One of the biggest challenges new companies face is customer acquisition; it’s a long and costly process making high customer retention a worthwhile goal. According to a recent study, acquiring new customers costs five times as much as retaining your existing customers and building long-term relationships with new customers costs 16 times as much as maintaining existing ones.
This isn’t to say that you shouldn’t focus on customer acquisition but if you’re a company that has been around for a while and are losing your potential repeat customers to your competition, it may be time to look into your customer retention strategies.
You should be aware of all factors pertaining to customer retention and know some strategies that can help. Here is an overview:
Every business needs new customers to succeed but that can be unpredictable whereas retaining your existing customers is a great, predictable source of revenue. Here are some major benefits of customer retention:
- Lower Cost – As mentioned above, it’s significantly less to retain customers than to acquire them, you’ll be spending a lot less on marketing campaigns to reach those new customers. When you build a strong repeat customer base, you’ll eventually start growing by word of mouth.
- Repeat Customers Spend More – Your loyal customers, on average, spend 23% more than the average customers. Keep building those relationships!
- Feedback – Listening to your repeat customers is one of the most valuable pieces of feedback you can receive. They’ll let you know if there has been any decline in quality or service.
- Brand Image – Repeat customers are great for brand image, they help build trust and confidence in your brand. They’ll share their positive experience and by default, become your brand ambassadors.
How to Calculate your Customer Retention Rate
Calculating your customer retention rate (CRR) is a necessary metric to gauge the success of your strategies. You can start with any period of time whether it be the entire year, a month, or the length of your new strategy and first find the difference between total customers at the end date and new customers acquired. You then divide by the number of customers at the start date and multiply by 100:
CRR = ((E-N)/S) X 100
Number of customers at the end of a period minus number of customers acquired during the period divided by the number of customers at the start of the period multiplied by 100
There are other important metrics involved with customer retention, such as purchase frequency and average order value. You can learn more about those metrics here.
The Role of CRM
Your customer relationship management system is critical to your success with customer retention. The right CRM system will provide you with all the tools to manage your customer relationships and continuously improve your customers’ experience.
Be sure to use a CRM system that is right for you, take advantage of the free trial periods until you find on that is intuitive and fits your needs. The goal is to know your customers, how they’re responding to the market and your strategies, and developing those long-term relationships. Zone in on those strategies that aren’t received well, study your target audience to figure out why and try it again.
Here is a guide on the best-rated CRM systems.
Customer Retention Strategies
Try these strategies out to improve your customer retention:
- Shared Values – One way to keep customers is to have shared values with them. People like to shop at companies that they feel a connection to so by standing for something, you’re less likely to lose your customers to the competition.
- Onboarding Emails – If you are offering a service, send out an onboarding and training email right away. Your customers should know all the features of your product to receive the most value. They may not understand how something works, and that could mean losing them to the competition.
- Loyalty Programs – Keep your customers coming back with exclusive sales, product rewards, and store credit.
- Constant Communication – Stay fresh in your customers’ inbox (or your target market’s preferred channel) and remind them of deals or new products.
- Fast Delivery & Easy Returns – It’s always impressive when a company has a seamless and quick delivery and return system in place. This is a great way to keep customers coming back.
- Customer Service – While your product may be great, many people will trade a superior product for superior customer service. Be prompt, actively listen, and offer a resolution.
- Subscriptions – Build a subscription model, but make sure it’s easy for your customers to opt-out of and that they are 100% aware of what the subscription entails.
- Rewards your VIPS – If a customer has been loyal to you, be sure to acknowledge that and offer them a gift.
- Personalize – Personalize as much and as often as you can – especially those follow-up emails.
Continue to gain those new customers but put as much effort into keeping your existing ones – it’ll save you so much time and money. Keep in mind, studies show the success rate of selling to a new customer is under 20% while selling to an existing customer falls between 60-70%. Work with a CRM system that’ll allow you to efficiently monitor your customer and allow you to easily build those relationships, they can become your next brand ambassadors! If you don’t have a strong focus on customer retention, put some of the above strategies in place today.