The appeal of attracting new business is undeniable. We’ve all been conditioned to continuously engage new leads with hope of converting them into customers — not that there’s anything wrong with that — but what about those customers we already have? Are they somehow less important than new customers, or could they in fact be appreciably more valuable? Understanding that re-engaging an existing customer is far cheaper than converting a new customer, neglecting customer retention efforts may be detrimental to your bottom line. That’s why successful brands focus on customer retention as they appreciate that their existing customers make them a sustainable, thriving business.
What is Retention Marketing?
Simply put, retention marketing concentrates on getting repeat business from existing clients — ideally having them purchase more frequently, with higher volumes, in order to maximize their lifetime value.
While many business managers believe that a good product alone will keep clients coming back, it doesn’t outweigh the significance of great customer care. Strong retention is a driving factor for the growth of any business.
Why Customer Retention is Important
- Research shows that 68% of customers are willing to leave a company if they feel they are being neglected.
- Lowered costs. Acquiring new customers will cost your business up to 5 to 7 times more than it would to retain an existing customer. Meaning, a 5% increase in retention can potentially result in increased profits of up to 75%. So while client acquisition will always be an important element of your overall brand marketing strategy, customer retention marketing is of the utmost importance.
- Returning customers have a much higher rate of conversion as their ability to trust and engage with your business is much higher. In fact, an existing customer is likely to repurchase at a rate of 70% versus the conversion rate of a new customer at 20%.
- Higher profits. Your repeat customers are more loyal which opens the door for up-selling and cross-selling given they already trust your brand and will be more likely to try out new offers. Research shows that your top 10% spend 3 times more per order, with your top 1% spending 5 times more than the others.
- Loyal customers are also more likely to become brand advocates. With a reported 85% of consumers trusting online reviews as much as personal recommendations, peer-to-peer referrals are a very effective way to promote your brand.
Strategies to Improve Retention
So how do you improve customer retention? There’s plenty of data-driven information available regarding retention strategies — some are psychological, and others are just common sense. However, in the end there’s one simple rule to follow: Give your clients a distinct reason to trust in your company, and they will continue to be loyal, happy, and passionate about your brand.
- Foster joy! Giving customers a positive experience based on their individual needs can be surprisingly effective in regard to client retention. This could be a result of:
– providing great customer service
– making sure your customer service reps use the names of the people they speak with
– Offering targeted incentives as proof that your company is listening and that you know cater to their specific needs
- Cultivate a culture of under-promising and over-delivering. Setting expectations too high has very little value, whereas surprising customers with over-performance helps to endear the customer to your brand. Going beyond expectations gives a client the understanding that you are giving them individualized care and attention.
- Keep communication consistent. Regardless of the channel, your message be relevant and authentic, as well as accountable and traceable. This applies to your staff as well as customers like consistency and more likely to engage if they have a good working relationship with your staff.
- Become a hub of intelligence. Provide clients with unique interactions and information. Provide them with genuine tips and advice to help increase trust and reliance on your brand. A good CRM tool can help immensely with this.
- Create brand ambassadors. Give them opportunities to take responsibility in your success. Whenever possible, ask your customer for feedback on your service and products. Think of your clients as part of your sales team. Offer incentives for those who refer new business. And create loyalty programs tailored to keep them loyal.
A shift to customer retention improves Customer Lifetime Value
Retaining clients has a direct effect on Customer Lifetime Value. The deeper your relationship with your customer the greater the value. Have you primed your clients to help you do some of your acquisition work for you? Do you have clients that discounts would help improve their investment in your company? Keep searching for ways to create positive engagement and meaningful partnerships that will contribute to your bottom-line growth. In short, take care of your customers, and they will take care of you.
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