What is customer retention?
Customer retention is increasing a business’s repeat customer rate and extracting additional value from those customers. A company can keep customers returning for repeat purchases and measure customer loyalty over time. Retaining customers involves convincing them not to defect to a competitor, keeping them engaged with your brand, product, or service to prevent lapse and churn, and implementing various tactics to reduce the number of customers lost in a period and better their experiences. Customer retention strategies focus on buyer relationships with existing customers to build customer loyalty and improve customer lifetime value. It is cheaper than customer acquisition as it involves catering to campaigns to remind customers of your brand and entice them to come back.
Why is customer retention necessary?
Customer retention is essential for businesses for several reasons. Firstly, retaining current customers is much more cost-effective than acquiring new ones, as research shows that 82% of companies state that customer retention is far cheaper than customer acquisition. Additionally, loyal customers are 23% more likely to spend more with a business than the average customer, resulting in increased profits. This is especially true if customer retention can be improved by just 5%, increasing profits anywhere from 25-95%.
Furthermore, when customers are satisfied with a business, they often become brand ambassadors, sharing their positive experiences with friends and family. This helps to increase a brand’s reach and build up a customer base, even if acquiring new customers is not a priority. Lastly, successful customer retention signifies a meeting or exceeding customer expectations and helps to build a brand’s reputation and authority, which are essential for ensuring the business is booming in the long run.
How to create a customer retention strategy?
Step 1: Build Customer Trust and Long-Term Relationships
Building customer trust and long-term relationships are the foundation of an effective customer retention strategy. To foster trust and build relationships, focus on delivering relevance and value at every customer journey stage. Educate your customers on the best use of your product or service and provide outstanding customer service with multiple service channels and fast, accurate responses that solve customer issues. Additionally, develop a frequent communication calendar and offer convenience with features like fast shipping, free returns, and mobile order pickups.
Step 2: Create a Robust Customer Loyalty Program
Creating a loyalty program is an essential part of any customer retention strategy. To maximize ROI, ensure your rewards reinforce your core business goals and offer more excellent benefits to valuable customers. Additionally, tailor your offers and rewards to customers’ interests and preferences.
Step 3: Leverage Customer Data
Listen to your customers to understand their preferences and motivations. Collect and map customer data, such as transaction histories, customer service interactions, and loyalty program data, to prevent churn and identify where customers’ wants intersect with your business objectives.
Step 4: Re-Engage Customers with Automation
Take advantage of marketing automation technologies to simplify customer re-engagement processes. Use AI and ML to automatically recognize when customers lapse and send personalized offers to re-engage them.
Step 5: Measure Customer Lifetime Value
Measuring customer lifetime value (CLV) helps you shift from a short-term to a long-term business strategy that values ongoing customer relationships. To calculate CLV, subtract the amount you spend acquiring and retaining a customer from the revenue they generate.
Step 6: Personalize Your Offers and Communications
Make your offers and messages more personally relevant to your customers by leveraging your collected customer data. Send targeted messages and offers relevant to customers’ interests and preferences.