Staying competitive in the digital age is no easy feat. Consumers are constantly bombarded with clever adverts trying to convince them to jump ship to another company or service, and without a strong customer retention strategy, it just might work. The good news is, if you’ve already convinced a customer to buy once, you’ve already done the hard part. All you have to do next is give them incentives to stay, and that’s why we’ve put together everything you need to know about customer retention strategies.
What is Customer Retention?
Put simply, customer retention is the act of deterring customers from defecting to another company or the actions a company takes to encourage customers to stay. Most companies focus more attention on the acquisition of new customers than customer retention. In fact, around 44% of companies have more focus on customer acquisition, around 18% focus more on customer retention and around 40% focus equally on both. However, customer retention is actually much cheaper for companies than customer acquisition. This trend appears on all studies on the topic of retention vs acquisition, but exactly, how much cheaper is hard to determine, some studies say five times, some say as high as 25 times. So, if customer retention is cheaper, then why are so many companies focused on the acquisition?
The simple answer is that all companies need both, and more new customers mean more customers you can convince to stay with your business and your product or service.
Why Is Customer Retention so Important for Your Business?
You’ve Done The Hard Part!
Repeat customers always make up a substantial portion of an organization’s profits, and the more times they buy, the more likely they are to buy again. One study showed that after one purchase, the customer is only 25% likely to buy from your company again. However, after two purchases they were 45% more likely to make a third purchase, and after three purchases, they were 54% more likely to make a fourth.
Even the ‘Big Fish’ companies experience high rates of shopping cart abandonment. For example, software giant Adobe reported having a shopping cart abandonment rate of 75.5% in 2016. There are lots of reasons for shopping cart abandonment but the most common are as follows:
- The cost of shipping – Your customer may get to the end of their shopping process and head to the checkout, only to find shipping costs were more than they expected.
- Trust – Customers are often wary of parting with their debit or credit card details for fear of having them exposed.
- Payment options – Some customers prefer credit card, some prefer PayPal, and some may not have their card on them and were hoping to use ApplePay or AndroidPay. If your site has limited payment options, it may deter some customers.
The good news is, if a customer has bought from you once, then they have overcome these hurdles already. You’re a lot more likely to be successful selling to an existing customer than to a new one, around 40% more likely in fact.
Repeat Customers Spend More
You’ve already convinced an existing customer to buy from you, and the more purchases they make, the more likely they are to spend more money. One study found that by a shopper’s fifth purchase, they were spending 40% more than their first purchase. By the time the customer hit the tenth purchase, they were spending a massive 80% more!
Word-of-Mouth and Loyalty
Happy customers are more likely to recommend your brand to their friends and family, and happy customers are repeat customers. Customer loyalty is a hugely important factor in word-of-mouth marketing and having a solid customer retention policy increases customer loyalty.
Data is the big buzzword right now, and with good reason – it recently overtook oil as the world’s most valuable resource! Existing and repeat customers will generate more data for your business, and you can use this data to gain actionable insights that can increase profits. For example, you’re more likely to get a complete profile of an existing customer than a new one. This means you can gain key insights into who they are, why they like your products, and if there is a pattern to their buying habits. You can then use this information to design marketing strategies for certain demographics of the population.
Find out more about the CommBox smart customer communication solution
How to Build a Customer Retention Strategy
The best customer retention strategies are formed around business goals and insights. For example, one goal may be increasing customer loyalty, and in this case, you’d want to pick strategies that focus on this. You may want to signal that your service is consistent and reliable with solid brand awareness. You may want to focus on developing a more personal relationship with your existing customers. If your customers come to your business because you offer the best prices, then your customer retention strategy should revolve around reminding them of this and get straight to costs! Whatever niche your business falls into should be reflected in your customer retention strategy and knowing what your goals are will help you pick the right strategy for your business. Now, let’s look at eight customer retention strategies that actually work and can boost your retention stats.
