Why Should Companies Invest in Customer Retention?
“There is a big difference between a satisfied customer and a loyal customer.” – Shep Hyken... Smart businesses know that satisfying a customer once isn’t enough, they need to make him loyal to the business. Customers are the backbone of any business. The more loyal your customers are, the better will be your company’s prospects.
“There is a big difference between a satisfied customer and a loyal customer.” – Shep Hyken
A loyal customer is one who is happy with your products or services, and will always choose your brand over others. Customer loyalty is hard earned by providing them with exceptional and personalized experience again and again.
Customer Loyalty is Priceless
According to a study, loyal customers are almost five times more likely to buy again, and seven times more likely to forgive a business. There is a reason that the global leaders like Amazon, Google, and Apple consistently top the charts in customer loyalty ranking (as per the 22nd annual Brand Keys 2018 Loyalty Leaders list)
The benefits of customer loyalty can be multifold:
- Lowered marketing costs
- Better brand image
- Consistency in revenue through repeated sales
- Word-of-mouth marketing
- Fewer chances of losing business to competitors
Cultivate Loyalty Through Customer Retention
Ok, we’ve talked a lot about the importance of customer loyalty. But, how do you bring customer loyalty? By focusing on customer retention. You need to keep track of your customers who tend to return and continue to buy from you. While you continue to make efforts to acquire new customers, you should be equally focusing on retaining the existing ones. Here’s why:
- It’s easier. Chances of converting a new lead into a customer is 5-20%, whereas chances of converting an existing customer into a repeat customer is 60-70%.
- It’s cost effective. Converting a new lead costs five times more than retaining an existing customer. (Source: Forrester)
- It means more profit. A mere 5% increase in customer retention rate can scale up your profits upto 95%. (Source: Harvard Business School)
- Lost customer means lost revenue. On an average, losing a customer can cost a company nearly 243 USD. (Source: Kissmetrics)
Now that we know the benefits of customer retention, let’s talk about how to retain customers. The first step is to know how good is your company currently doing at retaining customers. What is your customer retention rate (CRR)? You may calculate your CRR for a given period by this easy formula:
CRR = [ (T– N)/S ] X 100
T = Total customers at the end of the period
S = No. of customers at the start of the period
N = No. of customers acquired during the period
You are well on the right track of growth and success if your CRR rate is high. You can build up on your current approach of handling customers and leverage it for new leads.
Challenges of Customer Retention
But, if your CRR figures aren’t very impressive, you need to understand what’s not working in your favor. Let’s ponder over the important factors that drive away customers.
Top Reasons Your Customers Are Drifting Away
- Products or services are no more relevant
- Prices are non-competitive
- Inconsistent digital shopping experience
- Lack of personalization
- Poor customer service
Invest in Customer Retention
Once you identify the prime factors that are affecting your CRR, you can start working on ways to address each of them. It’s important for your business to stay abreast with the latest trends and statistics to be able to create customer loyalty. Your customers should be able to trust you with the best product or service offering and reasonable pricing.
Keep in mind that only happy employees can create happy and satisfied customers. So, focus on fostering a positive work culture, and motivate your employees to be passionate about their service and commitment towards end users.
Create and maintain a personal connection with your customers. The more you understand them, the better you’ll be able to satisfy them. Your customers are more likely to remember and prefer your brand if you engage them through social media channels. Sending them personal notes, gifts, or special discounts will go a long way in building a positive bond between you and your customer. Regularly ask for customer feedback and make sure their issues and concerns are valued and addressed.
So, while you continue to reward your sales team for every new conversion, do not forgetto retain existing customers. Remember, every business’ true value lies in the number of its happy and satisfied customers.