What Is Customer Retention? 5 Successful Strategies To Grow Profits For Your Business

Your business can grow profits in several ways, such as acquiring new customers, optimizing prices, expanding, among others. But the most straightforward and cheapest method, proven by research, is targeting repeat customers.

The main reason is since they are aware of your product and have already found value in it, you do not need to invest in a lot of marketing to get them to buy. Sometimes all you need is a few reminders that show customers you appreciate them.

In this post, we answer the question, what is customer retention? We also give you five strategies to apply to your business and improve your retention rate.

What Is Customer Retention?

Customer retention refers to the act of ensuring customers continue doing business with your company. The competition for customer attention is high in the online market. Advertising noise from competitors bombards customers from all sides. To ensure they do not jump ship, you must rise above the noise and continue delivering value.

The pandemic affected customer purchasing behavior. Initially, the main concern was price and quality. But in the post-pandemic era, they are also worried about safety. Acquiring customers at this time is challenging. Research also shows a 5% increase in customer retention translates to a 25–95% increase in profits.

Why Should Customer Retention Matter?

Long-term sustainable growth is difficult when you depend on customer acquisition only. It’s worse if your churn rate is high as your business growth can stagnate. To avoid such a scenario, you need to increase your retention.

The cost of acquiring customers increases every day, and more effort is necessary to convince customers. But businesses can increase their revenue by maximizing on the current customers. Research suggests convincing a new customer to buy is more complex than getting repeat customers to buy.

Since they appreciate your product and its value to their lives, repeat customers will spend more, raising revenue. In addition, repeat customers are the best brand ambassadors your business can ask for. They are more likely to recommend your company to family, friends, and colleagues. And as research shows, referrals influence people more than any other source of information about brands.

But how will you know if your efforts are bearing fruits? By measuring the right metrics.

Customer Retention Metrics

There are so many metrics you can use to measure the health status of your business. But these four metrics are enough to tell you whether you are making progress.

Churn

It’s a measure of how many customers are leaving your business. You will have difficulty growing your business when you have a high churn rate, regardless of your acquisition rate. Every customer or account that churns means lost revenue for your business.

Customer Retention Rate

This metric measures customer loyalty in numbers. You want your business to have a strong retention rate for increased revenue and optimal growth. This metric is the most significant indicator of whether your strategies are working.

Customer Lifetime Value(LTV)

LTV measures the total spend of one customer over the time they do business with your company. If your business retention strategies are robust, your LTV will be high. When customers remain loyal, they are more likely to buy more frequently and spend more.

Engagement Rate

Suppose your business is a SaaS business. You need to monitor the customer engagement rate. If your customers are not fully engaging with your product, the likelihood of churn is very high. Tackling the issues causing low engagement will improve your customer retention.

How To Build A Customer Retention Plan

The first step to building a successful customer retention strategy is ensuring your business goals align with your customer’s satisfaction. Alignment means that every department should focus its efforts on ensuring your customers are happy. Happy customers are loyal customers.

Look at your product and ask yourself, is it adding value to my clients? Because if not, they will move to your competitors. Customers are only interested in what’s in it for them.

Since competition is exceptionally high, keeping customers will not be easy. But winning strategies should include personalized attention and relevance to the customer at their core. Also, in your communications, ensure you are connecting with customers emotionally.

Your customer retention plan should also have technology at its core. From tracking metrics to automating your marketing messages, your tech stack will help you personalize your efforts to each customer.

Customer Retention Strategies

Since we agree you need to have a solid customer retention strategy, the following ideas will help you improve your customer retention rate.

Align Departmental Goals With Customer Retention

Different departments measure success differently. Often the sales team may define it by the revenue they generate each month. Marketing focuses more on leads who sometimes don’t convert to paying customers, while product teams only think about product features.

The result is a high churn rate because none of the metrics has retention at the center. You need to align the teams to focus their activities on customer retention. Have marketing teams track and base their success on customers who remain, while sales reps may receive incentives when customers stay for a specific period. Also, give the product team direct communication with the customer to help develop features based on customer needs.

A Good Customer Onboarding Process

It refers to activities tailored to helping the customer familiarize and use your product. Customer onboarding goes beyond the basics and teaches the customer how to use the product for success optimally. Show them the tips and tricks to using your solution to experience optimal value.

According to Neil Patel, a good customer onboarding process sets the stage for your relationship. It is also vital in providing customer satisfaction. Satisfied customers become long-term loyal customers, increasing the LTV and hence a better bottom line. You can use tutorials, videos, blog posts, walkthroughs, documentation, or learning guides to help customers.

Excellent Customer Support

Customers expect instant service. And unless you want to lose valuable revenue to the competition, you need to ensure you respond to them proactively. Anticipate situations before they escalate. An early detection system helps you identify the customers who are likely to churn and reengage them.

A ticketing system is a great way to gather data on challenges your customers may be facing. If you receive the same complaint from different customers, have your teams find out the problem and solve it.

Close The Feedback Loop

Feedback is crucial in any business, as it is an intelligent way to engage with customers to find out their needs and expectations from your product. Though a simple net promoter score survey will not give you much qualitative information, it is okay to start.

Getting feedback helps you know which of your ideas will resonate with customers. It is also an excellent way to build trust, create loyalty, and build long-lasting relationships. As a result, your customer retention rates will increase.

Invest In The Right Automation Tools

Many tools are available to companies that help make work easier. For instance, you no longer have to track each customer to determine their likelihood of churn. Many tools can help you track and report on the relevant metrics, sometimes at no cost.

Automation tools help you deliver a smooth customer experience at every stage of the customer journey. Marketing automation tools are great for collecting insights about customers and sending them relevant content. You can choose the right products or answer questions they may have.

Also, connecting with clients across multiple channels is much easier thanks to advances in technology. By giving value to customers consistently, you will keep them interested.

Final Thoughts On What Is Customer Retention

The most critical aspect of customer retention is giving customers value and an excellent experience. It is a far cheaper endeavor that you should consider compared to acquiring new customers if you haven’t already. What are your thoughts on customer retention? What other strategies are you using to improve your customer retention? Comment below with your answer,