Did you know that merely a 5% increase in customer retention can increase company revenue by up to 95%? Customer retention is extremely important and valuable to a company. Once customers become repeat buyers, you can build lasting relationships with them. Established trust from happy customers drives more sales, decreases advertising costs, and saves money. Returning customers are 50% more likely to purchase from you than new customers, and tend to spend about 33% more.
Loyal customers will further spread the word of your brand within and outside their circles and drive customer acquisition by attracting more customers. In fact, word-of-mouth advertising drives up to five times more sales than paid advertising. Up-selling and cross-selling are much easier when it’s for a group of your loyal customers. Research indicates that loyal customers are six times more willing to experiment with your new products. Engaging in customer retention practices helps your brand understand who your customers are and what they want. The data collected helps facilitate personalized and targeted promotions to maximize chances of success. It ensures real, organic growth, increases ROI and ensures future revenue.
Retaining your customers is more important than ever. Adopting best practices in customer retention is key to this. However, you must first measure your customer retention rate before proceeding.
How to measure customer retention rate
Customer retention is impacted by how many new customers are acquired, and how many existing customers churn. Before formulating a retention strategy, identifying your current customer retention rate is very important. This has an easy, standard formula.
First, decide and define a period for measurement, e.g., quarterly or yearly. Then, apply this formula:
[(Number of customers at the end of the period – Number of customers acquired during the period) / Number of customers at the start of the period] x 100
For instance: Let’s say you started the year with 30 customers, gained 10 new customers in the first quarter, and have 3 customers churn. This leaves you with 37 customers at the end of the evaluation period.
[ (37 – 10) / 30) ] x 100 = 90% retention
You can use this number to determine how well you are able to keep your customers coming back. A retention rate of 35% or more is considered to be extremely good for e-commerce or SaaS industries.
By identifying your customer retention rate, you can then make improvements where necessary and implement the best practices. For instance, conducting an audit of your churned customers can help determine the reasons for leaving and the types of customers that leave.
The following best practices can help your organization enhance customer retention and experience less customer churn.
Offer a great customer experience (CX)
Happy customers not only have a high lifetime value but are also the best brand advocates. Satisfied customers share their experiences with their friends and help to improve brand credibility. Your customer’s brand perception and their decision to return to business with your brand depend on every little thing that you do. So it goes without saying that a good customer experience goes a long way in increasing retention rates and boosting customer loyalty.
Zappos, an online shoe store, helped a customer who was late returning a pair of shoes due to the passing of a family member. Their customer service team went the extra mile and provided free return shipping and arranged for a courier to pick up the shoes. As a token of condolences, they sent a bouquet to the customer.
A good customer experience across all the touchpoints of your business from website navigation, customer service interaction to the final purchase goes a long way in customer retention. 86% of customers satisfied with great purchase experiences will likely purchase from the same brand again.
Subscriptions and loyalty programs
Exclusive offerings, incentives, and rewards for your existing and loyal customers further boost your brand loyalty and customer retention. In fact, 91% of customers are more likely to make purchases from brands that remember and recognize brand loyalty and provide meaningful offers and recommendations. For instance- access to exclusive content, advance notice of new product offerings, presale discounts, and invites to special events and other special offers. An example of a brand with a smart customer retention strategy that boosts brand loyalty is Buffer. A social media marketing provider, they keep their customers in the loop and build trust with their clients with their ‘Inside Buffer’ blog. Here they discuss operations and changes within the organization to make customers feel closer to the brand.
A subscription model with subsidized costs and free trials, for instance, the ones provided by streaming services like Amazon Prime, Hotstar, Netflix is a good way to retain your customers for a long duration of time. Loyalty programs also increase customer engagement and participation by building strong customer relationships. For instance, Sephora’s program called Beauty Insider is a good example of a loyalty program. This gives access to discounts and gifts to loyal customers without spending any money. The more money you spend with them, however, the better the perks.
Conducting customer surveys
Customer surveys enable you to find out what is going well with your brand and what are the points of improvement. Apart from online feedback surveys, this also includes gathering customer insight from service calls and during deliveries, installation, and other stages of customer interaction. This helps you enhance your CX across multiple product touchpoints and improve the quality of your services.
One example that illustrates the benefits of conducting customer surveys is Expedia. Expedia, a traveling firm, uses automation to collect feedback from customers once their trip has ended. Automating the feedback process makes it a consistent and informative part of business practices. This fuels consistent improvement in customer satisfaction and processes.
Educating customers about your products and services
Research indicates that 86% of customers say they’d stay loyal to a business that actively welcomes and educates them about their products and services after a purchase. 55% of consumers have also claimed they’ve returned a product because they didn’t fully understand how it works. Enabling your customers to make the most of your product or service from the first stage helps ensure that you appeal to all of your customers, not just a small set of them. Educated customers not only know how to utilize your products better, but they can also provide more detailed and comprehensive feedback.
Content that is interactive and easy to understand helps to develop a better understanding of your brand, enabling customers to have a better understanding of your products and services. Customers can find information and solutions through FAQs and other educational processes like webinars and access to company research and case studies, which reduces customer complaints. Zendesk, for instance, provides its customers with a variety of resources based on the needs that help them gain a deeper understanding of their products.
Prompt communication with your customers across channels
Prompt response to customer feedback is crucial to boost engagement. A key aspect of consistent customer engagement and prompt communication includes participation in social media channels. Maintaining an active presence on social media and providing a good social CX – with engaging campaigns and prompt responses – plays a prime role in shaping customer relationships today.
Another crucial customer engagement tool that helps boost customer frequency is email marketing. Emails give the opportunity to continue building a relationship with the customers before and after their initial purchase. It’s critical that each message sent adds value to the customer’s experience. Shopify data from Black Friday and Cyber Monday shows that, relative to other sources, email has the highest conversion rate at 4.29%, followed by search in second. E-mail is an important channel that helps to boost conversion rates.
Communicating consistently with customers builds trust, transparency, and makes customer needs known and understood.
Companies lose over $1.6 trillion each year due to customers bailing after a poor service experience. Relationships with your customers go a long way toward retaining them. As disruptions like the pandemic cause consumer loyalty to shift, it has become imperative to develop customer retention strategies that work.
Netscribes provides a host of customer experience management solutions, including customer insights, customer engagement, acquisition, and retention services, to help organizations connect with their audiences better. Contact us to know more.