For some companies, the idea of success is defined by more customers. Broadening customer base, bringing in new clients wherever possible. Bigger is better. Or is it? That might appear to be success at first glance. But truly, the business of customer retention is just as important and some say more important, than finding new customers.
What is customer retention?
The notion of customer retention means a business’s ability to turn a one time customer into a repeat user of their products or services. It means the creation and building of a longer term relationship with that customer and an increase in the value that customer can offer the business. Your ‘best’ customers don’t just buy from you one time and never return, the most valuable customer you can have is one that keeps returning to your business, engaging with your offering and spreading the word to others.
Why should we care about customer retention?
At core, a business should care about each and every one of their customers. Whether first time buyers or users of the service provided, or return, loyal customers who have been with the business over many interactions.
Here are some specific reasons why prioritising your customer retention is crucial:
Consider Costs
It is easier and less expensive to retain a customer than to acquire a new one. So much business advice is centered around lead generation and how to win new customers but economically, the smartest money you can spend is on maintaining your current customers. Statistics show that it costs 5 times more to acquire a new customer than to retain a current one and that a business is 40% more likely to sell to an existing customer than to convert a new one. If you’re aware of your overheads, it’s smart to target your budget at retaining the customers you have as much as possible.
Increasing your sales
Not only do they cost less to maintain but existing customers spend more than new customers. Existing customers are more open to cross-selling and up-selling opportunities and since they know the service or products, they will be more likely to spend more in each brand interaction. With this in mind, setting goals to increase your revenue should always include a focus on customer retention.
Spreading the good news
A positive experience from a repeat customer is invaluable when it comes to word of mouth. If you have a practice of treating your customers well and ensuring they have a good experience with your business, they are likely to tell their friends and families, to spread the word about what you’re doing and essentially to become a brand ambassador for your business. Genuine and free marketing is something to prioritise.
Plan for the future
If you’re planning to grow and scale your business, focusing solely on lead generation will only get you so far. You’ll need to both grow your customer base and build up your customer retention success in order to really scale your offering and broaden your reach.
How to build success in customer retention?
If you want to turn your attention to customer retention, here are a few tips on how to get started:
First stop: communications
Success in business often starts with communication. Be aware of all of your points of engagement with your customers from the very first impression they have of you right through to emails and mail shots, responding to social media comments and complaints. Everything matters and having a strong communications plan in place can be helpful. Small gestures like prompt answers, personal emails and non automated responses can help customers feel valued and encourage them to shop with you again.
Understand your customers
To encourage customers back, you need to know what their experience is. From the actual customer journey it takes them to find and engage with your product or service, through to the problem they’re looking to solve and the solutions you offer, finding out as much as you can about your customers is key. Knowing what your competitors are doing and being able to respond to them with a better offering demonstrates that you see and value what they need.
Make things easy
The process of shopping or engaging with your business should be as easy as possible. Any friction along the way could put customers and repeat customers off. Try to work through the customer journey and remove any barriers or complications you can so that customers can find you, shop with you and come back again to do the same as easily as possible. Perhaps you set up a customer login to retain shipping information or offer increased options for payment, whatever it is that your customer might need to come back with ease is where you should start.
Build up your content
Customers appreciate extra from the companies they choose to work with. What is it that you can offer? Posting clever, regular and free content on social media and your website or offering your customers added value in ways that link to your product offering, can really encourage loyalty from your customers and a promotion of brand awareness as a side effect.
Offer something extra
Consider a loyalty scheme or a reward system for certain purchases or interactions. Customers always appreciate being recognised for their loyalty so if there is a way you can reward that and make them feel valued, it’s a good idea.
Take feedback and run with it
When you receive complaints or positive feedback, really take it seriously. Understand the issues, respond to the customer genuinely and personally and see if you can make changes to ensure their experience is not more widespread.
As you build your business, understanding the importance of customer retention as well as lead generation will be crucial to your long term success. Working with your team to have custom retention as a core motivation will be time and effort well spent.
Whatever your business idea, whether it’s just something you’ve been mulling over or whether you’ve taken some steps on the entrepreneurial path already, we’d love to help. Read some of our Go For It Success Stories and get in touch. Our business experts will be delighted to hear from you and to talk you through everything you might need to know to move forward with your business concept.