The Ultimate Guide to Increasing Customer Retention
Every business must consider customer retention as a priority. Many companies miss out on this and only concentrate on going after new customers and getting them to purchase a product or service.
Did they buy? It’s an important question when you do marketing and promotions, but the next question is equally important – Are they returning to buy again after the first one?
For your customer base to keep growing, you need to add a strong number of customers. If you keep losing customers, you have to invest again to replace that number before you can begin to grow your customer base. Customer loyalty is key.
The following chapters will discuss, not only the value that customer retention can add to your business, but also the tools and strategies that you can utilize for it.
Chapter 1: Why Customer Retention
Customer retention adds value to the business According to many marketing experts. It takes more money for businesses to acquire new customers than it is for them to keep a client.
When you’re trying to win people to use your product, there is a pretty good chance that they have either tried it before but did not like it or that they have not tried it yet.
The latter is easier because if you have a great product or service, all you will have to do is to let them try it; however, if it is the first one, you will have to give them a reason to like your product and get them to agree that it is good.
Ill-equipped customer service staff
One of the problems that customers run into when they raise their concerns to customer service personnel is that they do not get the attention that they expect. Sometimes their concerns are dismissed while others have to go through frustrations over calls that do not get through the long automated queue.
Most of the time, this is caused by staff and employees who did not receive adequate training and orientation in how to attend to customers properly.
The common misconception that untrained members of the staff have of a customer filing a complaint or raising a concern with their purchases is that one disappointed customer does not have an impact on the brand’s name or marketing. This is far from the truth.
One person has an impact on his circle, and the effect of which goes on and on, which brings us to our next reason why businesses must value customer retention:
One satisfied customer is a walking and talking advertisement. [Tweet This]
In business, we do not underestimate the power of the word of mouth.
A happy customer is a reflection of the quality of your brand, the quality of your products and the quality of your service. They are physical proof that you have done a good job in creating your product and delivering great service.
Satisfied customers spend on your products
Another value that investing in your customer retention adds to a business is that a customer who is happy with your products and services will spend on your brand.
Have you noticed how people still buy products that they have been getting for years despite less expensive products introduced by other brands? It is because customers always go for the brands they already trust. Seldom will you see people make shifts unless they have tried the other brands and preferred their experience with them.
In summary
The value that investing in customer retention adds to your business are as follows:
1. Cost-friendliness
You spend more on acquiring new customers than in keeping them.
2. Referrals
Happy customers can directly and indirectly influence the people in their circle. Your brand widens your reach in the market through each person that speaks well of your products and services.
3. Sales
Satisfied customers come back and buy more. They tend to stick to products they trust. Customer retention is all about providing both quality of products and quality of experience to your customers.
Chapter 2: 8 Customer Retention Tools
There are some tools that can help you maintain your relationship with your customers and give them satisfaction. Some of them, you may already know but have overlooked.
As with any tool, every strategy requires the right tool.
Take a look at seven of these customer retention tools and decide which of them may be best fit your company’s plans:
1. Excellent Customer Service
When it comes to tools in retaining customer loyalty in your brand, nothing beats good customer service.
Good customer service translates to good customer experience. Customers know if you value them and will remember the way you attended to them when they ask for assistance.
For example, popular stores like Bath & Body Works, Anthropologie and Costco have very lenient return product policies. Anthropologie and Costco go as far as accepting used or unopened items returned to them for ANY reason. These brands continue to enjoy loyal brand following.
Statistics show that 86% of consumers are willing to pay up to 25% more on product prices for better customer service. Tweet This
This goes to show that their experience with your brand influences their decisions to continue patronizing it.
2. Magic Moments® and Personalization campaigns
Are you familiar with the Coke Happiness Machine campaign wherein people who approached the soda dispenser got unexpected items that included pizzas to share and 5-feet long subway sandwiches?
Or have you heard about WestJet Airlines’ Christmas miracle campaign in 2014 wherein the passengers were given gifts from their own wish lists?
These are what you call magic moments and personalized moments that usually come in some form of kindness which is rare in this time and age, accompanied with big gestures.
Many marketing critics argue that these types of campaigns are not necessary and that the best way to retain customers is to resolve issues before they even happen. But these campaigns show that getting personal with your customers, showing them that you are being a human acknowledging another human, can make you win their loyalty for years and years ahead.
3. Rewards and Loyalty Programs
Whether you run on a point system wherein your customers earn points that they can use in exchange for freebies, giveaways or huge discounts; or use the tier system wherein the rewards for your customers go up as they add years to their membership, implementing a rewards and customer loyalty programs can be a very effective tool for customer retention.
