Customer retention is critical to sustainable growth — securing repeat sales is far easier than attracting fresh clientele. According to Semrush, the probability of selling to existing customers is greater than 60%. In comparison, the likelihood of selling to new customers can be as low as 5%.
Yet, by increasing your customer retention rate by only 5%, you can see an increase in revenue of up to 29%.
In simple terms, if you’re not making an effort to retain customers, business growth is much harder. Let’s look into some ways to boost customer satisfaction, generate repeat customers, and improve your bottom line.
What is customer retention?
Customer retention refers to a business’s ability to keep existing customers and encourage them to make repeat purchases.
To measure customer retention, you need to calculate the proportion of customers who continue to engage with a company and remain loyal through consistently purchasing products or services.
(Number of Retained Customers / Number of Customers at the Beginning) x 100 = Retention Rate
For example, if you had 500 customers at the beginning of the quarter and retained 450 customers at the end of that quarter, the retention rate would be: Retention Rate = (450 / 500) x 100 = 90%
Why is customer retention important?
- As already mentioned, customer acquisition can be a challenging (and expensive) endeavor, requiring significant investments in marketing and sales. In contrast, retaining customers is a cost-effective strategy. By focusing on customer retention, you can reduce customer acquisition costs and allocate resources toward enhancing customer experiences and building stronger relationships.
- Maintaining a loyal customer base is a direct pathway to higher profits. Existing customers tend to spend more, make frequent purchases, and are less price-sensitive compared to new customers. By nurturing these relationships, you can maximize customer lifetime value (LTV), resulting in a sustainable revenue stream and improved profitability.
- Customer retention fosters strong loyalty, creating a mutually beneficial relationship between your business and your customers. Loyal customers are more likely to continue choosing a brand, even in the face of competitive offerings. They become advocates, spreading positive word-of-mouth and recommending your company to others.
Customer retention strategies to help you succeed
Does your business need more repeat customers? Do you not know whether or not this is an issue? It’s maybe time for you to introduce customer retention rate as a KPI.
Follow some of the customer retention strategies detailed here to make headway in improving customer loyalty. Although the responsibility of customer retention is, on the surface, placed in the hands of sales, success, and support teams, this should be a company-wide endeavor. But more on that later!
Retain customers with exceptional customer service
Customer service is a powerful way to drive customer retention and keep existing customers around for longer.
Yet, customer support teams often find it challenging to make their importance known throughout the entire company. According to a report by Hubspot, 40% of customer service leaders admit that their company views support as an expense rather than a catalyst for growth.
It’s important to note that a majority of leaders feel differently. In the long run, companies that prioritize support-driven growth will have an advantage.
Let’s look at the concept of support-driven growth and how a shift in mindset can turn your support department into a revenue driver:
1. Talk to your customers regularly
Building better relationships with your customers goes hand in hand with learning how to reduce customer churn. This is the only way you’ll gain a thorough understanding of their problems, which in turn allows you to prescribe how they can best use your product and get the most out of it.
2. Understand your main conversion drivers
Train your support team to encourage repeat business with questions like “Which features give your customers that Aha! moment that translates to a decision to buy?” and “Which customer segments are the most valuable for your business?”
3. Find opportunities to be proactive
Proactive support is all about being one step ahead and anticipating your customers’ needs. It means taking action before problems arise to make their experience with your company as smooth as possible.
There are a few ways you can provide proactive support:
- Monitor customer behavior: Keep an eye on how customers interact with your products or services. If you notice any difficulties, reach out to offer assistance. You can provide helpful resources, tutorials, or personalized support to help them overcome challenges.
- Improve self-service resources: Regularly update and enhance your self-service materials like knowledge bases, FAQs, and tutorial videos. This ensures that customers always have the latest and most relevant information, empowering them to solve issues on their own.
- Reach out proactively: Stay in touch with your customers. If there are product updates, maintenance, or potential disruptions, make sure to inform them in advance. Provide clear instructions on what to do to minimize any inconvenience.
- Follow up on support interactions: Show your genuine care for the customer experience by following up on their support interactions. Encourage your team to reach out and check in on customers, even if their issue has been resolved. Personalized emails or messages can be a great way to do this.
Remember, proactive support helps build stronger relationships with your customers by demonstrating your commitment to their success.
4. Think like an improv
In other words, say “yes, and…” For example, someone might be talking about one product and its capabilities. Can it do x or y for me? Rather than only giving an explanation, expand on the topic to include related features and complementary products.
