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The principle that finding a new customer is more expensive than keeping an existing one is well-known. Companies have developed a broad repertoire of strategies to comply with it. From giving freebies to loyal customers to sending personalized hand-written notes and developing fully structured loyalty programs, the options are endless. However, customer retention strategies work better when they are guided by a complete understanding of what customers want and how to incentivize their loyalty to a brand.
What is customer retention, and how can you improve your business for both your new customers and recurrent buyers?
What is customer retention and how to measure it?
Customer retention is the set of activities companies use to maintain a steady number of buyers month after month. Depending on its vertical sector and its particular situation, a company may require different strategies to achieve the retention rate they are looking for or even have a bigger urgency for acquiring new customers than retaining them. For example, a car selling business would need a different set of strategies than a beauty salon, as their products and services life cycles and costs are radically distinct.
As a general norm, products or services with higher costs and/or lower purchase frequency will focus on acquiring new clients. Those with lower costs and higher purchase frequency will tend to concentrate their efforts on customer retention.
A company’s situation also will determine whether its priority is customer retention or acquisition. A business that has been on the market for just one month will concentrate on customer acquisition, but a firm with a twenty-year background will need another approach as it will have to take care of the relationship with its long-time customers while working to find new ones.
This also means that the customer retention rate will vary from one period to another and we should calculate it recurrently. The formula to do it is:
[(Customers at the end of the period – Customers acquired during the period)/Customers at the start of the period] x 100
That formula will apply for any period you define, be it a month or a quarter, and will apply for any vertical sector. However, the interpretation of the result may vary.
Now that we understand better what customer retention is, let’s take a look at some strategies to achieve it.
Create valuable and updated content to keep customers in the loop
Content creation is an extensive marketing branch due to its value for lead generation; however, it also has a big potential for customer retention, as Aaron Agius explains in his Forbes article.
Valuable content –be it in the form of blogs, podcasts, playbooks, newsletters, etc.– is used to show potential customers the value of a brand’s products or services, but companies rarely develop a content plan focused on customer retention.
Post-purchase content may be a newsletter or webinar, to mention a couple of options, but it must show that you know your customers, understand their pain points and that you can continue offering them value in the long term. This way, you will build a stronger relationship with them and increase the chances of being referred to other potential customers.
There are several ways to focus on post-purchase content. For example, it can be an integral part of the customer onboarding process, giving updates on product development, introducing other products to encourage upselling or cross-selling, and fostering brand loyalty.
Identify what your customers love and use it to innovate
Another way to retain customers is making sure your brand continues to be relevant to them through innovation.
The first time you closed a sale with a customer, it was because you managed to hit one of their pain points –whether they were solving a complex CRM issue or hungry, your product or service solved something for them. However, it isn’t always evident which characteristic of your product was the one that made the deal. For example, suppose you are the owner of a salad bar and start noticing one of them has higher sale patterns than the others. In that case, you might wonder whether it was because of a particular ingredient IN the salad, something that is NOT in the salad and your clients are trying to avoid, or if its sale pattern is because of the way you are promoting your products on social media.
Once you have cleared out those questions, use the answer to develop new products or promotions, sparkle curiosity in your customers, and invite them to return.
Implement a Loyalty Program
Loyalty Programs are the most structured strategy you can implement to retain your customers. Depending on your business’ vertical sector, you might want to try a system using tokens or your product’s trademarks. However, those businesses using high amounts of information should go for an automated platform to guarantee they keep a fully updated database and know their customers in-depth. Not knowing your customers’ value is shooting yourself in the foot, so the investment needed to develop an excellent loyalty program is worth it.
Optime Consulting’s Loyalty Program would allow you to generate closeness with your customers regardless of their location, build and keep updated the database you need, have a direct means of communication with your clients, and increase sales along with customer satisfaction. If you want more in-depth information about Loyalty Programs, take a look at the other articles in our blog or contact one of our specialists.
Create a roadmap for the relationship with your customer
All relationships have their growth rhythms, and the customer-company relationship is no exception to this. In the same way, you get to know when a friendship won’t grow any longer, you also can understand as a customer if your relationship with a particular brand got stalled. When that happens, it is the ideal moment for other brands to make a value offer and take your customers away.
One way to avoid this is creating a roadmap for the relationship with your customer: design a plan to give them a feeling of growth as customers of the brand. There are several mechanisms you can use to that end. For example, implement a gamification strategy and reward your buyers with delivery discounts or benefits with allied brands, or create differentiated drip campaigns for loyal customers, showing them how well you know them and how much you appreciate them. Either way, an automated platform will be your best tool to keep track of them and make the best decision on the next step.
Empower your customers with the tools they need to succeed
As I said earlier, if you made a sale, it is because you were able to offer something your customer needed. That said, the fact you had the right product doesn’t mean you have guaranteed your customer can take the maximum profit from it. For example, think of a piece of furniture that was perfect for the space you had, but that also was an absolute nightmare to put together. Customer experience matters. A lot.
Choose the mechanism that works best for your business: from having an excellent call center to guaranteeing the instructions that come with your product are clear, the options are endless. But always ensure their success as it will keep them coming back to the solutions you offer.
Try these five principles and let us know your feedback. Which one worked best for you? What principles guide your customer retention strategies?
Business Trends – 5 CUSTOMER RETENTION PRINCIPLES YOU SHOULD WORK BY
By: Ana Enciso, July 2021
Edited by: Valentina Calderon & Isabela Rosa