Customer Retention

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Customer Retention Strategies2
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Customer retention refers to a company’s or product’s ability to keep customers for an extended length of time. Customers who return to, continue to buy, or in some other manner do not defect to another product or service, or do not use it at all, have a high customer retention rate. Generally, selling firms want to reduce client defections. Client retention begins with the initial encounter a company has with a customer and continues throughout the lifecycle of a relationship, and good retention initiatives consider this full lifecycle. The capacity of a firm to attract and retain new customers is tied not just to its product or services, but also to how it services its existing customers, the value that consumers perceive as a consequence of using the solutions, and the reputation it builds inside and across the marketplace.

Consumer retention entails more than simply providing the customer with what they anticipate. Exceeding client expectations may be necessary in order to create brand evangelists. Creating customer loyalty places ‘customer value at the core of corporate strategy rather than maximizing profits and shareholder value.’ In a competitive climate, providing consistently high-quality customer service is frequently the critical differentiator. Furthermore, retention is a crucial goal in the burgeoning realm of Customer Success.

Customer retention directly affects profitability. According to John Fleming and Jim Asplund’s research, engaged consumers produce 1.7 times more income than typical customers, while involved workers and engaged customers generate 3.4 times the standard.

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Measurement

Customer retention should be measured by distinguishing between behavioral intentions and actual customer actions. The use of behavioral intentions as a customer retention indicator is based on the assumption that intentions are a powerful predictor of future actions, such that consumers who show a greater repurchase intention toward a brand or organization will likewise display stronger related behaviors. Customer repurchase and retention behaviors may be monitored in a variety of methods, as outlined in a number of award-winning studies published in the marketing field. A number of review publications, including Keiningham and colleagues (2007), Gupta and Zeithaml (2006), and Morgan and Rego (2006), describe the research that also uses diverse metrics to quantify consumer repurchase intention and actual repurchase behaviors. The following broad conclusions may be drawn from these studies:

Customer satisfaction is a powerful predictor of both repurchase intentions and behavior.

Repurchase intentions are statistically significant and positively linked with repurchase behavior: as people’s repurchase intentions rise, so does their propensity to repurchase the brand. However, while the size of the correlation is positive, it is moderate to weak, suggesting that intentions and behaviors are not interchangeable entities for measuring customer retention.

The relationship between various retention indicators is not always clear. It can be (a) non-linear, with growing or decreasing returns, (b) varied for distinct consumer segments, and (c) different by industry.

Customer retention is a powerful indicator of a company’s financial performance when accounting and stock market data are used. According to a research conducted by a Brazilian bank, bank branches that were more competent at effectively gratifying and keeping clients were more lucrative than peers who performed one or the other but not both.

In terms of measurement, scale-items inserted in a customer survey are commonly used to derive intention measurements. Secondary data, such as accounting measurements of the volume (amount and financial value) and frequency with which a client acquires the firm’s goods or services, must be used to measure retention habits. This necessitates the establishment of a competent customer information management department capable of collecting all essential KPIs that may be needed for analysis. In a typical firm, these may come from a diverse set of departments such as accounting, sales, marketing, finance, logistics and other customer research. 

Calculating Customer Retention Rate

Companies can assess client retention rates in a variety of ways. It all depends on the time period under consideration, but many marketers employ far too many factors.

Assume we have 2,000 current clients during a two-month timeframe. 900 of them returned to buy something else from us throughout the same time period. These are the two figures we’ll need to determine our client retention rate.

However, any new consumers we bring on during those two months must be discounted. They are not a factor in the equation. We should only include as current clients those who purchased something from us previous to the two-month start date.

If we are assessing our customer retention rate from January 1 to February 28, we will include consumers who purchased from us prior to January 1. If a new consumer purchases from us on January 15, he or she will not be counted.

Formula For Customer Retention

The client retention technique is simple, but it is effective. It demonstrates how successfully we’re creating relationships and bringing back existing clients for repeat purchases.

