Today’s companies are laser focused on developing and converting leads. Technology is evolving and offering new ways to attract the attention of potential customers.
However, companies must not forget the existing customer.
Losing existing customers not only impacts current year revenue, but when a customer leaves, they take all of the potential future business with them.
Strategies that retain and delight existing customers are the cornerstone to any business.
Not only is catering to your existing customers the right thing to do, it is also makes very good business sense. Consider these statistics:
- To acquire a new customer, you will spend 5x more than you will to retain an existing customer.
- Success rates for sales to existing customers are in the range of 60-70% while success rates for potential new customers are 5-20%.
- Companies who increase retention rates by just 5% have seen a 95% increase in profits.
The next logical question becomes: how do you develop a customer retention strategy that not only retains existing customers but delights them enough to provide real momentum for your business?
How to Get Started
1. Calculate your customer retention rate (CRR).
To improve customer retention, you must be able to measure it. To calculate CRR:
- Choose a time period you’d like to measure – year, quarter, or month.
- Determine the number of customers who interact with your brand and have purchased from you at the beginning of the period and then again at the end of the period.
2. Understand Why Customers Leave
When you know your CRR, you can then dig into data about lost customers to understand which customers left and better understand their reasons for leaving. Even more important to see are the trends within those reasons.
3. Understand Why Customers Stay
Seek to understand why your best customers stick with you.
- Is it the product or service?
- Is customer service the driving factor for retention and repeat sales?
- Or is it something else?
This is not as simple as it sounds. Several underlying factors must be considered in order to see the complete landscape of why customers stay and make repeat purchases.
Are customers making repeat purchases because they are really happy with the brand and the experience? Or are they making repeat purchases because:
- the nature of your product has a short expiration date;
- your product needs replacing because it doesn’t work all the time;
- or a more effective brand isn’t available – yet?
Loyal customers who continue to patronize your business should have a line on your balance sheet because they are your organization’s most valuable asset.
Your marketing plan must include customized campaigns targeted specifically at retaining your most loyal customers. Loyal customers present opportunities to upsell and cross-sell. Not only do they buy from you regularly, loyal customers can also become a marketing channel by becoming brand advocates.
Strategies for Driving Customer Retention
Today’s customers base purchasing decisions on more than just price. Feelings of appreciation, shared values, and emotional connection with the brand go a long way when it comes to retention.
- Customer loyalty programs allow organizations to interact with the customer beyond the initial point of purchase. You are able to demonstrate your gratitude and give customers something in return for their repeat business. Incentives like free shipping on their next order, a special discount and other perks that reward repeat purchases can help you convert sporadic shoppers into loyal customers and retain them indefinitely.
- Societal marketing can also help retain customers. Find out what your customers stand for and stand with them. Studies show that 2 out of 3 customers are willing to spend more with an organization that shares their social or political values. Brands should work to evoke emotion. It is only natural that societal marketing, and the prioritization of purpose before profits, has significant influence when it comes to customer retention.
- A content calendar that shares valuable information helps to maintain – and can even increase – brand engagement. Statistics show that businesses that communicate with their customers at least 10 times per year see 300% more revenue.
- Community forums enable customers to discuss your products and services and, more importantly, their pain points, needs and preferences. When you notice complaints, address them with outstanding customer service and demonstrate how attentive to the customer you are.
A satisfied customer is a priceless asset. Satisfaction breeds loyalty. Companies who understand this and truly commit to exceeding expectations will retain their best customers and find long-term success.