When it comes to customers, many businesses tend to pool their efforts into lead generation, acquisition marketing, and other strategies to find and convert new clients. Companies will blow out their budgets on attractive offers, perks, or incentives for new referrals as a way to expand their customer base, but this isn’t always a complete strategy to maintain steady growth.
According to Marketing Wizdom, the average business loses around 20 per cent of its customers each year by failing to tend to customer relationships. This may not seem like that drastic a loss, especially to large corporations; however, that percentage can rise to around 80 per cent in some industries.
Leading IT research company Gartner, Inc. further proves that this annual loss is costing businesses a significant amount of revenue. They report 80 per cent of a business’s future revenue will come from just 20 per cent of its existing customer base (also known as the Pareto Principle, or the 80/20 rule). This is revenue that could be saved with an effective customer retention strategy, or a system to encourage customer loyalty and turn one-time buyers into customers for life.
Here are the basics to establishing a retention strategy that will keep your clients interested in your products or services in the long run.
Before you can implement a creative and effective customer retention strategy, you need to know the reason that your customers are leaving. What about your competitors is luring them away? When are they leaving (i.e. the week before their contracts up for renewal)?
The best way to track customer satisfaction and pinpoint the problem is to calculate your customer retention rate (CRR). Here’s a simple formula from Inc. editor Jeff Haden:
Say at the end of the quarter you have 445 customers, of which 60 new customers were acquired and 115 cancelled their subscriptions or contracts. You had 500 customers at the start of the quarter, so when you plug that into the formula, you get: (445 – 60) / 500 = 0.77 X 100 = 77%.
Whether this percentage is high or low somewhat depends on your industry and your business goals, but – unsurprisingly – the common goal is to keep it above 90 per cent. Measuring your CRR over time allows you to put these percentages into context, observe patterns and fluctuations, and plan for long-term retention solutions to keep that number in a good range.
Another way to track customer satisfaction is to ask them directly through surveys. Using a customer satisfaction software like Promotor.io or Yotpo, ask your existing clients to rate the likelihood of them recommending your service or product to their friends (1 being ‘not at all likely’, 10 being ‘extremely likely’) and why.
These results will allow you to section your customers into groups: the ‘promotors’ (those who marked 9 or 10), the ‘passives’ (those who marked a 7 or 8), and the ‘detractors’ (those who marked 6 and below). Based on these results, you can then plan specific strategies to improve your customer service, keep the promotors satisfied, help understand why the detractors have a lower opinion of your brand, and boost your overall Net Promotor Score.
Surveys aside, sending personalised notes or emails to your customers is another great way to increase loyalty. Whether it’s a simple thank you card sent out on the customer’s one-year anniversary with your company or a brief email checking in if there’s anything they need assistance with, being proactive about your customer service will be appreciated. (Just make sure you aren’t spamming them too often or this could backfire).
Make things as clear and simple as possible
It may sound a bit vague, but simplifying your processes will help improve overall customer retention rates. Reduce the amount of the effort on the part of the customer as much as possible. If your business requires that each customer create an account with a lengthy sign-up process before they can interact with your service or product, this will likely turn them off to your brand.
A few quick fixes you can make are:
Simplify your procedures, and you give your customers a strong reason to continue their relationship with you – for more tips on how to optimise your onboarding process, check out 10 Great Examples of Customer Onboarding That You Can Learn From by Groove.
Offer a loyalty scheme
Everyone loves freebies, and a loyalty program is a great way to keep your customers coming back for more. Depending on your industry, perhaps offering something that’s points-based (i.e. buy this many products and get a free gift or discount) would be effective. You can also offer tier-based rewards to encourage more purchases (i.e. spend this much and you’ll receive these benefits, but spend this much and receive even better benefits). For more information on customer loyalty and different programs to consider, read ‘7 Customer Loyalty Programs That Actually Add Value’ by HubSpot.
Keep your staff happy, healthy, and inspired
Having a loyal staff will encourage a loyal customer base. If your company offers valuable incentives for its staff, takes the time to hire the right people, and truly supports its workers, this will attract more customers, as happy employees are more productive employees. When a customer buys your product or service, they’re also buying your business values and mindset – a healthy, fun, and supportive company culture will increase your chances of brand loyalty.
Long-time customers are the lifeblood of any company, and it’s important to keep their valuable business. Instead of solely focusing on acquiring new business, make sure you have a creative customer retention strategy in place to reward and encourage loyalty.