The customer retention formula is as follows:

Begin by deducting the number of clients obtained throughout the time from our overall customer base at the conclusion of the term. Divide that figure by the number of consumers we had at the beginning of the time and multiply by 100.

Consider the following example of client retention.

We have 50,000 consumers at the start of a two-month calculating period. During those two months, we gained 1,000 clients, and at the end of the term, we had 40,000.

To get rid of consumers obtained during the testing time, we’ll deduct 1,000 from 50,000. That leaves us with a total of 49,000. We’ll now divide 40,000 by 49,000 to get 81. We may get the client retention rate of 81 percent by multiplying that number by 100.

Different Strategies To Achieve Customer Retention Rate

Establish sales targets

We need a goal before we can handle any marketing approach. Otherwise, we have no idea what we’re aiming for.

First, determine our current client retention rate. We must begin somewhere. Setting a goal of 50% retention isn’t very fair if we’re currently keeping 10% of our consumers. We need a goal that we can realistically achieve.

Take into account the size of our consumer base as well as the sort of goods we sell. Some items are designed specifically for client retention. People, for example, must constantly replenish domestic goods such as dish soap and toilet paper. In that situation, we can set a more ambitious aim.

However, if we want our clients to try new things, we must order the same products as gifts, or to order more of what they already have, we’ll need a more conservative goal. 

Map the customer journey

The path from prospect to customer isn’t always direct. In reality, it is more likely to take a number of unexpected turns. However, if we collect data on how consumers engage with our website and business, we can predict their customer path toward making a purchase.

Begin with the following questions:

  • How did people learn about our company?
  • Do people find our content through a Google search?
  • Is it true that they follow us on social media?
  • Do we receive a lot of referrals?

We’ll be able to figure out how they make their judgments once we know that. Concentrate on lead generation so that we may obtain prospects’ contact information and advertise to them more effectively.

Then, examine what persuades our clients to buy. Once we’ve figured out the consumer path, we can optimize each stage and improve customer retention in the process. 

Begin on the right foot

First impressions are important, right? If a consumer has a bad experience with his or her first purchase, that individual is unlikely to return to make another.

Fortunately, we don’t have to work too hard to make our clients feel welcome. Ensure that the checkout and shipping processes are as simple as feasible. Send a thank-you email informing the client of our appreciation for their business and directing them to any useful videos or instructions. 

Examine the value proposition

The importance of perceived worth is approximately equal to that of real value. Our clients must regard our company as the final answer to a problem.

For example, corporate social responsibility has become a top priority for many businesses. Green practices and community involvement do not add actual value to a product or service, but they do increase perceived worth.

Our value proposition should express our beliefs and why we are in business.

Reduce turbulence

If we are an existing client with a credit card or other payment method on file, we can purchase a product with just one or two clicks.

The less barriers we put in the way of our consumers, the more likely they are to buy our items again and again. Improve the checkout experience, provide connections to relevant products on our product sites, and give out regular emails about new or on-sale items.

Communicate effectively and interact with our consumers

When we are unable to speak with a friend or loved one for a lengthy period of time, the relationship suffers. It is becoming increasingly simple to avoid interaction.

The same thing happens to our clients. They won’t even consider checking out our latest blogs or engaging with us on social media if we don’t communicate with them.

By providing excellent material, we can educate our customers

Many individuals buy items and services from firms who are eager to educate their target customers. Customers will return for more if we regularly deliver outstanding content.

Staying top-of-mind is an important part of this phenomenon. If our company is the first thing that comes to mind when our specialty is mentioned in a discussion, we’re doing an excellent job.

Recognize our consumers’ issues

Even if we have the best product in the world, we won’t sell many of them if we don’t know what issues it answers. More importantly, we must determine which customers will gain the most.

What do our clients require? What is it that keeps them up at night? Continue to address those pain issues in our marketing initiatives so that our customers know we understand them. They’ll become more inclined to buy from us over time.

Make our returning consumers happy by implementing a loyalty programme

Loyalty programmes may appear straightforward, yet they may have a significant influence on client retention. Customers will feel driven to return to our online store if they know they will be rewarded for doing so.

