7 Customer Retention Strategies That Work For Your Brand
Your brand’s most valuable and important asset is your customers.
Having happy customers who keep coming back to purchase from you is your ultimate goal, but it’s not always easy. As an entrepreneur, you know that customer retention is a top priority. Customers are your lifeblood. But how can you keep them coming back for more?
In this post, we’ll cover some sure-fire ways to keep customers coming back time and time again. Let us get to it.
What is Customer Retention?
Customer retention is simply the ideas and strategies a company uses to ensure the customer stays with the brand. It’s the ability of a company to keep customers coming back for products and services repeatedly. That deepens the relationship with your brand and increases loyalty.
According to marketing metrics, an existing customer has a 60–70% chance of buying other products from you. The chance of selling to new customers is 5–20%. That makes customer retention key to the growth of your company.
Why is Customer Retention Important?
Customer retention measures how successful your company is at satisfying the needs of existing customers. The right retention strategy has the following benefits:
1. Repeat purchases
Loyal customers will buy more often and in large quantities.
2. Reduced marketing costs
When customers are aware of what you are offering, you don’t need to spend on marketing. Furthermore, satisfied customers will refer you. As a result, the overall marketing budget is reduced.
3. Source of valuable feedback
Repeat customers are a great source of valuable feedback since they understand how your product works.
4. Return on investment
An increase in customer retention will see revenue go up, giving you a better ROI.
How to Measure Customer Retention
To measure customer retention, you need to establish key performance indicators for your company. This gives you an insight into how well you are working to satisfy your customers. There are different ways of calculating customer retention. Below are some of the KPIs you can set when calculating customer retention.
1. Churn rate
The churn rate gives you an idea of customers who have dropped off the loyalty wagon. It gives you an idea of the percentage of customers who no longer buy from you.
Calculate the churn rate as follows:
Lost customers/total customers at the start of the given period*100
2. Customer retention rate
This gives you a percentage of the number of loyal customers you serve in a given period. To calculate the CRR, follow the below formula.
NCE-NEW/NCS * 100 = CRR
- CRR-Customer retention rate
- NCE-Number of new customers during the specified period
- NCS-Number of customers at the start of the period
3. Existing customer revenue growth rate
The metric gives you an idea of the revenue generated from successful customer retention efforts.
Calculate the revenue growth rate using the formula below.
RGR = (MRRE-MRRS)/MRRS
- RGR-Revenue growth rate
- MRRE-Monthly recurring revenue at the start of the month from existing customers
- MRRS-Monthly recurring revenue at the end of the month from existing customers
4. Repeat purchase ratio
This ratio gives you the percentage of customers who return to buy from your company in a given period.
Calculate RPR by:
- NRC is the number of returning customers in a given period.
- NTC-number of total customers in a given period
5. Customer lifetime value
Customer lifetime value gives us the amount of revenue generated from a single customer.
Use the below formula to calculate the CLV.
Customer lifetime value = total annual sales / total number of unique customers for the year* average customer lifespan
Customer Retention Strategies
In this section, we look at the surest ways to retain customers. Here are the best strategies to retain your customers and improve the ROI of your business.
1. Establish trust with your customers.
Before a customer buys a product from you, they consider whether they trust you or not. Based on statistics, 81% of consumers buy from people they trust. You must follow through with your brand promise.
Don’t compromise on the promises you have made to your customers as this creates doubts and mistrust. Below are some simple steps to help you build trust and a long-lasting relationship.
- Provide accurate and fast responses to queries about your product
- Train your customers on how to best use your products. Invest in after-sale services
- Provide excellent customer service
- Constantly update your products with convenient features
- Offer complimentary services such as shipping and free returns
- Ensure there are frequent and clear communication channels.
2. Establish a reward loyalty programme.
Loyalty programs provide you with one of the best ways to reward and retain your customers. To deliver better returns, make sure to create a robust loyalty program. A loyalty program should have the following features:
- The structure of the reward program should assist you in meeting your business objectives. For instance, if you want to encourage more visits or purchases, make sure the loyalty program reinforces that
- An effective loyalty program should provide more rewards to customers who spend more
- Offer relevant rewards and promotions. Personalize the offers to suit your customers.
3. Analyze customer data to learn about their preferences and motivations.
Data such as customer transaction history, customer service, and loyalty program data will help you understand your customers better. Leverage customer analytics to get insights on areas that need improvement.
Understanding customer data will help you know the revenue potential of the business, the most profitable customers, and marketing strategies to employ. The data may also help you come up with personalized products. When you know the needs and challenges of your customer, it becomes easier to design exactly what they need.
4. Automate your marketing efforts using technology.
Simplify marketing workflows using technology. Automating marketing using artificial intelligence and machine learning will help you notice which customers have fallen off the marketing cycle. And you can reengage them with more personalized offers.
Technology can help you identify patterns, and you can easily predict the probability of churn for customers. Adjusting your marketing strategies and product value additions will help you increase the customer lifetime value.
5. Create a feedback loop
You need to know how the customers feel about your products and services. Implementing a customer feedback loop is one of the best ways to know how customers respond to what you offer. The loop provides you with reviews and surveys for analysis and further action.
Using surveys or asking customers to participate in user testing groups will give you relevant feedback. Analyze the data and address any flaws highlighted. Using feedback loops will help develop products that serve your customers better and improve customer service.
6. Make marketing offers and communication channels more personalized.
Use the customer data you have collected to offer your customers relevant offers. Also, understand the preferred communication channel and make use of it. Offers for your customers include
- Mass offers – These are offers that are available to everyone in the program
- Segmented or targeted offers – Based on given data, customers are separated into groups. Each group has a different offer. A customer in a certain group qualifies for the same offer. Targeted offers are more personalized as compared to mass offers
- Personalized offers – Personalized offers depend on the customer’s preference and their purchase trend
- Dynamic offers – This offer is adaptable and is largely based on machine learning and artificial intelligence. Dynamic offers are automated and managed using technology.
7. Keep tabs on the customer’s lifetime value.
It’s important to often evaluate their value by measuring the customer lifetime value. Customer value, or customer equity, is the worth of each customer over a period.
Knowing the CLV of your customers gives you an idea of how much you need to spend to acquire each type of customer. Plus, it gives you a guide on how to create upsells and cross-sells that increase the lifetime value of each customer.
There you have it — seven customer retention strategies that work for any brand. By implementing even just a few of these ideas, you’ll be well on your way to keeping your customers happy and hooked on your product or service.
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