Keeping customer retention high is the key to increased ROI, customer loyalty, and business growth. Learn interesting information on how important customer retention is to drive your company towards profitability and growth.
What is Customer Retention?
Customer Retention refers to the task an organization undertakes to reduce the number of customers leaving their business. Or, to put it another way, customer retention is what you do to stop your customers from going over to your competitors.
For this, businesses should adopt relationship-building methodologies or principles to enhance customer loyalty and satisfaction. And, businesses must make sure that these customer retention strategies are put into action from the very first interaction a customer has with the business throughout the whole relationship.
Why is Customer Retention Important?
The importance of customer retention has been that customer retention accounts for a business strategy that focuses on sustainable growth by lowering costs as can be seen from the statistics.
According to studies done by Bain & Company, “A 5% increase in customer retention produces more than 25% increase in company profit.”
Beyond the financial aspect, customer retention enables you to strive toward developing long-lasting relations with customers, which may result in them becoming loyal advocates of your brand.
Benefits of Customer Retention in a Business
There are ample benefits of customer retention such as improving the long-term profitability of your business and streamlining operations to better serve the needs of your customers. Learn how by reading on.
1. Reducing the Cost of Customer Acquisition
Some businesses devote a significant portion of their budget to customer acquisition without realizing that it is more expensive to acquire customers than to keep them.
According to Harvard Business Review, “it costs anywhere from 5 to 25 times more to get a new customer than it does to keep an existing one.”
Therefore, consider focusing on customer retention rather than customer acquisition as your current customers generate more money through repeat business and referrals.
Another study reports that repeat customers spend more money and make more purchases than new ones.
2. Improve Customer Loyalty
In contrast to their recently acquired counterparts, customers who have been retained for a longer period of time are more likely to become loyal customers. This is due to the fact that trust takes time to develop and the customers you manage to keep have already appreciated the value of your reliable and trustworthy business.
3. More Word of Mouth Referrals
The customers retained owing to your value-added services turn into your brand ambassadors and they refer your services to their friends and family circles and on social media. Here, they are turning into a new source of business. Through your loyal customers, you can cash in on the power of personal recommendations, which are way more powerful than your marketing campaigns to build your business.
4. Customers Provide More Feedback
One of the best ways to enhance your service is to gather customer feedback and act on it. The loyal and engaged customers will be more than happy to share their opinions about your service. It’s because they’ve been a part of your business for a longer period and are more knowledgeable about what works for them (and other customers, too).
5. Increasing the Value of Each Sale
The customers retained over a more extended period are more likely to make repeat purchases or buy additional products. Therefore, selling to existing customers is the most fruitful way to boost revenue as it saves businesses’ the pain of educating and marketing to new customers.
The existing customers are already engaged with your brand and are interested in your product or service. As long as you are successful in keeping them, your ROI will increase since you already spent on their acquisition.
In other words, increasing customer retention will increase your Customer Lifetime Value (CLV), a figure that shows you the average value of each customer over the course of their relationship with your business.
6. Reducing Customer Churn
A higher customer retention rate lowers the number of customers that churn because the customer churn rate is just the inverse of the retention rate.
The amount of customers who churn significantly decreases with improvement in your customer retention techniques.
What is Customer Retention Management?
When you have a goal you devise strategies to achieve it. Our goal now is customer retention and we must manage it on the road to get the better of it.
By definition, customer retention management entails managing customer satisfaction and customer experience efforts undertaken to retain customers.
Therefore, through customer retention management you aim to create an environment where the customers feel valued, empowered, satisfied, and engaged which will have the customers come back to you.
Follow the tips outlined in the blog to improve the customer retention rate by keeping your existing customers engaged and happy.
How to Calculate your Customer Retention Rate?
The customer retention rate can be calculated using the formula,
Calculating the retention rate helps companies to work out effective customer retention strategies for continuous improvement of the metric.
How can Businesses Retain Customers?
Learn about some tips to improve your customer retention rate below.
1. Set your Goals
Set realistic customer service goals in line with the customers’ expectations. Resolving customer queries ahead of their deadline boosts the level of customer satisfaction and trust in your company.
2. Map the Customer Journey
Analyze the customer journey and understand the customer needs at different touch points. Learn about the customer pain points and the issues they face while in the customer journey. This can help you take up preemptive measures to save customers from experiencing similar friction points in the future, enhancing your reputation for providing quality customer service.
When resolving issues, customer service teams can use customer journey mapping to gain insights that help them personalize the customer experience and win over their loyalty.
Thus, customer journey mapping helps you improve the retention rate by understanding and optimizing the customer experience across every channel such as social media, live chat, or messenger apps.
3. Provide Great Customer Service
Customers will always keep coming back for exceptional service. You can take proactive measures to deal with at-risk customers such as deploying the best customer service agent for handling their queries.
Doesn’t matter if your product is the best in the market, you cannot hope to retain customers if your customer service is sub-par.