We don’t need a complex or elaborate rewards system, nor do we require pricey prizes for folks who “level up.” Just make certain that we provide something of value.

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Request feedback

Requesting feedback from our consumers serves two purposes:

  • It makes our consumers happy since we cherish their feedback.
  • It provides us with information on how our customers think and feel.

Boring surveys may not be the best option. We may send an email to all of our subscribers asking them to respond with their ideas. Encourage individuals to offer detailed responses rather than scoring statements from one to ten.

Educate our customer retention staff

Spend time educating a dedicated customer retention staff on all of the tactics. Do dry runs with all new team members using a script, for example, if sales calls are used to qualify and convert leads. Delegation is, without a doubt, the most crucial leadership skill you can develop.

However, if we do not properly teach our employees, they may develop negative behaviors and unwittingly damage our client retention campaign. When we develop new strategies, we must properly expose them to the tactics so that they understand how to implement them.

Provide a valuable upsell

Upselling and cross-selling are excellent techniques to entice clients to return to our establishment. Customer retention is frequently dependent on our ability to provide an even better opportunity than the one that enticed those consumers to convert in the first place.

Upselling is the practice of enticing clients to try a more costly product or service. They’ve previously been introduced to our company, so they understand the value we bring.

Cross-selling is the practice of enticing clients to buy items that are linked to or complementary to those they already hold. It’s like the clothes shop salesperson who says, “Oh, those trousers are a terrific pick.” We’ve got some soft socks to go with them. “May I show you something?”

Conduct A/B testing

We may anticipate that sending weekly emails with detailed material to existing clients will enhance customer retention rates. We build and launch an email drip campaign for that objective.

Perhaps our client retention rates will improve. Perhaps they don’t. But what if we were able to do better?

Create another email drip campaign for 50% of our readership as a challenge. Instead of every week, send such emails every two weeks. Examine the distinction.

On our website, we may also do A/B testing. Perhaps we can utilize a similar goods plugin to propose further items for clients to purchase. We could A/B test the positioning of the widget to determine which layout leads to the most conversions.

Benefits Of Customer Retention

  • Lowering the cost of acquiring new customers

Getting new clients is expensive, time-consuming, and energy-intensive. After weeks or months of developing a lead, they may decide to go to a rival. We are obliged to hunt for new clients when we have a high level of customer turnover.

  • Increasing the monetary value of each sale

Even when a consumer makes a purchase, the transaction isn’t ended. A common error that businesses make is failing to follow up with consumers in order to upsell or cross-sell additional items and services. These follow-up actions can boost not just client retention but also the value of the current sale.

  • Gaining a better understanding of our consumers

Because they know their clients, successful firms are good at what they do. They aren’t simply familiar with their demographics; they have in-depth knowledge of the problems their consumers encounter, the emotions they experience, the amount of transformation they want to accomplish, their willingness to buy, and their brand loyalty.

  • Increase recommendations and loyalty

One of the most significant advantages of client retention is that it helps you attract new customers. When a consumer returns to our business, they develop a sense of loyalty to our products and services.

As a result, they begin to recommend your company to their family, friends, and acquaintances. Not only that, but they may post good internet reviews, which serve as online word-of-mouth promotion.

We can further minimize your client acquisition costs as a result of our customer retention initiatives. New clients will seek us out because they have witnessed how nicely we have handled others.

  • Cutting down on customer turnover

Client turnover is diametrically opposed to customer retention. Customer churn can occur for a variety of reasons, including poor product quality, poor customer service, or better offers from competitors.

Losing a customer, for whatever reason, is bad for any business. We can lower the amount of customers who cease doing business with us if we aggressively focus on client retention techniques. This may result in fewer unfavorable evaluations – both in person and online.

No matter how successful a company is, customer retention should be a top priority. Make use of client retention strategies such as customizing each interaction with consumers and providing opportunities for feedback.

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Hindol Basu 
GM, Voxco Intelligence

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