5. Be transparent and set clear expectations
Being honest and clear about what people can and cannot expect from your business is vital for long-lasting customer relationships.
Ideas like this help you a) solve customer queries, and b) provide the customer with more value. You give them ways of improving their overall customer experience.
Using Klaus, conversation reviews help you get even more out of your support team. Quality assurance lets you:
- Understand reasons for customer retention and churn
- Identify trends and patterns
- Highlight parts of your process that are broken
Onboarding can be an effective customer retention strategy, too
Proper customer onboarding is when you nurture new customers with a thorough introduction to your business. It’s a way of making them familiar with a product/service so they get the most out of it. Userpilot states that 86% of customers will remain loyal if onboarding and continuous education are provided.
Too many businesses need to pay more attention to this during the customer acquisition stage. Your job isn’t over once you’ve won the client. If customers don’t get the full benefits from products or services, why would they come back for more?
One trick to increase customer retention rate is to implement a proper onboarding system. This can involve the following:
- Sending out emails with extra details on products/services a customer has purchased
- Providing links to a knowledge base or FAQ section full of useful product information.
- Providing proper instruction manuals for certain products
- Offering learning materials for customers to understand the products/services
A product tour is a wonderful way to set out on the right foot. A little “Getting Started” video can go a long way to improving customer engagement and loyalty – when users have a clear understanding of the complete benefits of your product, they can maximize its utility. This is simple yet effective onboarding.
How about retaining customers with loyalty & referral programs?
A customer loyalty program is an absolute must if you want customer retention to work. You want to encourage repeat purchases from your customer base. What better way to do this than by rewarding loyalty?
Research shows that plenty of consumers are more likely to stick with a brand that offers some form of loyalty program. Likewise, the best loyalty programs increase revenue by 15-25% each year. You’re improving customer relationships by giving back to them, and they know that they get more value out of every purchase because of your program.
When you want to set up a loyalty program to boost customer retention, here are some key things to keep in mind:
- Define the goals of your loyalty program
- Ensure it aligns with your brand
- Understand your audience and what will bring them the most value
- Think about personalizing the program
- Implement referrals for loyalty boosts
A great example of a loyal customer program is Starbucks. You get stars for every dollar you spend. Generate enough stars, and you can trade them in for a free drink. People keep going back to earn more stars and get free drinks, and the effort is low in return for the reward.
You can also consider a referral program, like Hello Fresh. This food delivery service rewards loyal customers with a referral code that they share with others. When someone uses that code, both they and the existing customer get a discount.
You get the idea — now start implementing loyalty or referral programs as part of your customer retention strategy!
Don’t forget about collecting feedback to improve customer retention
Finally, there’s customer feedback. When you look at customer retention, feedback is fundamental.
Meeting customer expectations is only possible if you know what they are. Asking for feedback opens a two-way dialogue between you and your customers, where you can also prove that you take their opinions into account.
Although your customer service team is the one collecting and analyzing feedback, the voice of the customer should resonate throughout the company. Product teams benefit from understanding what is popular, development teams benefit from knowing what needs to be worked on, sales needs to understand what messaging to prioritize, etc.
When customers feel valued, they’re likely to stick around for longer.
How do you collect feedback? Here are some of our top suggestions:
- Send out regular CSAT or NPS email surveys to gauge customer satisfaction and loyalty.
- Ask for reviews after a product is purchased (perhaps sneak in a discount code as an incentive to write the review!).
- Use your community! Create a subreddit or a community page on your website with forums where customers can discuss things and propose feedback suggestions.
- Open your DMs on social media (risky, but worth it!)
You can also use Klaus’ AI-powered features to collect and analyze customer feedback. This way, you can identify all of the negative or positive comments in a matter of seconds.
Once you act upon their feedback, make sure to ask your customers what they think. Has this solved the problem? What else can be improved?
You’re creating an extremely customer-centric business where customers feel involved. They’re likely to stick around and make more purchases when they know their opinions are valued and wanted.
Start boosting customer retention today
If you aren’t thinking about customer retention, you better start.
The customer retention strategies outlined above can improve customer loyalty and ensure people return. This is the key to building a big customer base – while you also work on adding new customers.
A cat called Klaus is always here to help. Use our many features to offer improved customer experience and inspire customer loyalty. After all, it’s your bottom line that will be thankful.