Once you have your churn rate, the next step is to investigate the cause that is resulting in churn; this could vary from fluctuation in price to change in marketing strategy, more competition, or even redundancy in the current packaging, marketing, or product attributes.
- Make Amends – Once you have correctly identified the cause(s) of the churn rate, you need to work expediently towards making amends. According to a study by CallMiner, “37% of customers would like companies to apologize when the service does not live up to their expectations.” Making amends also includes reaching out to your customers, accepting where you fell short, and assuring them that you are working towards improving the brand and customer experience.
- Start a Friendship – Consistent engagement is key to enhancing customer experience and thereby improving retention. One of the main benefits of customer retention is mutual trust between the brand and the customer; this friendship of sorts forms a strong pillar of long-term growth and customer loyalty.
Customer Retention Playbook
- Identify your Strengths – Before implementing a strategy, be it customer retention or acquisition, it is imperative for you as a brand to understand your USP and strengths. This will help you better formulate marketing strategies and create a base of loyal customers. It will also help customers form realistic expectations from the brands and attract relevant audiences.
- Access CLV – Customer lifetime value (CLV) refers to the revenue generated by a customer throughout the customer journey. Determining CLV can help you plan short-term and long-term marketing objectives and strategies for customer retention. It will also help you to identify and pursue customers with high CLV, which proves to be an asset to the company in the long run.
- Create a Quarterly Communication Plan – Communication is key to retaining customers and keeping them engaged with the brand. A well chalked-out content/communication calendar will help you engage with the audience periodically without being repetitive or spamming them.
- Enhance Customer Experience – “65% percent of American consumers say positive personal experiences are more influential to them than great advertising,” according to a study by PWC. Positive customer experience is the core of customer retention. A happy customer is bound to transact with the company repeatedly. To enhance customer experience, you as a brand must reassess your data/analytics, communication strategy, and customer support from time to time.
- Enhance Technological Capabilities – With various mediums at your disposal, it is important to connect with the customer through their preferred channel. Explore the latest options and switch to omnichannel marketing to improve customer experience and retain customers more successfully.
- Invest in Loyalty Solutions – A report by Bond Brand Loyalty says, “Over 70% of consumers are more likely to recommend a brand if it has a good loyalty program.” Loyalty programs are a significant revenue driver. A well-planned and rewarding loyalty program can help in boosting sales, retaining customers, encouraging trust, and building loyalty among customers. Connect with Annex Cloud, to learn how you could design loyalty strategies that resonate with your brand values and business aesthetics.
- Value your Customers – The aforementioned strategies and techniques will only work when you understand and value your customers. According to SmallBizGenius, “56% of customers stay loyal to brands that ‘get them.’” To leverage the benefits of customer retention, it is crucial that you empathize with your customers and treat them as assets. A customer that feels valued and appreciated is bound to form a long-term association with the brand.