4. Care for your Customers
The necessity of personalized customer care has been time and again proven by statistics. So, analyze the customer data to learn about the history of interactions, the logged service tickets, and the issues that trouble the customers most.
Generate reports on the customer service data by applying appropriate filters to help you zero in on the most commonly reported issues or other critical problems that can put the customer relationship at stake.
A comprehensive analysis of the reports will help your business fare better at customer care by arming you with a deeper understanding of customer pain points and how to eliminate them proactively.
Furthermore, sending out personalized messages and emails rather than generic ones is another way to make them feel valued.
You can use customers’ first names while addressing them, for instance, or send out personal greetings on special occasions such as birthdays.
Kapture can help you automate these tasks and help you make the most of customer data for delivering personalized services.
Communication is the essence of sustaining any relationship. Not engaging with the customers promptly can pave the way for the deterioration of the relationship.
Therefore, reply to the customer queries promptly. If a customer query is running in the support team and takes longer than expected to complete, send constant updates to customers and keep them in the loop as to the reason for the delay.
Keep the communication channels open and easily accessible to customers. Having an omnichannel communication system, which integrates customer queries coming in from several channels into one, will give customers plenty of options to contact you.
Kapture’s customer service platform incorporates amazing and utilitarian features such as omnichannel integration of communication channels and other third-party applications, multilingual chat, and intelligent chatbots to ensure smooth communication.
This would assist in a constant flow of communication between your support team and customer, allowing you to gradually win their trust. The customers will just be delighted by your honest and forthright approach.
6. Train your Employees
Another way for improving customer retention rates is to train the customer-facing teams with skills to provide high-quality customer service.
Incompetent employees make customers’ lives more difficult and they end up earning a thumbs-down from the customers. So ensure that your staffs are skilled enough to resolve customers’ problems and can tackle customers’ issues end-to-end.
Let them also know the potential pitfalls of losing a customer. This will motivate staff to value the customer retention strategies of your organization and have it in their stride to work toward better customer retention.
It can be challenging and time-consuming on your part to implement employee training programs across different teams. To ease your workload, you must use a simple Learning Management system or LMS to efficiently impart knowledge to your employees.
The LMS allows you to organize training materials in a centralized cloud-based location eliminating the need for employees to sift through folders on hard drives.
As a manager, you can track employees’ performance, administer tests, upload or manage courses, and more. Thus, giving every employee equal opportunity to expand their knowledge while also guaranteeing that there is consistency in learning and knowledge among the staff. Get in touch with us to know how we can easily make this happen for you.
7. Ask for Feedback
You should get feedback from your customers after a ticket is closed, after they have contacted you or made use of self-help resources, and in similar instances to know how they feel. Doing so will also make the customer happy because of the value you place on their opinion.
Furthermore, exit surveys collected from churned customers can provide you insights into what led to the churn. This will help you take measures to prioritize improvements that influence customer experience.
To run the surveys periodically, having a customer service automation platform helps. You can choose between pre-built templates for the common CX surveys and customizable survey templates based on your company’s needs.
With such robust software in place, you can schedule the surveys to go out at predefined points in the customer journey. Additionally, you can also have the survey reports delivered to your inbox.
8. Build a Customer Loyalty Program
Habits persist, and so do those of your devoted customers. Your loyal customers are your brand advocates who are hooked to your product or service and have the habit of recommending your brand to their social circle.
And, the inevitable byproduct of loyalty is increased ROI and business growth. Loyalty programs have proven to have a significant impact on the customer retention rate.
Discount offers on your product or reward points for future purchases to compensate for delayed service, or SLA breaches, can pacify customers’ anger and make them think another time before leaving you.
Customer segmentation and analytics can help you identify your loyal customer base and reward them for their commitment.
9. Empower Customers
You definitely should provide some autonomy to the customer to work their way around finding solutions to their problems as a means of empowering them. Provide customers with access to self-help options such as a comprehensive knowledge base with video tutorials or FAQs. Implement knowledge management systems to access the knowledge base through chatbots, interactive discussion forums, or self-help web portals.
Empowering the customers through self-help tools saves their time and helps them carry out their business without hindrance.
Besides this, empower customers by giving customers the benefit of an omnichannel communication platform, and by encouraging them to provide genuine feedback.
Kapture: Your fastest path to Customer Loyalty, Increased ROI, and Business Growth
Understanding the customers’ needs and providing service according to those needs is the best way to delight and motivate the customer.
Bottom line, in order to have a healthy relationship with the customers, it is crucial to shift your objectives to be more customer-centric. Here is where Customer Relationship Management or CRM solution can be of great value as it caters to customers’ needs from start to finish.
So pair up with Kapture, a customer service automation platform, to fine-tune your CRM and customer retention strategies with its’ Intelligent solutions in keeping your customers happy.
About the Author
|Seema C Mohan|
|Seema C Mohan is passionate about all things XaaS and loves to write value-added content. She has been in Business Process Management in the past and has published technology articles in journals.|