Customer Retention Guide
Definition
A measure of customer loyalty or an organization’s ability to retain customers over the long term.
Example – A company that starts the month with 100 subscribers and ends the month with 90 subscribers will have a customer retention rate of 90% and an abandonment rate of 10%.
Why do we need Customer Retention
The key reasons why customer retention is essential are as below:
- Lower marketing costs – Marketing budgets go further by prioritizing existing customers in the buyer retention phase. Loyal customers already know your products and services, so frequent flyer marketing campaigns don’t need to be as expensive.
- Repeat purchases mean repeat profit – Loyal customers make regular purchases and then spend 33% more money, resulting in higher customer lifetime value. They are also 50% more likely to try new products than new customers because they trust each other in your brand.
- Free word-of-mouth advertising – Loyal customers are more likely to share their positive experiences with like-minded people, essentially becoming free advocates for your company. This tactic works because people trust the opinions of those close to them.
- Gain valuable feedback – Customers who regularly shop from your business will also see improvements, so don’t be afraid to ask. Collecting feedback can be as simple as sending an email to your subscriber list, posting a survey on your social media accounts, or sending a customer survey right after placing an order. As soon as you make the new changes, you will discover untapped opportunities and increase retention and sales.
- Previous customers will pay premium prices – Many buyers are less interested in price than potential new customers because they have used your product before. In general, many customers combine higher prices with quality service, so the added benefits keep them returning for more.
Proven retention strategies of Customer Retention
1. Offer flawless customer service – Addressing the concerns promptly can go a long way in increasing positive brand awareness, increasing loyalty, and increasing the average purchase price. According to research published by HBR, the team surveyed customers who contacted brands via Twitter to post their complaints, questions, and comments.
The ways to use support services as a customer retention strategy:
- One of the easiest ways to provide 24×7 support is through live chat. This allows your customers to contact a technical support representative in real-time without having to send an email or wait for a call.
- Another essential tool is a reliable ticketing system. You can add a simple submission form to your website or app.
- Install self-service options such as the Integrated Knowledge Base and the Help Center. You might also consider creating a video help center. Tools like StoryXpress (an alternative to Vidyard and Loom) can be a great way to start.
Similarly, internal KPIs can measure support staff performance. Some of them are:
- Number of service requests handled by the channel.
- Total number of repeat tickets per customer.
- Average response
- Customer Effort Assessment(CES)
- Customer Satisfaction Assessment (CSAT)
2. Establish a strong relationship – To build lasting relationshipswith your customers, you need to reallycare about their experience with your brand. You have to be willing to do your best and give them whatever they need to make them happy.
CRM tool like BIGContacts helps in long-lasting customer relationships in the following ways:
- It allows you to stay on top of your business, build customer loyalty, and streamline the sales
- Youcan group your customers and prospects into different segments to understand each group’s interests, needs, and
- Uses targeted marketing strategies to attract different customer segments at different points in the sales funnel.
3. Collect regular customer feedback – Among the different methods of collecting feedback, surveys are the best way to create a continuous feedback loop. They are easy to implement, cost-effective, and provide comprehensive insights into customer behavior and activity.
Let’s take CSAT (Customer Satisfaction) for example. It is one of the most effective surveys.
CSAT helps measure a customer’s trading experience to determine how satisfied or happy they are after an interaction. It could be a purchase, a support call, or any other interaction.
4. Offer post-purchase services – Acquiring new customersis only half the battle. You need to extend yourpost-purchase offerings so they feel like they’re getting more value out of their investment.
A good example is Amazon clearly listing its return policy right below the product feature list so people don’t accidentally miss it.
5. Engage in customer loyalty programs – The loyalty program is an initiative that rewards loyal customers with points that can be used for future purchases. Rewards encourage them to keep buying from you and refer you to others to earn more points.
Let us take the famous Starbucks for example.
Starbucks gives loyalty points every time you buy certain meals or drinks. Rewarding customers for using a particular product or service is a great way to feel more engaged with a brand.
6. Introduce gamification to your customer loyalty program – Gamification uses game features to reward customers, usually to increase customer engagement with a product or service.
Here are some examples: prize spins, quizzes, exclusive club memberships, and more.
With a simple quiz, you can get to know your audience and get their email addresses for retargeting campaigns.
What’s more, you can also use data from product demo quizzes to provide you with the best buying options your customers see fit every time.
7. Address customer complaints – If a customer has complained about the lack ofyour product or service, chances are they willtell someone else about it. Therefore, it is extremely important to respond to customer complaints as quickly as possible.
An omnichannel approach to address the complaints must be there like a dedicated helpdesk system to centralize the tickets.
Live chat must also be integrated with the helpdesk to automate ticket creation after the chat ends.
8. Track customer lifetime value – Customer Lifetime Value (CLV) is the total value of that customer throughout their relationship with you. This helps you determine if your existing customers are spending more than they originally were and whether you have a long-term relationship with them.
9. Provide personalized experience – As we can see from the above image, 44% of people would likely become repeat buyers after personalized experiences.
Example – Spotify’s personalized experience
10. Automate customer engagement – Marketing and experience automation helps you reach your customers without spending too much time on day-to-day problems.
