Customer Retention Strategies For Practical Profitability

Customer Retention Rate As A Key KPI

Customer retention is the percentage of customers who stick with a company over a specific amount of time. This is the opposite of the churn rate, which is how many people leave in a period of time. For businesses looking to navigate through difficult times, turning to keep current customers may have a bigger impact on the bottom line than finding new customers.

Other researchers found the cost of acquiring new consumers can be 5 to 25 times costlier than retaining existing customers. In addition, capturing new customers is only successful 5-20% of the time.

Everything points to higher customer retention as much easier and more profitable than focusing on new prospects.

6 Reasons Why Customer Retention Matters

So besides being more profitable and easier to sell to, what are other reasons high customer retention and low customer churn make sense?

Here are 6 reasons why:

  1. Returning customers requires less marketing investments. As repeat customers are already familiar with your goods and services, they need less marketing spend to attract.
  2. Expenditures associated with customer service and continuous client satisfaction typically far outweigh the costs associated with them. Service agents are extensions of the sales force and will bring in lots of up-sales and cross-sales through more customer interactions.
  3. Loyal customers tend to be long-term and repeat customers who return automatically when they have a favorite business they can depend on.
  4. Often through word-of-mouth, new consumers can be gained from existing customers’ recommendations at no cost or effort from the business.
  5. Returning customers are also a great source of insightful feedback. As long-time users of a business’s products and services, they know them better than many within the organization. Many customers are more than willing to participate in helping build better products and services they will use in the future.
  6. Returning customers are often more likely to accept higher-priced goods and services for additional customer services and priority treatment. They are less price-conscious than new leads who focus on cost over quality.

How To Calculate Customer Retention Rates

Before a business can improve customer retention, they need to know how it’s calculated.

Customer retention is frequently assessed using the customer retention rate (CRR). CRR needs to be regularly tracked and monitored over a period of time to see trends and help gather data for analysis. The first step starts with identifying the period a business wants to record. This may be a month, a fiscal year, or longer. The following are additional variables considered when calculating CRR:

  • The number of customers at the start of the period (S);
  • The number of customers at the end (E)
  • The number of new customers acquired over time (N).

These metrics should be recorded, and the formula is as follows:

CRR = E-N/S x 100

For example, if you have 7000 customers at the start of the year and end the year with 9400 but acquire 4000 over that year, the CRR would be 77.1%.

9400-4000/7000×100 = 77.1

12 Customer Retention Building Strategies

With this starting point, a business can test strategies that may impact its CRR. Here are 12 ways to increase CRR:

Make Onboarding An Experience

Customer onboarding can usually be frustrating and time-consuming for many. When customers find the product not working, they lose a lot of respect and momentum to stay with a business. Planning the onboarding process ahead of time allows a business to see where customers may hit problems and find solutions before they arise. Many options, from self-service problem-solving customer service to customer success programs, can help.

Build Roadmaps With Customers 

Together with your customers, develop a customer success roadmap. Be reasonable when it comes to establishing and meeting client expectations. Be upfront about what customers will get and what can be achieved after implementing your products. Beyond closing the deal, work with customers to build a roadmap they can use to succeed. A realistic roadmap should have objectives that can be reached, and your team’s experience with past customers can help others avoid likely pitfalls.

Design Detailed Customer Experience And Journeys

Gather the different departments in your business to help design the perfect customer experience and journey map. Have everyone give feedback and buy-in to understand what customers need at each engagement stage. Track your consumers’ interactions with your brand across all touchpoints. 

Related Link: 6 Ways To Upgrade Your Customer Experience Strategy

Offer Digital Customer Support Options

Many customers, especially Millennials and Gen Z, prefer tech-savvy digital ways of interacting with a business. For example, many avoid talking to customer service representatives or visiting the stores in person. Providing digital support options such as email, chat box, social media, and video chat to help customers get the help they need in the form they are most comfortable with.

Related Link: How to Elevate Your Ecommerce Business with Advanced Digital Tools

Automation Is Your Friend

Automation helps businesses deliver the right materials at the right moment to the right customers. With segmentation, a business can organize customers at many points of their customer journey and automate much-needed information. For example, prospects and customers can be divided into categories using CRM and automation software. In addition, automated emails, retargeting campaigns, and text messages are great ways to set up things ahead and always be top-of-mind with customers.

Take The Opportunity to Upsell

If customers like what they are using, they are likely open to more of the same. Be bold about upselling and cross-selling customers on other offerings if you can see the potential. Convincing customers they need premium or upgraded services can be hard to bring up, but if done with good intentions, they should be received positively.

Target Customer Churn Problems

Patterns can be seen after enough customers leave. Make it a standard procedure to record and dig into your customer churn rate once the warning signs are identified. Set off alarms to kick into action processes to proactively engage with customers before they leave. These efforts should be prioritized to keep at-risk customers from churning.

Personalize To Stand Out

One of the best feelings in the world is being recognized. Offering personalized services to customers helps them feel they are unique and cared about. Small actions like personalized communications and attention can dramatically improve the customer experience and lead them to continue working with your business.

Make Customer Support A Priority

Improve customer support services by expanding and optimizing how customers reach your business. There are many tools that exist, such as live chat, help desk, and face-to-face meetings. All customer support services should aim to provide the easiest, smoothest, and most enjoyable customer experience. Make the customer service process as seamless as possible and ensure there are no points where a customer may fall off. Customers remember and patronize companies that treat them well.

Related Link: Four must-have remote customer support tools

Reward Customer Loyalty

Implement Customer Loyalty Programs to encourage purchase frequency and reward customers for their continual business. The longer a customer stays with the business, the larger their CRR. Therefore, a great loyalty program is a marketing campaign and a CRR program.

Always Ask For Feedback

Data is critical for insights to be gained. Information directly from a paying customer is worth more than any industry research report or highly paid consultant. It is always good to ask customers about their experience, including the good and the bad. Let them know how much their thoughts matter to your business and how their opinion can influence decisions. Consent improvement, no matter how little it is, can help increase your business’s competitiveness. This can be accomplished through satisfaction surveys, feedback forms, or directly calling your customers once in a while.

Don’t Forget Your Employees

When you lose a good marketer, salesperson, or customer service representative, they can take a big chunk of customers with them. By building strong employee loyalty, you can be assured that customers are more likely to be treated well because your employees are happy and satisfied. To achieve this, ensure your employees have the necessary resources to perform their work efficiently. Acknowledge great work and help train those who need help so they can level up.

Related Link: Top 10 Tips To Improving Your Customer Service Training

Long-Term Value Equals Long-Term Customers

As each business situation is different, use these recommendations as a jumping board to help your business design its plans for customer retention building. When focusing on building long-term customers, the importance is not seeing how much you can extract from customers in the short term, but how much value you can provide them in the long term. Customers are creatures of habit; when they like something, they tend to return for more.