Many business owners think that acquiring new customers is the way forward when it comes to maximising profits and growth. But the stark truth that every modern business owner should know is that it actually costs a business more to acquire a new customer than it does to build loyalty and nurture relationships with repeat customers.
More specifically, research shows that acquiring a new customer can cost five times more than retaining an existing customer. Furthermore, if you increase customer retention in your business by just 5%, you can increase your business profits anywhere from 25-95%. This can be a huge boon to your bottom line, won simply by ensuring that you don’t alienate existing customers.
So, if you’re a business owner, finding ways to retain customers should be at the top of your priority list. It’s just as important as finding new ones!
Find out why and how retaining customers should be a key strategy in your toolkit for business growth.
What is Customer Retention?
The customers who have shopped with your business in the past might well play a key role in the success of your business’ future: a whopping 65% of a company’s business comes from existing customers.
Therefore, when we talk about customer retention, what we are referring to are the activities that a business can undertake to maximise the number of repeat customers in order to maximise the profitability of each existing customer.
When you create a strategy around customer retention, you ensure that your business actively maximises the amount of value it brings its customers. As a business, you always want to make sure that the customers you’ve worked so hard to win, stay with you, enjoy their experience with your business, and continue to return for additional value.
Why is Customer Retention Important?
As we’ve mentioned, the two key reasons for the importance of customer retention is that:
- A significant part of every business’s sales comes from its existing customers.
- The cost of selling to existing customers is cheaper than acquiring new ones.
These are key reasons why customer retention is so important, but they aren’t the only reasons. There are also other benefits to customer retention:
- Increasing Average Order Value (AOV): Loyal customers are more likely to spend more money with your business over time than new ones are. So, nurturing those relationships in the long term can benefit your business in that it can lead to bigger-ticket sales transactions with each customer you retain.
- Creating Brand Ambassadors. While advertising and marketing are important, the best advocates for your business come from genuine customer recommendations. Loyal customers share their positive experiences with business and can be highly valuable to your reputation. Research shows that 60% of customers talk about a brand they have had a positive experience with to friends and family.
Strategies to Increase Customer Retention
Now that we’ve identified why customer retention is important and what it can do for your business, how can you incorporate some practical tactics for retaining customers into your broader business strategy?
Regardless of your business type, here are 10 steps you can take today to help increase customer retention in your business.
1. Focus on Customer Service
The customer experience is everything! This incorporates every touchpoint that a customer has with your business, from the initial outreach all the way through to making a purchase and post-purchase follow-up. For a customer to become loyal to your business, they must feel that they’ve had a positive experience throughout every interaction. This means focussing on your customer service as a top priority.
First and foremost, you can ensure your customer service is of the highest calibre by hiring experienced sales and customer service professionals to act as the ‘face’ of your business. Whether manning the sales floor or responding to product queries on social media, your reps should be polished, knowledgeable and responsive to every customer. This will help customers feel valued and cared for.
2. Take a Stand
Today’s consumers are more switched on and socially conscious than ever. Regardless of their beliefs, 71% of consumers say they prefer to buy from brands that are aligned with their values. The same amount (70%) of consumers also say they would pay a premium of 35% more, on average, for brands that are sustainable and environmentally responsible.
Customers are more likely to ignore a brand that doesn’t stand for anything, whereas they are more likely to support a brand that does take a stand for specific causes. Brands such as the cosmetics company Lush and sportswear brand Nike are proof of this. Both have taken on causes over the years, ranging from sustainability to social equality and are recognised and loved by consumers for their stances on these matters.
Obviously, politics can be a minefield that businesses don’t wish to align themselves with. Simply making it a mission to show that your business cares about charitable endeavours or generating positive change in the form of spreading kindness in the world are examples of standing for something.
When your business has core values and communicates those core values through its actions, customers take notice and will be more likely to do business with you.
3. Develop a Customer Loyalty Programme
Loyalty programmes are a great way to increase customer volume because they offer customers an enticing incentive to purchase more. For example, if your business offers a ‘member’s club’ that rewards members for hitting a specific spending ceiling with special experiences, free gifts or other rewards, it’ll help drive additional sales.
Making your customers feel special by offering them access to sneak peeks of new products before they’re widely available, or offering special in-store or online experiences that others don’t have access to are other ways to build a loyalty programme.
You can be creative with the type of loyalty programme you develop and what you offer. The bottom line is that you want to make your returning customers feel like VIPs. Let them know they are valued and show it through your actions so that they continue to have the incentive to come back.
4. Offer Discounts to Returning Customers
Like loyalty programs, another way to get customers to make repeat purchases is by offering discounts on their next purchase. You may choose to offer free shipping on future orders or offer 10% off their next purchase.
Whatever you offer, discounts are always appreciated, and they may be just the thing that pushes a one-time buyer into becoming a repeat customer, especially when bundled with other rewards or loyalty programmes.
