The last thing we want to do when winning a new client, particularly through our pay-per-click efforts is to end up losing their business, especially when you have spent so much time and effort into winning that custom in the first place. If your business sometimes feels like a holey bucket, then keep reading because in this blog post, I explain 5 ways to boost your customer retention rate.
What is Customer Retention?
Simply put, this is when new customers repeat purchase. This loyal customer base is hugely important for a business because it’s easier and more cost effective to retain customers, as opposed to all sales being new. Here’s some stats to back this up:
- 86% of loyal customers will recommend a company to friends and family (KPMG) and retained loyal customers will have a positive effect on future sales
- Loyal customers are good for business because they cost you 5.25x less than new customers (Hubspot).
- The success rate of selling to an existing customer is 60-70%, as compared to 5-20% for a new customer (Huify).
Working out your customer retention rate (CRR) is essential for all businesses, and you can do this using a simple formula (remember to use the same time frame i.e. at the end of every month/quarter/year).
CRR = ((E-N)/S) x 100
N = customers acquired during the period
E = customer you have at the end of the period
S = customer you have at the start
If I had 100 customers at the start of the month (S), and I acquire 5 customers during the month, but lose 1, then E would be 104. The formula would be ((104-5)/100) x 100 = 99% retention rate
5 ways to boost customer retention rates
So, we have established that customer retention is a better strategy for your business than continually going after new customers. Creating and introducing a customer retention strategy will enable you to monitor and improve your customer retention rates. Below are 5 strategies that you can use to boost customer retention.
- Understand the customer experience – getting an understanding of what makes your customers loyal to you is the first step. Is it your customer service, the ease of checkout, the quality of your product, price etc? Gaining an understanding into why people keep buying from you means you can then build on that by creating a consistent customer experience that exceeds their expectations. Mapping out the process a customer goes through at every stage provides insights into where you could be losing them and what needs improvement.
- Introduce a feedback system – asking for feedback (good and bad!) enables you to improve your service and understand your customer more. It doesn’t need to be complicated, a simple email after they have purchased or finished a project with you can yield lots of information. And if something has gone wrong, then you will be able to identify it through your feedback process and rectify it sooner.
- Make the most out of social proof - 66% of customers are likely to write a positive online review after a good experience (KPMG). If you sell predominantly online, reviews are hugely important. I’ve written a blog post that explains more about the importance of customer review sites for your business. You can read it here.
- Introduce a loyalty programme – millennial's have grown up with loyalty programmes, and there’s good reason to have one, as when done correctly they add value and enhance your relationship with the customer. The key to a successful loyalty programme is understanding your customers’ needs so that you can reward accordingly.
- Communicate – Great communication is at the heart of high customer retention rates. Thanking customers when they purchase and apologising when things go wrong is the start. Introduce a CRM and a mailing system for regular communication and to remind them that you’re here – you can read my blog post here about mailing lists. Personalise your communications whenever possible by using names and humanising emails. Don’t forget that up-selling to existing clients can also yield more profits and you can do this through your mailing system.
The bottom line here is that when your business starts to put as much time and focus into retaining customers as it does into winning them, you will soon start to see the benefits.
Implementing a customer retention strategy will not only increase profits and improve brand image but over time you will spend less on customer acquisition.