Now that businesses are starting to reopen after the lockdown, they should try to find ways to not only gain new customers but also retain their existing customers long-term.
This article explores the importance of customer retention and outlines 5 of the top customer retention strategies that your business can implement to keep existing customers around.
Why is customer retention important?
Customer retention is the length of time a customer stays with a particular business. It is an important metric to determine the stability of your business and its future growth (or loss). Lenders often look at a business’s retention rate to identify how likely it is for the business to succeed long-term and how risky a loan might be.
Repeat customers make up a large portion of a business’s profits. When a customer has already purchased from your business, they have already gone through the onboarding process and placed trust in your products or services. This greatly increases the likelihood and simplicity of another purchase.
Having low customer retention means that your business experiences a high rate of churn, meaning that customers are leaving the business and unlikely to make another purchase.
Measuring the customer retention rate on a regular basis can help a business determine how satisfied their customers are, if there are any concerning trends, and if their business is sustainable long-term.
How to calculate your customer retention rate
Every business, especially newly established ones, should calculate their customer retention rate on a regular basis. If a business has a low retention rate, then it should consider changing its processes to increase customer satisfaction and boost purchases.
To calculate your retention rate, you will need the:
- time period you want to measure (usually quarterly)
- number of existing customers on the start date
- number of customers on the end date
- number of new customers gained within the measured period
The calculation for the customer retention rate is:
5 strategies to increase customer retention
If your business has a low retention rate, you should implement some changes to keep existing customers purchasing from you. Below, we have listed 5 of the top retention strategies that can help your customer satisfaction levels and increase recurring sales.
1. Streamline your onboarding process & customer service
Streamlining your customer onboarding experience can affect your long-term retention efforts. Once a consumer decides to purchase from your company, it is important that they continue using your product/service.
If your initial onboarding process is difficult and unintuitive, this may lead to the customer not making the initial purchase. You should make the initial experience as seamless as possible. However, you should also consider your onboarding experience after the initial purchase takes place.
After the customer is fully onboarded and has made their first purchase, contact should not end there. It would be beneficial to reach out to them to share contact information, features that they might be interested in, training guides, or any discounts or referral bonuses that might attract them to purchase again.
Customer service is also an extremely important factor for many customers. Offering quick, effective, and accurate customer service can prove to the customer that you’re willing to go the extra mile and help them with any questions or issues that may arise.
2. Offer discounts or referral rewards to existing customers
Just because a customer has made a few purchases from your business does not mean that they will stick around long-term. If a better deal comes along for a similar product, then this may sway them to switch providers.
Many businesses offer discounts to new customers but do not offer anything to existing customers. Offering existing customers an incentive will give them a reason to stay with your company if they were considering switching.
In most cases, offering a discount or referral bonus will increase your profits. For instance, a business might consider offering a 10% discount off a customer’s 3rd month if they make weekly purchases for their first 2 months. This means that the customer is likely to make a purchase every week so they can receive their 10% discount.
Another common incentive is a referral reward. A referral is when an existing customer recommends your business to someone who is not a customer. Often, there is a financial incentive for both the original customer and the individual they referred.
For instance, a business might offer a £20 credit for the existing customer and a 10% discount for the new customer. Importantly, the referral bonus should only be applied after the new customer has made a purchase.
3. Identify customers who are likely to churn
Another strategy to increase your customer retention is to focus on customers who are likely to churn. Regularly reviewing your customer retention and churn rates can help you identify similarities between churned customers and help you implement changes to reduce this pattern.
An example of a targeted retention strategy is to set up automatic discount emails for customers who are likely to churn.
4. Remain competitive
Nowadays, every business is likely to have some competition. It is beneficial to regularly review what your competitors are offering.
Try to put yourself in the customer’s shoes. Take a look at your closest competitors pricing and product/service offerings and consider whether you would purchase from your business or one of your competitors.
From there, you can decide whether to lower your prices, offer more competitive discounts, or start providing more products or services.
Another strategy would be to use your competitor research to identify what puts you one step ahead of your competitors. You can then advertise that feature more prominently.
5. Use customer surveys and feedback
At the centre of customer retention is your customers. They are the ones who will ultimately decide if they wish to continue purchasing from your business or not.
Most unsatisfied customers would be pleased to tell you the reason that they are not continuing with your business. Your customers are the most crucial part of understanding what is not working.
Therefore, you can send out customer surveys or apply a feedback form on your website. Gather this information and make changes accordingly.
Summary - Customer retention
Customer retention goes hand in hand with customer satisfaction. Keeping your customers happy and giving them an incentive to stay with your company will ultimately increase your revenues.
There are several strategies that you can implement to increase your retention rate. Obviously, not all of them will work for every business. Do some research, competitor analysis, and customer surveys to find an ideal solution to help your business succeed.