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Customer retention: why it is important and how to improve the metric

Guest contributor

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Customer retention: why it is important and how to improve the metric

Acquiring customers is, by all means, not a simple thing to do. This implies that once you have managed to “win over” clients, the efforts for keeping them should become even greater. Overlooking this point is a rookie mistake to certainly avoid regardless of the type of business that you are running.

In this post, you will get acquainted with the process of customer retention, why it is essential, and learn about the strategies that can assist you in making the metric better. Let us dive in:

Why you should not neglect customer retention

It is not uncommon that business owners often overlook customer retention. They put obtaining clients, boosting a website, improving eCommerce store performance, or expanding online presence in the primary focus. The thing is that this is a decision that can lead a business to suffer from consequences.

In simple words, retaining customers deals with engaging them in such a way that they will proceed to do business with your company, not with those who you are competing with.

And if a pretty large proportion of your existing clients is continuously choosing some other company over you, you are in trouble. Ultimately, this only means that you are losing money. According to 99 Firms:

“Increasing retention by just 5% can lead to doubling the profits.”

Perhaps, this reason alone is more than enough for companies not to neglect this point. After all, the prosperity of a company and the growth of its revenues are always a priority.

But did you know that it is a lot more costly to acquire a new customer than to retain the one that you already have? This is precisely why it makes sense to put the retention of returning clients higher among your priorities than getting new ones.

At the end of the day, your smaller fraction of loyal buyers can be bringing you more money with repeat purchases than a larger fraction of newbies making their first orders. Additionally, this strategy is considered relatively cost-effective, and it pays off in the long run.

Repeat customers: 5 strategies to implement

There are many things that you can do to prevent your customers from abandoning you for your competition. The same applies to what can be done for building stronger longer-lasting relationships with your clients. Below are our five top-pick strategies that are worth paying attention to:

1. Start loyalty programs

Can you believe that numerous companies have over half of their profit come from returning clients? Among the reasons why this is possible deals with correctly running loyalty programs that assist the company in keeping clients satisfied. Based on the consumers report on reward programs by Oracle:

“72% of US adults belong to at least one loyalty program.”

Pro tip: That said, one of the most straightforward retention strategies deals with launching various loyalty programs. By putting sweeteners and unique offers “on the platter”, you can increase the number of sign-ups, orders, and check sizes.

What is more, the process of earning reward points can also be engaging for customers, forming a “sporting interest” of some sort. For example, you can offer special perks for friend referrals or other initiatives.

Plus, once you get more data on your clients, it will become simpler to interact with them across more channels, including your socials.

2. The power of reviews

There is no denying that the testimonials of customers are beneficial for increasing trust in a company and for influencing purchase decisions. Yet can reviews be used for retaining customers? The answer is a sturdy “Yes”.

Pro tip 1: Inviting your clients to leave feedback on the item or service they have purchased from you or on their experience of doing business with you is the first step to take.

This point can easily make its way onto your email marketing “to do” list since it surely does not hurt to ask for a review in, say, a delivery confirmation mailout. Make sure that it is very easy to leave the review, though, and have all links readily in place.

Giving something back to acknowledge that the person has taken the time to share their opinion is your second step. For example, in return, you can offer a special coupon with a generous discount which can indeed be very encouraging.

And the best part about this fueling strategy is that you thus give your customer a reason to use the perk you have offered, make another order, and buy more from you!

Pro tip 2: Responding to reviews (regardless if they are good or bad ones) is another crucial point to keep in mind. Don’t be ignorant! Your short “thank you” or desire to get to the bottom of the issue shows that you care.

And this is needed not only to please the client you are replying to. Remember that those who are reading the reviews see the interaction too. Essentially, this is necessary for retention and for boosting trust.

3. How about your socials?

Crave to reap more from your company’s official social media accounts? As an option, involve your customers in your socials. This can increase the number of your followers, help you appear in the feeds of more people, and boost your communication with loyal clients.

Pro tip 1: Even putting up the positive reviews that customers left on your social accounts can already be a good “move”. Instagram Stories, feedback sections, gallery content, there is so much that can be done.

The main aim here is communication, therefore, using your socials to share valuable content, different guides, or anything else that matters to your audience is already better than just posting your company’s latest news.

Pro tip 2: Running contests and giveaways are also an excellent retention method. By raising interest and truly offering something worth the trouble, you can not only engage customers but also make them more loyal to your brand.

In common cases, the requirements for giveaway participation are unique content creation, account sign-ups, mentions of accounts (of the company and friends), to name a couple.

4. Have you asked clients about what they want?

What is the point of guessing what your target audience is craving or is not satisfied with when you can ask them about it? Being on the same page with your buyers is vital, not to mention that it will help you in forming better relationships. Based on the findings by Fundera:

“56% of customers said they feel more loyal to brands who “get them.”

Pro tip: Surveys, this is the simplest reply. You can ask about new products, personal favourites, strong and weak points, other preferences, and experience, as well as test your hypotheses. Think your questions through.

Do not make the forms too time-consuming and challenging to fill out. Do not pitch surveys to clients too often, and analyse the received data. That is pretty much it. As a result, you get a better understanding of what your customers need, allocate the weak sides that need some work, and by fixing them, you give your customers fewer reasons to leave you.

5. Are you sure you have lost them forever?

Bad experiences are hard to make up for. Whether you have not provided quality or timely support, or have not given the customer the needed attention and pampering, or have not apologized for messing up a product order or service experience and upsetting the person who paid you money, you must take action.

People can lose trust in you; this happens inevitably with every business regardless of its type. But is there nothing you can do to prevent your customer from choosing another company over you? Is there no going back and attempting to make things right?

Pro tip: The good news is that there are escape routes that can help in client loss prevention and retention. For instance, you can offer back-shipping free of charge if the product does not meet expectations.

On a similar line, you can present a discount or free delivery for the next purchase as an apology if something went wrong. In any event, such conciliatory gestures will help to retain your clients.

Over to you

If you manage to establish sturdy connections with your customers, your business is in for the win. In essence, retention is not as pricey as nurturing and acquisition. And loyal buyers do tend to bring back much more than newly obtained clients, this regards not only larger average check sizes but also referrals.

About the author

Alex Husar is the CTO at Onilab and 8+ years of experience in Magento and Salesforce. He graduated from the Czech Technical University and obtained a bachelor’s degree in Computer Software Engineering. Alex’s expertise includes both full-stack dev skills and a strong ability to provide project-critical guidance to the whole team.

Disclaimer: The views and opinions expressed in this blog post are those of the author and do not necessarily reflect the official policy or position of Think Little Big Marketing.

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