The points system has simpler mechanics and created for short-term values, whereas, the tier system works well for loyalty programs by larger companies such as those in the hospitalization industry or the airlines.
4. Gamification
Gamification is adding an element of play and fun in customer experience. The rewards of gamification are usually the game itself, wherein the consumer has enjoyed his time with it or when they earn points to level up.
If your brand’s market belongs to the gaming demographic, this can be an effective tool for engaging and providing satisfaction to them.
5. Customer support system: Help desk or Chat support
One of the tools that is often overlooked providing a solid customer support system. Brands must provide their consumers with a way to get in touch with their customer support team when they need help with a product they purchased.
This is especially true for brands that sell technical products, or products with high customer lifetime views. Many consumers get frustrated with the lack of technical support they get from brands that they walk away with no intention of coming back.
Sometimes, the concerns raised can easily be resolved by providing a few simple instructions to the customer. Other times, companies need to send over a technical team to the customer’s location when installations are involved, to get things fixed from their end.
But more than just providing solutions to their problems, what a customer really wants is to see that their brands care enough to help them out with their purchases. When they see that you value your customers enough to assist them properly and patiently, they will choose to stay.
6. Customer Feedback Survey
The essentiality of pushing a customer feedback survey is that you will be able to gather information from the customers themselves and take action based on this information.
Customer feedback also gives you an insight into your customers’ loyalty to your brand- of whether they will remain, or if their answers reflect dissatisfaction leading to finding another company that will provide them the service they need.
7. Customer Relationship Management (CRM) Tool
A CRM is very useful in providing data of the history your company has with your patrons. It shows the progression of your customers’ loyalty and the trail leading to the current status.
A CRM is basically a database of all your clients’ information and interactions. Through these information and interactions, you can make assessments that can help you create actionable strategies.
8. Social Media
Facebook, Twitter, Instagram, Pinterest, and many other social media platforms are effective tools in nurturing your relationship with your customers and keeping them hooked.
You can communicate with your customers by updating your business page with your special promos, keep your fans on their toes with discussions in your community page, or pose questions weekly to gather data from your customers’ answers, and act on the data accordingly.
Communication is one of the most important aspects in customer retention and social media provides an avenue for this, aside from emails and chat lines.
Keep the market hooked
The idea is not only to gather people to try out your product once, the goal is to make these people stay with your product for a long period of time.
The bottom line is that retaining your customers is part of managing your business. It is, in fact, more expensive to keep trying to catch a new market every time, than it is to nurture the relationship with the customers you already have.
Customer retention does not always need to be a big gesture, it can be the small ones too, such as keeping them updated and informing them of your promos and discounts way before the schedule. Or reimbursing their money for a product they changed their minds about.
If they are happy with you, there will be no reason for them to look elsewhere.
Chapter 3: Customer Retention Strategies
Most companies focus on promoting products and pulling in new customers, but only a few have realized the returns that customer retention can give your business. On the average, businesses may lose up to 20% of their customers for lack of customer retention strategies.
The impact of a smart customer retention tactic on your business can last very long, but you will need to be willing to extend beyond what is required of a business to provide their customers if you want it to be successful.
Here are 8 customer retention strategies that you and your team can employ:
1. Keeping the customer
One of the biggest mistakes that companies make is focusing more on winning the market but neglect the nurturing aspect of this strategy. As marketing experts put it, you do not need to work so hard in pursuing new clients if you can keep the ones that you already have.
A simple way to keep your customers loyal is to underpromise but overdeliver. This shows your customers that you are providing them value over the price that they are paying for the service or product.
2. Striking while the iron is hot
Go beyond the initial sale. Put your customers at ease and show them again and again that they have made the right decision about hiring your services or buying your product.
Many companies stop after they make their initial sale and do not follow through with their customers. But to ensure a repeat business, you need to seal that satisfaction by following up on the performance of your product and allaying their fears; and putting them in the position of buying again from you.
3. Customer reactivation
Reach out to your loyal customers who have faded from your activity radar. You can only do this if you keep track of your customers, or better yet if you have built a relationship with them.
Reconnect with them. Find out if they have run into a problem with your services that you can help them with. Do they have concerns that were not addressed? Or perhaps it’s as simple as they just need to be reminded of your existence. Whatever the reason is for their disappearance, know what it is and reactivate the relationship.
Sometimes all it needs is a small gesture that shows them you care about them and that you value them. Once you get them back, grow the relationship and keep it going.
4. Going beyond the call of duty
Nothing is as effective in making loyal customers out of consumers more than brands going beyond their call of duty to provide excellent customer service.
