Top 5 customer retention strategies
Losing customers is bad news for any business which is why many companies are trying to improve their customer retention strategies. And it’s well worth keeping your existing customers satisfied because loyal customers spend 67% more than new customers.
What’s more, 90% of buyers are willing to pay more for a better customer experience so if you’re not prioritising your customer's needs, you risk losing them to a competitor.
So how can you improve your customer retention and boost your revenue? It’s simple, all you need to do is know how to track it and how to anticipate the needs of your valued customers. To help you, our top five strategies will reduce your customer churn and keep your numbers where you want them.
Measuring customer retention
Before you take any steps to improve your customer retention, it’s important to start tracking it so that you know exactly what works and what doesn’t. Without measuring customer retention, you’ll never know if your efforts are paying off so it’s important to keep a consistent record of the following rates:
To calculate your customer retention rate for a certain time, you first need to know the following numbers:
- Total customers at the beginning (CS)
- Total customers at the end (CE)
- The total number of new customers acquired (CN)
Calculating your customer retention rate (%)
- Subtract the number of customers left at the end of the period from the number there was at the beginning or CE-CS.
- Then divide the result by the number of newly acquired customers (CN).
- Finally, multiply that result by 100 for a percentage. This is your retention rate.
For example, if a brand had 30 customers at the beginning of August, 40 at the end, and acquired 20 new customers during that time, the equation would look like this:
((40-30)/20) x 100 = 50%
Essentially, your retention rate is the number of customers who have remained loyal to your brand, and therefore, the higher the percentage the better. But even if your retention rate is at 100%, you should keep tracking it to ensure that nothing changes.
Another way to look at customer retention is to review, at the end of the year, the volume of sales to new customers versus the volume of sales to existing customers. If the percentage of sales to existing remains fairly steady then retention is healthy, but if the number of repeat customers is declining then there’s a retention issue.
Ways to improve customer retention
The best way to improve customer retention is to tune into what they need and want from you. The following are some of the most common and proven ways that brands can improve their customer experience (CX) and generate repeat business.
1 - Implement a customer feedback loop
To retain customers, you need to understand how they feel and what they need from you. By paying attention to their preferences, you can refine your processes to suit them better and give them a reason to remain loyal. The best way to do this is by using a customer feedback loop. Essentially, what that means is that you ask for feedback, take action with the results and assess how effective the change was before doing it all again. This loop is constant and every time a customer gives feedback, it should turn into relevant change. To ensure no customer is lost through the cracks, it’s worth finding a customer feedback management platform that streamlines the whole process for you.
2- Reward loyalty
To encourage loyalty, many brands have begun to offer incentives and loyalty programs. By offering discounts, rewards, giveaways and other benefits, brands are able to give customers a reason to stay invested. It also makes it harder for customers to leave a brand, knowing they’re giving up those incentives for a less appealing alternative.
Before you offer any of these benefits, it’s worth finding out exactly what your customers would value most. By providing them with a relevant solution to their needs you’ll demonstrate how willing you are to listen to and prioritise them.
3 - Improve products and services
Without your products and services, your customers will have no reason to invest in your business, so it’s crucial to always improve them as much as possible. Whether it be small edits or a major overhaul, your customers know what they want, so ask them and take their input on board because when your products and services are optimised, your customers are more likely to return for another purchase.
4 - Set and exceed expectations
Perhaps the most important strategy on this list, managing expectations is critical. If you’re constantly overpromising and underdelivering, your customer's trust in you will dwindle. After only one negative experience customers are 88% less likely to renew their loyalty to the brand, showing just how important it is to deliver what you promise.
The key to this is knowing how to set realistic standards. Before making any guarantees, be sure to have systems and strategies in place that will ensure you can fulfil them. At that point, it’s your responsibility to clearly communicate those standards to your customers so that they know exactly what to anticipate.
5 - Improve your communication
In the age of digital technology, customers have higher expectations than ever when it comes to brand communication. With live chats, social media and automation, customers expect rapid responses to their queries and will often switch to another brand if the wait is too long.
Another important part of communication is improving personalisation. By integrating your CRM and other business tools this can all be automated, so it’s easier to synchronise all the customer’s data as needed. For example, using a customer’s name instead of a generalised default is more likely to resonate with them and make them feel valued. In the same way, integration also allows you to streamline communication so that each interaction is helpful and relevant, not just a repeat of a previous conversation.
Why customer retention is important
Now that you know the best ways to improve customer retention, you need to get started today. Your customers are incredibly important, so you shouldn’t waste any time trying to improve their experience with your brand.
It’s 5-25 times more cost-effective to retain existing customers than acquire new ones, so it’s well worth investing in ways to retain them. And not only is it more cost-effective to begin with but it’s also proven that a 5% increase in retention can boost profits by up to 95%. That explains why so many brands are choosing to listen to their customers more closely and become more customer-centric.
For more advice on how to improve your services, Review Tui has a comprehensive guide for implementing a customer feedback strategy. By engaging with your customer's expectations you can ensure your brand is delivering exactly what they need, and keep them coming back for more.