Customer retention is one of the most commonly overlooked areas in the small business world. Many companies get it in their minds that they need to grow their customer base to be successful.
While this is true, it’s not really the whole truth. Yes, new clients are needed for the expansion of any company, but to really run a successful business, both socially and financially, a company must be able to retain its customers.
From strictly a financial standpoint, it makes sense to devote plenty of time and energy to retention, instead of just to acquisition. Increasing customer retention by only two percent actually has the same effect on your bottom line as decreasing your costs by a whopping 10 percent.
That’s because it’s over six times more expensive to get a new customer on board than it is to market to one you already have. A repeat customer costs less to target and also proves to be a more successful target, costing less in marketing efforts. Plus, customers that you already have actually spend more than new ones, statistically speaking. For example in ecommerce, a new customer averages a checkout price of just under $25.
A loyal, repeat consumer, however, averages over $50. Therefore, not only is it more cost effective and easier to target already existing customers, but it also pays off in average purchase amount. It’s for all of these reasons that the 80/20 rule is so famous in marketing.
The rule estimates that 80 percent of a company’s business will come from 20 percent of its customers. That only emphasizes the importance of retention versus acquisition. While both are important, a successful company simply cannot get by without high levels of customer retention.
Looking to improve your customer retention? Here are a few tips and tricks to help you make it happen:
1. Engage your customers
The biggest mistake you can make in terms of customer retention is ignoring your customers once you’ve brought them in. Surprisingly, this happens more than you’d think. Companies put all of their effort into customer acquisition because they think that’s where the money is, but ignoring your loyal customers is also the fastest way to decrease customer retention.
Why not go a step beyond paying attention to your customers and truly engage with them? You can do this any number of ways, from optimizing how they use your service, to holding contests to offering special promotions or discounts. You can even offer freebies now and then, because who doesn’t love something free?
2. Work on listening
Listening should be one of the largest focuses of all companies. Start by surveying your customers or acquiring feedback and then implement changes accordingly. But listening doesn’t just mean hearing what your customers have to say. It also means paying close attention to trends in your market. You want to be on the front of anything new in your industry. This means doing your research.
Try holding focus groups or paying attention to similar fields to see what’s trending there. Knowing what’s going to happen before it does leaves you extra time to ramp up marketing efforts and take full advantage of any shifts in the market. The more with the times your company is, the more likely you’ll be able to hold onto existing customers, rather than lose them to trendier competitors.
3. Customize and personalize
Customers love when your services or products fit their needs and wishes. While it helps to add in first names to email campaigns or have readily available data to refer to when a customer calls, truly savvy companies go above and beyond basic data dropping. With online shopping now a dominating industry, many companies take advantage of personalization in their efforts to offer new products.
The databases pay close attention to what each customer buys and, based on common trends, recommends new products or services accordingly. Amazon is a great example of a company that’s taken full advantage of this. If someone buys an iPad, Amazon may suggest some of the top-selling iPad cases or other accessories to go with it. Using personalization in a way that ups sales is one of the best things a business can do to increase customer retention because you’re taking the work out of the purchase for the customer.
4. Keep an eye on the ones that may be unhappy
One way to make sure that you keep your customer abandonment rate down is to make sure that you watch out for potential “red flag” customers. Look for early signs that a customer may be unhappy or on a track to leave you. This may mean something as obvious as a complaint, but it may also be subtler.
You can even go as far as to look for a group of customers who have recently had a decrease in email open rates, if your company relies heavily on email marketing. Then, build a process to manage these customers. This process should be totally unique to your company.
If you see a decrease in email opens, it may mean sending a unique email campaign, featuring less aggressive and more carefully constructed emails to those who draw these red flags. If the red flag is a complaining customer, it may mean giving them a special offer or gift for being a loyal customer. Your company should choose a plan that fits best for your product or service and marketing technique.
By really honing in on both the proactive and reactive techniques, any company has the opportunity to increase their customer retention. Remember, in the long run, retention is at least equally, maybe even more important than customer acquisition. By building brand loyalty and keeping customers coming back to your business, you’re spending less on marketing efforts and likely making more money off of each customer’s purchase, which can mean only good things for your bottom line.
If you have any questions, our team would be more than happy to help. Call us today at (484) 893-4055.