CUSTOMER RETENTION
Customer Retention: The most underrated growth channel
It is 5 times easier to retain your customer than to acquire a new one. Know why customer retention is essential and some easy tips to create your sticky customers.
Customer Retention
Customer Retention can be defined as the ability of your service or product to retain it’s acquired customers for a long time. This is done to increase the Lifetime Value (LTV) of the customer and increase the profits of your company.
Moreover, who would ever like to lose a customer whom they have acquired? And that too to one of your competitors?
Customer Retention v/s Customer Acquisition
A lot of marketers are confused about whether they should work on customer retention or customer acquisition. Both companies and agency clients have a greater focus on customer acquisition than retention (44% vs 16% for companies and 58% vs 12% for agency clients)(1). This tells us how underrated this growth channel is.
It has been noticed that the success rate of selling a new product or reselling the old product or service to an existing customer is 60% to 70% against 5 to 20% of selling it to a new customer.
Attracting a new customer costs five times as much as keeping an existing one. (Lee Resources 2010). Customer Retention is not only underrated but sustainable as well.
Moreover, in a study done by Bain and Company just by increasing customer retention by 5%, your profits could be increased by 25% to 95% depending upon your industry.
The motive of mentioning these points was not to say that one should never try to acquire new customers. It was to make you realize how necessary customer retention is and if not higher, it should be of equal importance.
Channels used for Customer Retention
Email Campaigns, In-app notifications, and products and services related text messages remain the top channels for increasing customer retention with approximately 60% of companies using the above three channels as their primary sources for conservation.
Check out the article on how to increase clicks on email campaigns for better understanding.
This then is followed by social media remarketing campaigns with Facebook and Instagram ads being the top contenders for the same with 40% of companies using Social Media applications for remarketing its customers.
Check out this article on how to run Facebook and Instagram Ad Campaigns successfully.
How to Calculate Customer Retention Rate
So, you’re probably wondering how you calculate your retention rates. A retention rate is the percentage of customers who are still with the company after a specific period. It asks in essence that a user perform any action, leave, and then come back and perform another action. That’s what you’re looking for here. If the answer is yes, the user has been retained. If not, they’ve churned.
Retention is based on actions. Actions can be defined differently for different organizations. For a company, purchasing is an action while for another, simple signup can be an action.
Then you would like to fix the period in which retention is being measured. For a lot of consumer-facing apps, it’s common to track several, such as one-day retention, one-week retention, two-week retention.
To calculate it, you take your current number of customers retained after X number of days, 14, 30, 90, and your total number of customers at the start of the same X number of day period. That is your retention rate. So, if there were 100 customers at the beginning of the period and only 27 have taken action in the past 14 days, then the retention rate would equal 27%.
Customer Retention Strategies
Now we know the importance of customer retention and calculate our retention rate, let’s discuss how to increase it?
I would be explaining some of my favorite strategies that I think can woo your customers and help you create sticky customers.
1)Set Expectations Early and often.
Find out your aha moment! And apply it from the start and try finding out new ways on how people can benefit from the services you’re providing. They might believe you can deliver on specific results. In reality, those results are only seen after a specified interval of time. Hence, communicate effectively.
2) Offer Free and Easy Returns
Everyone loves free things and services where they can return or exchange an item if they didn’t like the product or service they initially bought.
It’s not only a great way to persuade first-time customers but also a well-versed technique for retaining customers. Customers tend to come more often when they know that they can easily exchange items if they have a change of mind.
3) Ask for feedback and act on them
Listening to customer problems and helping them overcome it is the very least thing an organization should do. You can’t retain customers if you’re not able to solve their problems. You can often create a small FAQ section on your page to answer some of the questions which are asked regularly and give it to both your sales and customer service team.
4) Talk to your customers
By talking, I don’t mean that you just tell them about your services or product. Of course, you and your team do that all the time. What I’m talking about, is sitting down with them to discuss their business, why they do what they do, to learn what makes them tick. These are interviews, not product calls.
Your product or service should help them reduce the efforts put by them to do a particular task. By talking to them, you can understand how it is doing it and how you can improve or adapt your services according to their need.
5) Regularly Update them about the new offerings you’re providing
You should keep them updated on every new offering or new strategy you’ve devised. This could be done by sending emails or in-app push notifications. You can even use social media ads for retargeting your customers.
6) Build Customer Loyalty Program
One of the easiest and smartest ways to foster customer loyalty and retention is by providing even more value to them. This can take the form of a customer loyalty or rewards program.
Loyalty programs seem simple, but they can have a significant impact on customer retention. If your customers know they’ll be rewarded for returning to shop at your online store, they’ll feel compelled to do so.
It doesn’t need to be something fancy or complicated, just some points which they could redeem afterward. These go a long way, fostering loyalty and force them to come back again and again.
Lesson Recap
In this blog, first, we covered:
- How Customer Retention is and how it is one of the most underrated growth strategies. Customer Retention is nothing just the process of holding on to your customers and increasing their LTV with you.
- We then understood why customer retention is essential.
- We learned to calculate our retention rate
- Went through some retention strategies which could be a game-changer for your organization.
I hope you’re ready to implement these strategies to create sticky customers and increase customer retention. Some excellent content on customer retention could be found on CXL Institute, so be sure to check it out.
Let’s connect if you want to know more about Customer Retention or growth marketing. You can reach out to me at LinkedIn at Shreyansh Goel or email me at shreyanshgoel16@gmail.com.