5. Leverage Email Marketing
Keep in touch with your customers! Remember that ‘out of sight, out of mind’ is a real threat. If your customers don’t hear from you, they’ll likely forget about your business the next time they need to make a purchase. Don’t let that happen!
Keep a targeted email list using specific funnels that deliver the right email marketing messages to the right people. For example, if you know your customer is a Millennial or a parent, segment them accordingly so that you can deliver the most targeted and relevant offers and content to them
Providing high-quality email marketing content will help your customers get to know you, offer them something of value (premium content delivered to their inbox), and, most importantly, make sure that your business is in the front of their minds when it matters most.
6. Offer Personalised Experiences
The more you know about your customers, the more you can improve their experiences with your business. We touched on segmentation above, but we can’t stress enough how important it is to know your customers.
When you understand who your customers are, what they need, and what their pain points are, you’re in a better position to provide them with exactly what it takes to win their loyalty and keep them coming back for additional transactions with your business. 91% of consumers say they are more likely to shop with brands that provide more personalised shopping experiences tailored specifically to them and their needs.
This is why personalisation needs to be a key element in your customer retention strategy. You can get to know more about your customers by surveying them or simply by making conclusions based on their shopping habits.
The more you know about a customer, the better profile you can build of that customer. Efficient customer profiling is ultimately what helps your business deliver those personalised experiences that will drive loyalty.
7. Don’t Underestimate the Power of Fast Shipping and Easy Returns
Customers today want what they want, when they want it! Speed of delivery has never been more important, with customer expectations around delivery higher than ever. While 88% of customers say they are willing to pay more for next-day delivery, over a quarter (27%) of shoppers expect their orders to arrive within 48 hours.
Amazon has been one of the pioneers in offering quick shipping. Its Prime customers benefit from some of the fastest shipping times of any company, and this has adjusted global expectations accordingly. To stay competitive, your business should be looking at shipping as an area where it can ‘wow’ the customer by being on point and on time.
In addition to offering speedy shipping, ensuring that returns are hassle-free will also satisfy customers and keep them coming back. When you make shopping easy and quick, you’ll find your customers will become more satisfied with the service they receive and will be more likely to shop with you again.
8. Surprise and Delight Your Customers
Offering incentives is always a good thing, but sometimes, a bit of ingenuity can go a long way when it comes to winning customer loyalty. More specifically, offering a special deal to a customer when they least expect it can make them feel truly valued – something every customer wants from the companies they do business with.
For example, companies who pride themselves on excellent customer service, such as StitchFix, will often randomly reach out to longtime customers, offering them a discount or freebie ‘just because’.
Surprises like this can delight customers because they come when they are least expected, and they communicate to the customer that they needn’t make noise in order to be seen and appreciated.
9. Consider a Subscription Model
If you want customers to keep coming back, there’s no simpler way to do so than by offering them a subscription model to sign up to. This works especially well if you sell a product or service that the customer would naturally need to renew or re-purchase at regular intervals.
With 70% of business leaders saying that subscription business models will be key to their prospects in the years ahead, there’s never been a better time to try out subscription models in your own business. You may just end up with more repeat customers than you imagined.
The final strategy we’ve seen work repeatedly is when a business is at the top of its game in all areas of service – from initial contact point to shipping to post-sale follow-ups.
With customer expectations at an all-time high, being average just isn’t good enough. Businesses need to be spectacular to stand out, so it’s time to elevate your offerings in every customer touchpoint. Ensuring that your team is polished, on the ball, and ready to go above and beyond for each customer will help you stand out from the crowd and win loyal customers.
Calculating Your Customer Retention Rate (CRR)
Your business’s customer retention rate (CRR) shows the percentage of customers it has been able to retain over time.
To calculate CRR, start by identifying a specific period and subtract the number of new customers acquired from the number of customers remaining at the end of that particular period.
You can then calculate the percentage by dividing the number by the total number of customers at the start and multiplying it by 100.
You should calculate CRR before employing the tactics outlined above and again after you’ve put the tactics into place. What did you learn? Hopefully, your CRR has increased!
Slow and steady wins the race! We all know that time is money, yet, equally, Rome wasn’t built in a day. Customer relationships take time and effort to build, so while you may not see results overnight, if you put in the work to place customer retention at the heart of your business by working diligently to improve your customer retention strategies, you will absolutely see the reward of your labour pay off.
And even then, once you start seeing results, it’s not time to take your foot off the pedal. Businesses need to continuously work to keep customers happy and to maintain important relationships.
Business is a journey, and so is your relationship with your customers; make the most of every opportunity to build loyalty and enjoy the lasting relationships that result from it.
Book a demo to learn more about how eDesk can help your ecommerce business improve customer retention with amazing customer service. Ready to get started now? Try eDesk free for 14 days, no credit card needed.