1. Surprise Gifts and Discounts
Customers are people and people love to feel appreciated. One way you can show your customers that you appreciate them is through surprise gifts and discounts. You can offer them a discount on products they frequently purchase, along with a short and sweet message from the customer service team telling them why they are receiving the surprise. The exact wording of the message will depend on your company brand and style, but the message should make it clear that they are getting this discount for being a loyal customer.
Another way to do this is to make a VIP list for your repeat customers and send them VIP only discounts. This is great for customers because they get a discount, they will feel appreciated, and like they are part of a special club – which they are!
It doesn’t always have to be a discount either, you can send your customers gifts too. For example, you can send them a card on their birthday, and maybe include a voucher for your store.
Offering surprise gifts and discounts not only encourages customers to buy again, but it can also elevate your brand. Customers who receive surprise gifts often post them to social media, increasing your exposure which can help attract new customers to your business. Master Card expertly used this strategy to reward loyal customers by sending cardholders free surprise gifts of cupcakes, concert tickets, and VIP celebrity meetings.
2. Provide Excellent Customer Service
This may seem a little obvious at first glance, but you need to consider what a company considers excellent customer service doesn’t always match up with what the customer thinks is excellent customer service. There’s often a huge gap in perception. In fact, around 75% of organizations believe they are customer-centric, but only 30% of customers believe the same. A 2017 study found that 8 out of 10 customers are so frustrated by this that they’re actually willing to pay more to have a better experience.
Here are a couple of ways you can boost your customer service to the next level:
- Provide a cohesive and consistent experience – a customer should always feel like they’re getting the same care and attention whether you’re talking to them on the phone, via email, or on a live messaging service.
- Provide multiple contact channels to accommodate a range of communication preferences.
- Route the right agents to the right customers by assessing the customer’s needs and assigning the agent most skilled in that area.
3. Customer Surveys
Send your customers a quick online survey to complete to gain a better insight into what’s working, and what isn’t. You’ll never please every customer on every issue, but surveys can help you identify patterns that you’ve missed. A good survey should have a mixture of multiple-choice questions and free text answer fields to allow the customer to express their opinions more thoroughly where needed. Design a strategy for when you’re going to send out a survey – will it be every six months, or once a year?
4. Be Active in Your Community
Customers are becoming increasingly socially conscious, and that means you should too. Customers pay attention to whether your organization gives to charity, whether the employees take part in community improvement schemes, and who you engage and partner with. You don’t necessarily need to have an elaborate Corporate Social Responsibility (CSR) plan or donate to charity, there are also simpler ways to show you care about the community. For example, if you’re a tech company you could offer to go into a local school to give advice to the next generation of techies. Even simpler, you could write blogs on how to get into the industry or record a short podcast on the subject. The key is to be creative with your brand. Customers don’t want to feel like they’re dealing with a cold corporate entity, they want the companies they buy from to feel well-rounded, sincere, and like a real person.
5. Keep Customers Informed
Make customers feel a part of your wider team by keeping them up to date on new developments such as new product lines, new partnerships, or exciting milestones for the company. You can do this through a monthly newsletter over email.
6. Customer Onboarding
Onboarding will vary depending on your company’s niche, but the aim is to educate a customer about your products and your brand. You don’t want to overwhelm them with a wall of text about your business philosophy but being too quiet can make the customer feel ignored. When a customer buys one of your products, you can send them an email with a short tutorial on how to use it and the details of the customer service team, so they know who to contact if they have any issues.
7. Use Gamification
Gamification is a fun way to reward loyal customers for benefitting your company, and it’s a very successful strategy. You can offer customers a discount for referring a friend, you can award them redeemable points for each purchase, or you can give them a visual appreciation boost in the form of a badge.
8. Be Personal
You’re collecting lots of data on your customers, so use this data to improve their experience. Before reaching out to a customer you should know how they like to be contacted, what they have bought previously, and what previous interactions looked like. Customers don’t want to feel like just another number, and they will become frustrated if they have to repeat the same information over and over. By offering a personalized experience they will feel like a part of your team and associate your company with a smooth and easy experience.