What Actually Is Customer Retention Rate?To put it simply, customer retention rate is the percentage of existing customers that stay with your brand (and keep making repeat ) over a specific period of time. We should understand that acquiring new customers and keeping them abroad are two totally different things. So, here customer retention rate is properly measuring the latter, with the aim to optimize or even improve it. A low customer retention rate means you can’t keep your customers from making repeat purchases (or in different business models, renewing their subscriptions). As we have mentioned, acquiring new customers is significantly more expensive than retaining existing ones, and so it will affect your revenue -and profit margin- in the long run.
Maintaining and Improving Retention Rate: Effective Customer Retention StrategiesThere can be many different approaches in improving customer retention, some tactics or methods will work in a specific business model over the others. So, for the rest of this guide, we will discuss these effective customer retention tactics, how to implement them, and their specific pros and cons.
1. Change your mindset: a sale is just the beginningThe thing is, so many marketers and salespeople are actually good at making the initial sale. Yet, so many of them thought that the sale is the finish line, and then went to ignore the customer to chase new sales. We certainly can’t blame this thought process. In the eyes of marketers and salespeople, which are often commissioned based on sales, convincing a new customer to purchase -at least in their minds- is quicker than waiting for an existing customer to make a repeat purchase. So, to optimize retention, first we must address this mindset. Actually, this stage where the buyer just made a purchase is really important in encouraging retention: if you can show them how you really care through your actions, you can build trust and relationship. So, at the very least, thank them for making the purchase, and provide them with your absolute best customer service. Schedule a drip campaign (link) to sell, and sell to them again with at the right time.
2. Show your brand valuesResearch suggested that 64% of the sample that included 7,000 U.S. customers mentioned having shared values as the primary reason for their loyalty toward a brand. So, first, stand for an authentic value. It doesn’t always have to be a social cause, although admittedly it’s the easier to implement and the most effective. Consider Zappos with the core value of delivering happiness that has attracted so many customers over the years. So, if you are an SaaS company, you might want to have a mission about making digital marketing easier and more fun for everyone. It’s not always necessary to have a huge mission about making the world a better place. If you can, great, if not, start with smaller things. The best approach about this is to understand your customers, and find out the values they often associate with.
3. Optimize positive social proofIn this digital world that is increasingly about social media, social proofs like positive reviews and testimonials are extremely important not only in convincing existing customer to make another purchase, but also in acquiring new customers. So, encourage your existing customers to leave a positive review. You might want to offer incentives, like probably a discount or freebie when they leave a positive review, blog comment, or like your content on social media. Another approach we can use here is to use influencers (link). Find the right influencers that are well-trusted in your industry, build relationships, and ask them to endorse your brand.
4. Meeting customer expectationsCustomer service is not solely about answering customer questions and complaints as well as attending inquiries, it’s also about meeting customer expectations, giving them something to look forward to. Some customers expect fast responses to complaints and inquiries, some others expect simple purchasing processes or the ability to track orders in real time. Yet, it can be hard to satisfy a totally new audience. This is where the importance of truly knowing your customers comes in. Know their needs, problems, and behavior. One of the best ways to meet customer expectations is to keep your promises and be transparent. So, keep your promises realistic, and always fulfill them. This is true for every stages of the business. For example, if you are not honest about value proposition, your customers will regret making a purchase, and obviously they won’t make another purchase from you. If you promise to solve your customer’s technical problems within 24 hours and don’t fulfill, it will seriously hurt this customer’s retention. So, promise what you can do, set expectations you can meet. This is not saying you should be idle and static, always aim to improve your business to better serve your customers.
5. Establish trustPeople only buy products or services from brands they can trust, even more when it’s about making repeated purchases. Yet, with so many brands available through the exposure of the internet and social media, it is increasingly hard to get their trusts. So, it is extremely important to continuously attempt to promote this trust, and the first thing you need to do is to again, truly understand your audience’s behaviors and needs and provide value. In this saturated marketplace, the easiest (but not saying it’s easy) and the most effective way to gain customer’s trusts is through inbound marketing (link), establishing your credibility as the thought leader or expert of your industry. Inbound marketing is not only useful in continuously educating existing customers to maximize their retention, but it can be a very effective lead generation device. In fact, inbound marketing is effective in all stages of the customer’s journey. While inbound marketing can be a pretty broad subject on its own, essentially there are only three key steps involved:
- Content Development
- SEO and Content Promotion
- Lead Capture Form
6. Optimize your customer serviceDelivering great customer service is obviously very effective in maximizing customer retention. Yet, how will we define ‘great’? Here, we should define clear, quantifiable KPIs of your customer service. This way, you can figure out the areas where you are lacking, and improve it, as well as maximizing your strengths. Here are some important KPIs to track regarding customer service and engagement:
- Conversion Rate
- Response Time
- Drop Rate