Calculation of Customer Retention
Customer retention rate is the percentage of existing customers who are still customers after a certain period of time. Customer retention can help you better understand what keeps customers in your business and identify opportunities to improve customer service.
To calculate Customer Retention Rate (CRR), you can use the following simple formula, which takes into account the customers you have at the top (S), at the bottom (E), and those acquired over a period of time you measure (N).
It looks like this: CRR = ((E-N) / S) x 100.
Companies who have successfully adopted Customer Retention and how
Nike –
Being the most sought-after sports brand in the world Nike has its loyalty scheme to brag about. Nike is updating its rewards program to become one of the best e-commerce loyalty programs.
Nike Loyalty Program benefits include priority access to tickets to sporting events, exclusive products, early access to product launches, expert training, and advice exercise, in-app rewards, birthday promotions, plus free shipping.
To echo Nike’s approach on your own agenda, try adding a level of loyalty. Fast fashion never fully utilizes tiers to provide members with first-class benefits not available to regular customers. Low-level members get exclusive discounts. And at the higher level, “Superiorly Sassy” has access to “Secret Sale”.
PwC (PricewaterhouseCoopers) –
Nearly 80% of US consumers say speed, convenience, professional help, and friendly service are the most important elements of a positive customer experience.
Deloitte –
The data shows that every second consumer is a regular user of loyalty programs, using brand loyalty programs at least once a month or more often.
54% stated that they prefer points-based loyalty programs, a similar percentage of consumers don’t always use up their points (53%). When asked about their attitude towards loyalty programs, 42% answered that they need more points to shop with brands.
Ways to increase Customer Retention
1. Retain customers with a smooth onboarding process – A good referral process is an important customer retention strategy that can ensure your success for years to come. It should be personalized (if possible), practical, and aim to eliminate as much friction as possible.
It’s what you do in-between acquisition and first success that will affect your customer retention rates.
2. Create a customer feedback loop – One of the most important keys to customer retention is knowing how they are feeling. When you understand your customer’s moods and what they like/dislike, you can respond to their feedback, improve your approach, and better serve their needs.
3. Keep your products and services top of mind – You can do this with any number of customer retention strategies. Good options include weekly email newsletters, social media contests, and valuable content creation (such as videos, podcasts, or downloadable PDF resources).
4. Reward promotors and loyal customers – If you’re assessing how long a customer’s loyalty has been with you, you might consider sending out rewards at important intervals like six months and a year. Setting up a loyalty program is also always possible.
Top Customer Retention tools
1. Amplitude – It analyzes customer data for you, and thanks to his analytical skills, he will suggest which activities will be more profitable for your company. Not only that, but what keeps your customers loyal and keeps coming back every time.
On day one, retention was 22.9%, which means 2480 of the 10,830 users returned and triggered the return event 24 to 47 hours after the event kicked off. be activated. Day 3 retention was 21.6%, which means 2,339 of the 10,830 users returned and triggered the return event between 48 and 71 hours after the start event was fired. Sometimes an asterisk will appear next to the retention rate. This means that the day is not over yet and Amplitude is still collecting data for that particular day.
2. Qualaroo – The tool observes the customer’s past activities and provides you with data. It also helps to improve products and services. Qualaroo has 15 billion views and over 100 million ideas.
3. Zendesk – This is a great tool for improving your customer experience as it helps you understand what needs to be improved and how to do it correctly.
4. Userpilot – User pilot helps you get the most authentic customer feedback, allowing you to focus on the changes you need to follow. The software does not require a high level of coding and is very easy to use for anyone, which does not prevent them from achieving excellent results. This is a great tool to make customers feel heard and thus help companies achieve high profits.
5. Heap analytics – This helps you keep your customer data up to date as it changes every few months so you are always up to date. This will help you deliver the right information to the right customer at the right day at the right time.
6. Gainsight – It also makes it possible to develop new solutions to build lasting customer loyalty. Gainsight allows you to take risks by looking for the right customer data. This software enables you to send your customers notifications via email.
7. Tidio – Tidio is the best tool to improve customer experience. It provides live chat and chatbot tools to help customers get familiar with your business. It’s the best way to build a relationship with your customers.
About 43% of customers say they prefer real-time customer service over other methods such as email or phone support. This number is only expected to increase in the next few years.
Changes in Customer Retention strategy with respect to different types of businesses
SaaS business – SaaSretention is an important metric focused on customer usage of your product, which is a key driver of customer satisfaction, with retention exceeding sales growth and cost of living.
B2B business – B2B companies must rely on customer service as a key strategy to achieve long-term growth. It also increases ROI and customer loyalty also increases with customer retention in B2B companies.
Service business – Every opportunity to reward customers is an opportunity to build love and loyalty.
D2C business – Having a solid customer retention strategy will help you stay ahead of the game because only 18% of startups focus on customer retention. Moreover, loyal customers can give honest feedback on your products and services. They will also be less sensitive to variations in the cost structure. Therefore, D2C companies can find great value in focusing on customer loyalty programs.
eCommerce business – E-commerce insurance allows you to build long-term relationships with your customers. At the business level, customer retention focuses on key activities and strategies that engage existing customers and build trust.
