The Ultimate Guide to Enhance Customer Retention in Your Business

Attracting a visitor and converting that visit into a purchase is impressive. However, to have that customer making further purchases with you is a whole new ball game. Customer retention is the basis for any thriving business’ success. In this article, we will cover how customer retention can help you grow your business and what you can do to improve the customer retention rate.

Source: Beautyindependent

Importance of customer retention for businesses

There are two ways to generate business in any industry, whether it is through new customer acquisition or through retaining existing customers. Generating business through new customers is a constant aim for any company. However, companies often overlook the impact of effective customer retention.

Here are some of the ways customer retention can help you grow your business:

• Making the most of customer acquisition cost:

  Generating business from new clients takes effort and cost. However, customer retention can help make the most out of new business relations carefully and diligently, thus delivering higher and continued returns on customer acquisition costs.

• Improving Customer Lifetime Value (CLV):

  Customer Lifetime Value is a measure of the average total business a company gains through one customer. A better customer retention rate leads to a higher CLV and signifies a thriving business.

• Reducing customer attrition:

  Customer attrition or churn rate, often assessed through competitor benchmarking, reflects customers who leave a business for competitors. By implementing robust customer retention strategies, a company can effectively reduce attritions and establish a solid foundation upon which to foster growth.

• Consistent revenue growth:

  Customers who retain business with a company are the most reliable source of revenue. As such, higher customer retention leads to stable and consistent revenue generation despite economic constraints or market sentiment.

• Building brand identity:

  Customers who consistently perform the business with the same company over and over help cultivate a sense of trust and reliability, building the company brand. Such brand identity goes a long way and can create a transformational impact down the road.

• Spreading the word:

  Customer retention efforts can lead to loyal customers advocating the brand's offerings and experiences to their peers. As such, they indirectly promote the company in a relevant network of prospects.

Customer retention is a clear representation that a brand is delivering value to its customer and that consumers trust it after experiencing their offerings. Customer retention rate is a performance indicator for the same.

What is the customer retention rate?

Source: Questback

There is a 60% to 70% ratio that a company can sell to its existing customers. As such, it is critical to keep track of customer retention performance. Customer retention rate is the ratio of customers that are retained at the end of a certain period. Customer retention rate demonstrates to take your customers from “welcome on board” to “welcome back again.”

How to evaluate your customer retention statistics?

Hubspot suggests that the average customer retention rate should be around 20%. Therefore, companies can aim to maintain a certain level of customer retention and push themselves toward it. As such, companies can set guidelines to measure customer retention from time to time.

Improving customer retention rate requires efforts to keep customers happy, engaged, and wishful to again work with the same company. Continued measures of the customer retention rate also help companies evaluate their performance towards maintaining the customer account.

List of reasons for a poor customer retention rate

There are different root causes for a company's inability to retain its customers. However, some of them are common and often overlooked by businesses in their day-to-day practices. Here is a list of items every business should pay attention to in order to retain its existing customers.

Source: Revechat

Lack of engagement after-sales

One of the significant contributors to the lack of customer retention is not paying the same attention to clients after gaining their business. If companies overlook post-sales engagement, customers might drift away to a competitor and, hinder the customer retention rate.

Lack of personalization, communication, and satisfaction surveys can create an impression to customers that a company is not able to keep up its initial treatment, and they might lose interest in conducting business with the same company again.

Absence of customer loyalty incentives

Customers who stick to the same vendor over a period of a long time must be rewarded so that they can feel their value and understand that their business is still a priority for the company. Customers may not feel value for their business if they are working with a company for a long time without any type of direct/indirect loyalty incentives.

Poor user experience personalization

If a customer is working with a brand over a period of time, they may end up expecting a certain level of personalization in their business engagement. It may disappoint customers if they do not feel understood by a company they have worked with for almost a couple of years.

Overlooking repetitive requests for modifications or additions to goods or services may result in poor user experience personalization. It would force customers to take their business elsewhere where they might value it further.

Dissatisfactory services

Coming to the most fundamental reason for higher customer attrition, the return on investment that companies get is the most crucial criterion for retention. Delivering the bare minimum to a client may allow a company to be free from any objections; however, such customers may not return for further business.

Here’s how to improve your customer retention rate!

The secret to a better customer retention rate is to work on the dissatisfaction of existing customers. The simplest way to treat it can be by asking those clients through your dedicated account executives or simple old customer satisfaction surveys.

However, here is a short list of major ways to improve customer retention rate for sure:

Introducing loyalty programs

The easiest way to remind the customer that their business is valuable is by providing some unique reward or appreciation. A loyalty program is a relatively simpler practice that companies can adapt to as part of their process.

Here the company can provide some benefits to its old customers, such as discounts, free resources, or a token of gratitude. In summary, loyalty programs are a way to give back to the key contributors of the revenue.

Customer experience personalization

If an IT outsourcing company has been working with a client for years, then it must understand users’ intent, like delivery schedule, communication methodology, and coding standard needs. Such a level of personalization helps clients know that the provider is aware of their needs and demands.

Personalization demands that the company pay attention to clients' requests, pain points, goals, and motivation to work together. If a brand is able to follow its client to such an extent, then it can improve its odds of retaining that customer.

Retention marketing efforts

Retention marketing is among the most fruitful forms of marketing, and it can help companies stay close to their customers. Such a marketing approach can grow the company’s business with existing customers or help them regain a lost client. Retention marketing is a field of its own that every brand should learn and follow.

Post-sales engagement with customers

Lastly, the simplest way to retain the customer is by staying in close contact with them and knowing their needs. Post-sales engagement refers to staying in touch with customers even after the delivery of a product or service. Companies can connect to their customers through feedback forms or regular follow-ups to improve post-sales engagement.

What is retention marketing?

Retention marketing is a unique and precise form of marketing focusing exclusively on a company’s existing customers. Retention marketing aims to be close with existing customers, upsell to them, or have them purchase their products or services more often.

The principle behind retention marketing is to spread awareness among existing customers about the company’s services and capabilities. Retention marketing can nurture relations between the company and its clients.

How does retention marketing work?

Retention marketing relies on the data and preferences that existing customers have already shared in the past. Such an exclusive form of marketing presents the right customer with their exact needs. The higher relevance of offerings and appeal makes retention marketing effective. Here are some examples of retention marketing in action:

• Newsletters with relevant resources & tips for new customers

• Unique offers, proposals & access exclusive to high-value customers

• Encouraging upselling offers and combo purchase deals

• Spreading the word about brand-new innovations and initiatives

  Retention marketing content can vary as per the nature of the business and the immediate goals.Crafting such content strategically ensures alignment with the broader content strategy while addressing specific retention objectives.

Everything you need to get started with retention marketing

Before beginning with retention marketing, it is crucial to follow this basic to-do process to ensure that you don’t end up spamming existing customers without effectiveness:

• The first step is customer segmentation to classify clients accurately.

• Define the immediate goal among new launch awareness, upselling, loyalty rewards, etc.

• Matching the right retention marketing goal with the right group of clients, i.e., loyalty rewards for the set of top-paying clients.

• Reaching out to the group of clients through the right channel, such as newsletters, SMS, influencer marketing campaigns on social media, or in-app notifications.

• Evaluating customer interaction with the campaign & following up accordingly.

Conclusion

Customer loyalty is not a goal but a process. Consistent efforts from brands to better engage and serve clients is a thumb rule to improve customer retention rate for any business. However, an extraordinary customer retention rate can act as a market differentiator for the company and stand apart from any competition.