Suppose a customer came to your bookstore to find a sold out book. What do you do? You can either send the customer away disappointed, or ask for their number and promise to contact that customer when the new copies are delivered.
For some people, these are unnecessary gestures, after all, it is no longer your responsibility to inform someone of a product they have not yet bought from you and customers can just come by again some other time to check if the book is already available.
But these small services are the acts that provide your customers an extraordinary experience; the kind that brings them back to your store over and over again.
5. Keeping a culture of respect within the workplace
A happy team usually translates to happy customers. If you treat your staff in a way that they deserve, or even more, their tendency is to put a lot of respect in their job and in the people that their jobs are created for.
How do you practice a culture of respect in the workplace? Treat them with kindness and decency. Give them a voice at the workplace and let their ideas be heard. Give them an avenue to put their great ideas into work and credit it to them.
Let your employees have a sense of dignity in what they do. Pay them rightfully, give them rights to vacation leaves and bonuses, acknowledge them for their hard work and include them in the successes that your company gains.
If you show them that you value them, they will value your customers as well.
6. Product Integrity
No matter how great your marketing team is, you can never sell a bad product. It all boils down to having a great product. Don’t lie about them, don’t exaggerate. Produce them to fill a need.
Let what you say about your product be consistent with the results of your customers’ product use. Be open, be generous, and be reliable.
7. Lifetime value over immediate payoff
Do not pursue temporary pay offs, but look at relationships in long term values.
The most successful entrepreneurs value their time and relationship with their clients more than the sales value of their products. They understand that the real payoff is a long-term personal investment.
8. Listening to unsatisfied customers
Many employees try to avoid having to face a complaining customer for understandable reasons. Situations with a dissatisfied customer can turn into an unpleasant exchange that is both draining and frustrating for both parties.
Seasoned marketers can see the value in a complaint raised to the management team.
For example, the situation may be an overlooked recurrence among your customers that needs swift action and a resolution. Many unresolved minor instances in businesses can blow out of proportions if they remain unnoticed.
Another value that it offers is that a customer raising a concern is an opportunity for you to keep that customer and turn him or her into a loyal fan of your brand.
Studies have shown that 96% of unhappy customers simply walk away without letting you know why they did so. Knowing what caused their disinterest in your product or service can help you gauge how your strategies are working and if there is something that needs changing or overhauling.
Customer retention strategies are very doable, but it takes commitment to work on nurturing customer loyalty to your brand. The bottom line is that consumers are humans that expect to be treated properly and attended to when necessary.
Chapter 4: Measuring Customer Retention
There are two ways to measure customer retention: CRR or Customer Retention Rate and PRR or Peso Retention Rate. Both metrics are measured alongside each other to give you a better picture of how your strategies are working out for you.
To calculate for CRR, you need to list down the number of customers at the start of a period (S), the number of customers at the end of the period (E), and the number of new customers you have acquired during this period (N).
To know the number of customers that remained with you at the end of the given period, you deduct the number of new customers you have acquired during a period from the number of customers you had at the beginning.
For example:
E – N = # of customers you have retained.
Divide the sum by the total number of customers you had at the start of the period, then multiply the answer by 100 to get its percentage value.
For example:
# of customers retained / S x 100 = %
Measuring your Peso Retention Rate is purely based on the monetary returns within the period. It basically refers to how many of your customers have exhibited the willingness to spend more on your brand.
Businesses normally aim for a PRR of over 100% which means that there is growth in your company’s earnings. However, higher CRR result does not always translate to higher PRR. For example, you may have acquired more customers during the period, but many of these customers either have low subscription rates or have downgraded their subscriptions.
Calculating your customer retention can provide you with a good insight into the health of your relationship with your client, measure your strengths and weaknesses of your business, and helps you in gauging customer satisfaction.
Conclusion
Growing your sales and seeing the effectiveness of your strategy is more than just engaging your target marketing, but keeping them hooked on your brand for a long period of time.
A study conducted by the Gartner group reflects that 80% of your sales come from your loyal customers, which only goes to show that there is a lot of value in your current list of customers that you should not take for granted.
Companies must allocate a huge budget in retaining their customers because these are the people that already liked the brand. The way businesses are being run now evolved at the dictate of the market. If you want to see marketing success, you must adopt a customer-centric approach if you want to cultivate customer loyalty.
There is a huge room for improving on this aspect of the business. You can start by using the principles, tools and strategies stated in this article.
And finally, track your progress using the metrics, then fine tune your tactics based on collective data.
