When you are ready to launch your business, there is so much time and money that has already been invested in creating a viable product that customers want. That is because you took the time to do the market research via surveys and countless other means.
You have identified your target market and created the perfect product that your audience has been clamoring for. Now you have to launch your new product through the use of effective market strategies and promotion via social media and e-mail lists.
However, all of this would have been for naught if you have not implemented a strategy to actually keep your existing customers. That is why customer retention is vitally important for your business.
Customer Retention Defined
Customer retention is a company’s capacity to turn current customers into repeat buyers. It’s about enticing them enough to keep them from choosing your competitor. It is a valuable indicator that determines whether or not your service or product is actually pleasing and meeting the needs of your current customers.
For subscription-based businesses, customer retention is the very essence of your business.
Customer retention is not the same as customer acquisition or lead generation. All of the focus is concentrated on customers who have already purchased from your business or have signed up for your services.
When it comes to retaining your customers, it should be less about transactions and more about building meaningful relationships. It has been proven in research studies that customers see their relationships with businesses the same way they view their relationships with their friends. It is no longer just about the purchase or product. They want to do business with a company that is transparent, trustworthy, and fully aware of what is important to them.
By fueling your focus on improving the “buyer relationship”, you will inevitably improve your “brand loyalty.” Once you have mastered this strategy, your brand will be solidified in your customers’ minds. They will continue to choose your product over anything similar currently out in the market.
Why Is Customer Retention Important?
Acquiring first-time customers has been shown to be far more expensive than nurturing current customers. In fact, it is so much more costly than the Harvard Business Review reported that the cost of attracting a new customer can be as much as five to 25 times more costly than simply catering to your existing one.
When you focus your efforts on acquiring new customers, you have to worry about spending more money on advertising, marketing, and many forms of “sales outreach.” With your current customers, none of that is necessary since they have already purchased from you before. If they are repeat customers, then that means that they have developed a trust in your brand, your product, and your story. There is no need to convince them to buy from you.
With new customers, you have an uphill battle as you try to win their trust and convince them to make their first purchase.
Once you have established customer loyalty, you not only have the benefits of “repeat business”, the added bonus is that the customer will recommend you to their circle of friends, family, and followers on social media. It becomes an effective marketing tool that can bring in new customers, at no cost to your business.
How Is It Measured?
When it comes to calculating the customer retention rate, it is calculated by using this formula:
[(# Customers at End of Period “” # Customers Acquired During Period) / # Customers at Start of Period] x 100
This customer retention formula measures just how proficient a company is at acquiring new customers and how proficient they are at pleasing their current customers.
Ways To Increase Customer Retention
Now that we have discovered just how important it is to increase customer retention, let’s look at the following tips on how to make it happen:
- Be Realistic About Customer Expectations
When it comes to setting and fulfilling customer expectations, do take a more realistic approach. Take time to discover what other successful companies, that are similar to yours, are doing. Your milestones and goals should be achievable. A customer success team should be very familiar with the customer roadmap you create.
- Enhance User Onboarding
Churn typically happens when customers are unfamiliar with how a product works and how to reap the best benefits. The best time to address this issue is during the onboarding process. This is the time to educate your customers about all the benefits that your product offers.
Consider offering training courses for all new customers to get an in-depth look at the product and the best way to fully take advantage of what it has to offer.
- Understand Customer Experience
The best way to optimize the customer experience is through customer experience mapping and customer journey mapping. It’s about tracing your customer’s “interactions” with your brand through various “touch points.” The more insight you gain about the various journeys customers take on their way to make their purchase, the more you can enhance it.
- Get Social
When it comes to social media, customers expect a quick response. If there are any customer issues or questions, they can be resolved almost immediately via a social media message. The greatest advantage of using social media is that it lends itself extremely well to providing the most personalized level of customer service.
Closing Thoughts
So why is customer retention so important for your business? Serving the customers that you currently have is considerably more cost-effective than acquiring new ones. This is why a business must do all that it can to focus its efforts on pleasing its current customers.
A happy customer is likely to become a loyal customer and advocate, bringing more customers to your business. As a matter of fact, when you keep your customers coming back, it actually turns into a higher Return On Investment (ROI).