How to Improve Customer Retention
Customer retention is an important aspect in established businesses. It will affect the business trust and profit, ultimately being the deciding factor in the success of the business. In this article, we will explore all you need to know about customer retention, and the top 10 strategies you can implement in your business for better customer retention.
What Is Customer Retention?
Customer retention is where the customers who have engaged with your business previously, come again as repeating customers instead of going to your competitors. Having a high customer retention indicates your product or services matches the needs and provides satisfaction to the customer.
Why Customer Retention Matters
There are many reasons why customer retention matters for a business. Try taking a look at a newly established business without any existing customers. The amount of funding they need to direct into marketing, and the effort needed to increase exposure of their business to potential customers are significant.
Having a repeating customer, or a steady customer, can help cut down on these costs and effort. This would be highly beneficial to the business as they can direct their resources and focus away from huge and costly marketing campaigns.
Here are some other reasons why customer service retention matter for business success:
- Increased Revenue: Repeating customers tend to spend more as they already trusted your brand.
- Improved Profitability: Higher customer retention rates lead to increased profitability due to less resources needed for marketing.
- Easier Exposure: Repeating customers are most likely satisfied and will be more likely to recommend your brand to others.
- Competitive Advantage: A strong customer retention strategy can strengthen your business standing from your competitors.
How do you calculate your customer retention rate?
You can calculate your Customer Retention Rate using this formula :
Customer Retention Rate = (Total customers at the end of the period – Total new customers acquired during the period) / Total customers at the beginning of the period
For example, if you started the period with 100 customers, gained 40 new customers, and ended the period with 90 customers, your customer retention rate would be :
(90 – 40) / 100 = 50%
It is also best to know the Customer Churn Rate, the percentage of customers who stopped doing business with you over a specific period, using this formula :
Customer Churn Rate = (Total customers lost during the period) / (Total customers at the beginning of the period)
For example, if you lost 20 customers from the initial 100 customers, your churn rate would be :
(20) / 100 = 20%
While a 100 percent retention rate and 0 customer churn may seem like the ultimate goal, that could only happen in theory. Realistically, the retention rate benchmark varies by industry. It ranges from around 70 percent for healthcare and up to 80 percent for professional services.
10 Customers Retention Strategies
Here are 10 effective customers retention strategies you can implement into your business :
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- Build Trust
Building trust with your customer is important in order to increase retention. One of the ways you can build trust is by being transparent with your customer. You can start by sharing information openly and honestly, being reliable, and delivering on your promises. You will also need to be ethical in your day-to-day practices, and be consistent in providing great customer experience.
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- Implement a Customer Loyalty Program
By rewarding customers with points, discounts, or even special benefits when they’re being loyal to your brand, you will encourage them to continue doing business with you. You can create tiered rewards to offer different levels of benefits based on customer’s total spending or engagement. This will encourage new customers to engage you, and repeat customers to keep coming back.
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- Show Customer Appreciation
Showing gratitude and appreciation to your customer for their loyalty can strengthen relationships and encourage them to stay with your business. You can send them a tailored gift or discount for special occasions like on their birthday, or after a certain period of time since they first did business with you.
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- Become Part Of Their Lifestyle
While some brands exist as a standalone product, some others are able to blend into the customer’s daily lives as part of their lifestyle. This is achieved by integrating the product to fit into the customer’s sense of style, or by having an ecosystem which compliments their daily needs and usage. You can see this in a few smart home products, creating a whole ecosystem for their brand and integrating into customer’s lifestyles.
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- Differentiate Your Business
Making your brand stand out from your competitors can help attract and retain customers. You can achieve this by identifying your unique selling points, highlighting the strengths of your brand or products, and offering exclusive features that are not available elsewhere. This method is called Breakaway Methodologies which you can find out about more here.
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- Provide Convenience
Everyone loves simplicity and ease. You can leverage this by providing convenience to your customer, making it easy for them to do business with you. Achieve this by simplifying the purchasing process, provide a flexible payment method, and offer multiple delivery or pickup options. Doing this can help improve their satisfaction and loyalty to your business.
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- Provide Proper Customer Support
Having excellent customer support is essential in retaining customers. Be responsive to any inquiries or complaints from your customer, show proper empathy, and provide accurate and informative assistance to them. It is also best to have multiple channels for the customer to reach out to you.
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- Listen To Feedback
Actively seek and respond to any feedback from the customer in order to tackle any potential issue and keep improving your service or products. You can gather feedback by conducting surveys, reviews, and monitoring brand mentions in social media. By analyzing these data, you can identify any issues or possible trend, allowing you to address any concern or be a market leader when the trend peaks.
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- Provide Positive Employee Experience
Happy employees will be more than likely to provide exceptional service to your customer. You can achieve this by creating a positive work environment, recognize and reward employee contributions, and respond to their feedback.
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- Keep It Interesting
Keep the customer excited by continuously innovating and offering new experiences. Read into the current trends and find out how you can implement this into your product, services, or features. You can also offer limited-time products or promotions to create a sense of anticipation among the customers, and ensure your brand would not be obsolete.
Conclusion
There are many other strategies and approaches you can take in improving your customer retention. It is best to analyze and find out which one suits your business the most. A properly implemented customer retention strategy will strengthen your relationship with the customers and drive your business to a long term success.