Customer retention is the collection of activities and strategies a business uses to increase the number of repeat customers, in other words, to increase the number of its loyal customers and ultimately to increase the profitability of each existing customer.
Customer retention strategies enable a business to both provide and extract more value from its existing customer base. You want to ensure the customers you worked so hard to acquire stay with you, have great customer experience, and continue to get value from your products.
In short, the acquisition creates a foundation of customers while your retention strategy is how you build customer relationships and maximize revenue for each one. But how much time and resources should you devote to your retention program? Why should you even allocate your valuable time and resources to it? Unfortunately, most businesses are obsessed with generating new leads – but careless when it comes to customer retention. Is it not sad to lose the customers you worked so hard to attract; so easily?
We should not underestimate the power of a loyal customer base. According to Brandongaille, 12 – 15% of consumers who are loyal to an organization, can represent up to 55 – 70% of sales. In addition to that a survey by SAS and Loyalty360, suggests that 68% of the business comes from existing clients. Despite this, most companies focus more on customer acquisition than customer retention strategies
This makes customer retention incredibly important to look after. Customer Retention is not only less resource exhaustive than customer acquisition but also plays a major role in business growth in the long run.
Losing customers due to various reasons is an inevitable part of every business, however, few organizations ever measure or recognize how many of their customers become inactive. Most businesses, ironically, devote an enormous amount of time, effort and resources into building that initial customer relationship. Then they let that relationship go unattended, in some cases it would appear as if the business has lost the interest it initially had in the customer before the deal was made. The easiest way to grow your business is not to lose your customers. Once you stop the leakage, it’s often possible to double or triple your growth rate because you’re no longer forced to make up lost ground just to stand still.
The average business loses around 20 percent of its customers annually simply by failing to attend to customer relationships. In some industries, this leakage is as high as 80 percent. The cost, in either case, is staggering, but few businesses truly understand the implications.
Imagine two businesses, one that retains 90 percent of its customers, the other retaining 80 percent. If both add new customers at the rate of 20 percent per year, the first will have a 10 percent net growth in customers per year, while the other will have none. Over seven years, the first firm will virtually double, while the second will have no real growth. Everything else being equal, that 10-percent advantage in customer retention will result in a doubling of customers every seven years without doing anything else.
The consequences of customer retention also compound over time, and in sometimes unexpected ways. Even a tiny change in customer retention can cascade through a business system and multiply over time. The resulting effect on long-term profit and growth shouldn’t be underestimated. Below we would take a look at some of the steps you can take in order to increase and maintain your business’s customer retention.
1. Get to know your audience and engage with them
Nestlé Waters has launched a digital Consumer Engagement Center that analyzes their customer base through online communities. This center is aimed to empower their digital team and partners to deepen the relationships between the brand and consumers across all digital channels, and to deliver more personalized experiences. This allows them to better understand consumer wants and needs, enabling them to deliver a higher level of customer service.
Wholesome Culture, a fashion brand aimed at people living a plant-based lifestyle, engages with their customers on Instagram by posting relevant memes and attractive photos along with their product images. This strategy has allowed Wholesome Culture’s customers to get to know their brand while creating an engaged community around their product.
Being aware of who your customers are, what they need and want and engaging with them allows you to provide better customer service which ultimately leads to more customer retention. We should also bear in mind that customer experience is so much more than solving customers’ problems, it’s being available when customers need you and speaking through channels they are familiar with. Companies who are better at engaging and maintaining a good relationship with their customers enjoy fierce brand loyalty.
2. Provide an exemplary experience for your customers.
The Ritz Carlton network of hotels aims to deliver an outstanding customer experience that a guest will not consider staying anywhere else if they have an option. They even take it a step further by placing themselves in customers’ shoes and looking for the unexpressed needs and desires of their customers and try to fulfill them before they are even mentioned. Thanks to this reason they are recognized as an extremely accommodating, luxury hotel brand that consistently delivers amazing experiences. What’s more, employees have a $2,000 budget to resolve any customer concern.
A personalized experience received by a customer can also ensure the customer would become loyal to the brand. For instance, Disney does a great job of personalizing every experience that happens at one of their theme parks, stores or anywhere associated with Disney. From employing character actors to ensure each visitor gets personalized attention to using innovative technology to provide interactive experiences, Disney trains their employees to make sure their customers feel uniquely valued.
3. Stress a positive experience over sales.
Apple stores are centered around delivering a positive experience rather than enforcing the customers to purchase their products. They try to focus their store environments on educating people about their products rather than sales, which helps put the customer at ease when making decisions. Customers feel comfortable going into an Apple store to explore new products or just browse, which adds to the positive feeling associated with the brand. This opportunity of being able to go to a center and explore the products as they would like to ,allows the customers to make better decisions when deciding upon which product meets their needs the best and eventually leading to the customer feeling more satisfied with the product they have chosen, and as obvious as it is, satisfied customers would be loyal customers.
As another example, Zappos, an Amazon-owned online shoe retailer, trains its employees to use customer interactions as a way to build positive relationships rather than boost sales. In fact, their call center employees are encouraged to take as much time as needed in order to solve customers’ issues rather than ending the call quickly. As a result, Zappos has fiercely loyal customers and is often cited as a pinnacle example of customer service.
4. Empower your Employees
Simply put, an empowered employee is a happy employee. And happy employees translate into happy customers and thus more chances of them becoming loyal customers of the brand. For instance, Alaska Air employees are some of the happiest in the industry — and it shows. Their multiple awards for customer service are largely due to their empowered workforce. Employees are encouraged to take initiatives to solve customers’ problems themselves instead of merely filing a complaint or discussing the issue with a manager. They are rewarded for treating their customers like humans and, since they are also treated well, are happy to do so.
Organizations that treat their employees with respect, give them the necessary tools to do their job and continually demonstrate that they are appreciated will see a workforce that will go the extra mile for the customers they serve. Unhappy, frustrated workers have little reason to put in the effort. Why should they? If employees don’t feel valued, work becomes boring and customers are seen as just part of the daily grind.
As it can be concluded from the facts mentioned above, there is a direct correlation between the brand’s customer retention and the level of customer service it provides to its customers. In better words the more satisfied the customers are with the service and experience a brand provides, the more likely they are to become loyal to that specific brand. To conclude, it is worth recalling the fact that “An extraordinary experience builds fortunes in repeat customers, whereas a poor experience will drive your customers to your competition.”