How to keep a customer? Complete Customer Retention Guide
If you work in sales, you know that finding new customers and new ways to increase your revenue is one of the priorities for every business.
For the majority of the companies, gaining new customers takes so much time and focus, they forget about taking care of their existing customers.
Yeah, everybody heard that taking care of old customers is several times cheaper and more effective than gaining new customers.
According to HBR, it’s from 5 to even 25x times more expensive to acquire a new customer than it is to retain an existing customer!
What’s more, loyal customers spend even 3x times more on your company than new ones, but it seems like sales people forget about it often.
One of the reasons why companies act like is because they think that if they have a great product or service, then customers will return to them no matter do the companies bother with customer retention strategy or not.
It might work for a local shop or a tiny cafe that knows all their customers, but for bigger companies focusing only on new clients is a short-term strategy.
Sooner or later, customers will notice that new clients get far better treatment than the existing customers, get annoyed and leave. And with so many companies tempting them, your customers can switch companies at any moment.
That is unless you will make an effort to build a connection with your customers before they even get an idea to leave by using customer retention strategies!
What is customer retention?
Customer retention is a set of actions that help a company to retain its customers over a period – in simpler words, things you do to keep your customers happier and stay with your company for longer.
The number of customers you can keep from leaving you is known as “customer retention rate” – meaning measuring how many customers your company retains at the end of a given period, how many new customers you acquired and the number of customers who left your company.
The formula for counting your customer retention rate looks like this:
CE = number of customers at the end of a given period,
CN = number of new customers acquired during a given period,
CS = number of customers at the start of a given period.
Counting your retention rate might look complicated at first glance (especially if this is the first time you read about it) but it will get much easier to use with time.
Why is it crucial for me to focus on customer retention?
If your customer retention rate is low, it means you need to give much more effort to build a relationship with your customers and have your customers feel they have a genuine bond with you.
Why? Because establishing a connection with your customers has plenty of advantages!
- Loyal customers keep buying from you – Loyal and happy customers return much more often to you than “one-time” customers. If they have an excellent opinion about your brand, they are much more likely to buy your new software or use a new service (and it’s much easier to convince them to buy it than if you talked with a new customer).
Also, those customers are emotionally attached to your brand and see you as their “company of first choice” whenever they have a need related to your business.
- They spend more money on you and your company – Loyal customers typically spend even three times more money on their favourite companies because they trust you and trust in the value of your product. What’s also important, those customers are also more likely to make a more significant purchase.
- They keep spreading superb word about you and your company – If your customers like what you do and how you do it, they’ll talk about it with others and recommend your service. What is more convincing and authentic than a friend recommendation?
Loyal customers will happily provide free advertising for you to make other people know about your service or your software (and that saves your marketing team a good deal of money)!
- They are more forgiving if you make a mistake – Even if there is a severe problem or error on your part (such as there is a sudden server failure or the product you shipped to your customer turned out to be faulty), if your customers know you will correct the issue as soon as possible (and maybe even offer them a small gift as a compensation), they are much calmer and much more patient while waiting for the solution.
Still think that customer retention is not that much important for your revenue and business growth? Here are a few statistics you might be interested in!
- It is 16 times as costly to build a long-term business relationship with a new customer than simply to take care of an existing customer
- The average customer spends 67% more in his or her third year as a customer of your business than in the first year
- Businesses lose $1.6 trillion per year when customers move away from them
- 20% of customers of a given company are the source of 80% of the company’s profits
- 55% of consumers are willing to pay more for a guaranteed good experience
- 79% of consumers want brands to demonstrate they care before considering a purchase
- 54% of UK consumers feel more loyal to brands that show a deep understanding of their preferences and priorities
See? The most significant source of your revenue and the best way to grow your business is just under your nose!
If you didn’t focus on it before, it’s high time to change it and add customer retention strategies to your daily marketing efforts.
ow can I improve my customer retention rate?
I’ll tell you straight: improving your customer rate is neither easy
To make it a bit easier for you here are ten ideas how can you improve your customer retention rate in your company!
Nothing shows customers trust your company better than a glowing review.
Customer testimonials show that your customers use your product/service and are very happy with it – happy enough to prove they trust and recommend to others your company.
How to get them?
Simply ask your customers for a review of your product (even better if you can offer them an incentive for doing it – such as being entered in a sweepstake).
How to NOT get them?
Write glowing reviews yourself and post it on your website – it’s effortless to find out are the reviews genuine or not.
Paying people to give you great reviews it’s not an option either – no one is going to trust a company that uses such a shady tactic to get more customers.
