01 Nov 4 Powerful Customer Retention Strategies
Building customer loyalty is expensive. After you’ve acquired a customer, losing them is even more expensive. Customer retention is a vital key performance indicator (KPI) for all businesses to measure, improve, and build upon.
In this article, we will elaborate on the definition of customer retention, how to calculate your customer retention rate and the significance of customer retention. We will also highlight 4 effective strategies to retain customers long-term.
What is customer retention?
Customer retention is a metric used to measure customer loyalty, or the ability of a business to keep its customers over time. Retaining a customer’s loyalty shows that a company’s product, service, or brand is satisfying enough to the customer for them to stay with the company rather than switching over to a competitor.
How to measure customer retention rate
To know how well you are doing in terms of retaining customers, you must measure it objectively without using your emotions.
The standard equation for measuring Retention Rate:
Retention Rate = ((CE-CN)/CS)) X 100
Here’s what the variables stand for:
CE = Total number of customers when the period ends
CN = Total number of new customers that you acquired during the period
CS = Total number of customers at the start of a period
TIP: The flip side of customer retention is customer churn, which is the number of customers you’ve lost over a period of time.
Why customer retention matters
Clearly, no business wants to lose customers, but exactly how important is having a good customer retention rate?
According to Harvard Business Review, acquiring a new customer costs between 5x and 25x more than retaining an existing customer. What is really astounding is that with a 5 per cent increase in customer retention rates, profits can be increased by 25-95 per cent!
If you think about it, these data points make sense logically. When you increase customer loyalty and in turn your retention rate, you save your resources on marketing, sales, customer training, and other customer acquisition costs. Not to mention, customers who stick around tend to be happy with your product or service, which makes them more likely to spread your brand through word-of-mouth.
In conclusion, better customer retention translates to better cost efficiency in every aspect of your business.
4 effective customer retention strategies
Now that we have established the importance of customer retention we shall discuss how to turn your below-average retention rate into a healthy retention rate that benefits your bottom line. Here are a few simple yet powerful customer retention strategies:
Optimise and smoothen the onboarding process
In the customer journey, when the customer is first made aware of your brand, that moment stays with them forever. Research shows that after the initial excitement of purchase, most customers will remember the first experience they had with your brand the most. If it was a good one, they will tend to be more loyal.
A good acquisition process needs to be part of your retention strategy. It is the most long-term way of attaining loyalty. Ways to improve it include personalisation, fast response systems and building a frictionless experience.
Create a customer feedback loop
Get to know your customer and the customer journey. When you understand your customer’s sentiment and their likes/dislikes, you can refine your approach to meet their exact needs.
Send customer surveys
There are plenty of customer survey templates to use when gathering feedback, but these will likely not fit your organisation’s unique needs. Aeon conducts surveys with a keen eye on personalisation and customer psychology. For personalised and accurate feedback from your customers, contact us today.
Close the loop
Getting customer feedback is essential but also remember to close the customer loop. Show the customer that you care about them and value their time. The easiest way to implement this is by customising a Thank you message on your survey and directly responding to their feedback to show them that you’re listening and utilising their feedback to improve.
Tip: Enable your customer service teams to see negative feedback in real-time and act quickly to follow up or resolve the issue.
Making an impact with a thoughtful and prompt closed-loop process sticks in customers’ minds and improves your relationship with your buyer.
Prioritise your product/service
Don’t stop marketing to someone just because they’re already a customer. In today’s highly competitive world, people are more likely to switch brands.
It should go without saying (however many companies forget) that you must take in the feedback of leads that were not converted into customers AND of your existing customers. Also, keep reminding them of these updates to keep your brand fresh in their minds.
For example, Weekly email newsletters, running contests on social media, and producing high-value content (like videos, podcasts, or downloadable PDF resources).
Reward promoters and loyal customers
If a customer doesn’t feel appreciated, all it takes is one mistake or a “better opportunity” with a competitor for them to jump ship. It’s important that you don’t take your loyal customers for granted. Reward them for sticking around.
Rewarding loyalty may look like grandfathering-in prices when rates increase or sending bonuses and surprises when a customer places their tenth or twentieth order. If you gauge loyalty in terms of how long a customer has been with you, you might consider sending bonus gifts at important intervals, such as six months and a year. Setting up a loyalty program is also a great option.
Or, say thank you and encourage promoters to refer their friends by incorporating discounts and rewards directly within your survey feedback.
Improve customer retention with Aeon
Want to collect customer feedback so that you’re able to gauge customer satisfaction and ultimately improve the overall customer experience? Aeon offers syndicated research and competitive intelligence collected across 20 cities in India. Leverage the power of market research to help identify growth opportunities in your business. Contact us to find out more.