Give your customers a tailored service
If you are thinking seriously about keeping your customers satisfied for longer, you need to learn about your customers’ needs and expectations down to the last detail and then prepare personalized messages to them.
No more “one size fits all” approach – long time customers deserve a different approach than customers who just made their first purchase.
Time for a surprise gift!
Customers love surprise gifts; they make them feel that a brand thinks about them and appreciates them as customers. And they don’t even have to cost you a fortune!
It’s the simple, heartfelt gestures that count – for example, a birthday card sent on a customer birthday, a freebie to the first purchase, a sticker set or maybe a handwritten note?
Even if it’s a small thing, they will surely make your customers smile. And if you can make people feel happy about using your products, they are more likely to stay with you!
Quality is more important than speed!
What is more important for your sales team? To make sure their customers leave satisfied or to just make a daily quota? To spend as much time as they need to solve the customers’ issue or to finish as soon as possible? Of course, answering the customers issue in the shortest time possible is important but according to a survey from Gallup Group, customers are 9 times more likely to stay with a brand when they see the customer service as “courteous, willing, and helpful,” rather than when sales rep attempt to finish the interaction as soon as possible.
Make your best customers feel like VIPs.
You surely have customers that use your services or products often, make larger purchases or that recommend your business to others. Show them how valuable are they to you by giving them special treatment.
There’s a dozen of ways how you can do it: a discount on their purchases, a “VIP card” that gives them free shipping on every fifth purchase or free service once in a while, exclusive offers or maybe a chance to test your new product before it gets released?
Nothing makes your customers happier than the feeling of being appreciated!
Reward your “brand advocates”.
If you hear about customers that go out of their way to recommend your product or service to their friends, don’t treat it like a usual thing, let them know you see and appreciate it!
Those customers are saving your marketing team a good chunk of money by providing a free advertisement – and no campaign will be as useful as a simple word of mouth recommendation!
If you spot someone recommending your business on social media (or if you hear from a new customer he/she came here because a friend suggested this place), don’t forget to thank them – it shows you’re paying attention to your customers and that their opinion is valuable to them.
Even better if you can give them a small gift as a reward, though for the majority of customers a simple “Thank you” is enough.
Don’t hide things from your customers
Trying to do something behind your customers back?
No matter how well you try to hide your plans to raise the prices or to give your customers fewer membership benefits than they had earlier, your customer will find about it and get upset. Not only because they would have to pay more but also because you betrayed their trust in your company.
If you have to raise prices for your service or products, tell your customers about it straight away and explain the reasons for doing it, don’t hope they won’t notice the change.
Bring back the customers you lost
Bringing back the customers who already know you and your product but at some point stopped interacting with your business is much easier and cheaper than getting new customers.
You surely have that kind of customers too – they used your service or shopped at your store frequently, but at some point, they stopped.
The best way to remind them of your existence is to contact them and ask them out why they’re no longer buying.
It might be something you can’t change (such as the customer moving out and can no longer visit your store), but it’s also possible that there was an issue with your service or your product that turned the customer away from you.
Did they had any problems with your product? Was he ignored when he needed help? Did they stop feeling you care?
Solving the problem the customers have and showing you still value them as customers can immediately improve their mood and make them return to your company.
Just be sincere – if your customer comes back to your company only to see nothing really changed, he’ll leave again, this time for good.
Take a complaint or a negative review as a gift
Many companies don’t bother with reading and responding to negative reviews and comments – some go as far as deleting them from their social profiles and pretend they only have 5-stars review.
That is, unfortunately, a short-term strategy – what should they do instead is to use the complaints as a chance to make their customers closer to them!
96% of unhappy customers don’t complain – they walk away. And even if they didn’t tell you what made them miserable, they will tell their friends and family about it.
A customer who tells you why they are unhappy with your service or product is giving you a second chance – and it depends on you will you use it.
Answering all complaints on time and reaching out to customers who posted a negative review of your service/product should be your priority if you want to have satisfied and loyal customers.
Ask for feedback and learn from it
What is the best way to learn what your customer wants from you? Ask them for the feedback! It’s a fantastic (and effortless) way to determine what your customer wants, what are the recent issues they had and how they think you would improve your product/service.
But you can’t ask and then ignore the feedback, you also have to show your customers you take their opinion seriously.
If your customers will fill out a survey or give you suggestion only to see you completely ignored it, they won’t be so willing to provide you with their opinion again.
There are many ways you can use for making a customer stay with you for longer – it all depends on your creativity! But you should remember that there are no shortcuts in the business, and there’s no magic tool that will suddenly make your customer love you.
Bonding with your customer (as with any other human being) takes time, patience and effort. But it’s going to be worth it in the end!