Most businesses put an awful lot of time and money into gaining new customers. Yet the most important source of revenue for most companies is the customer-base that they already have. Customer retention is one of the most important aspects of your business, and crucial for healthy long term profits and growth. So why do customers leave, and what can you do about it?
Why Is Customer Retention Important?
On average, it is much cheaper to retain an existing customer and lead them back towards a sale, than it is to recruit new ones, which is around 7x more expensive. Yet an Econsultancy report shows that investment in retention is going down, while the focus on keeping customers is going up. This makes very little economic sense. An existing customer already has a certain amount of trust in your company and the buying process, and is therefore much more likely to buy again in the future, whether that be a repeat purchase or an entirely different product or service.
Marketing to existing customers also requires less effort. Marketing Metrics suggest that it is around 50% easier to sell to an existing customer. They don’t need to be convinced about the service and are even less concerned about costs. Therefore, higher customer retention rates lead to more sales and increased profits. You should be dedicating a decent chunk of your marketing budget to the creation of a customer retention strategy.
Why Do Customers Usually Leave?
Customers have more choice than ever before, but most leave because they feel like your business doesn’t care about them.
There are many reasons why a customer can stop buying from your company. They can be persuaded to buy from a competitor, but this actually makes up only a small percentage of those who leave, as does direct dissatisfaction with your business. The most cited reason why customers leave is due to them believing that you don’t care about them.
If a customer has a bad experience with your customer service department, or they simply get the message, due to lack of communication or effort, that their custom doesn’t matter to you, then they can simply find somewhere else to shop. There’s plenty of choice in the marketplace. Customer retention is based on loyalty and trust. You have to prove that you value your customers and that you would do anything to keep them on your side
As we have seen, the first and most important step to customer retention is excellent customer service. This means being available when customers need to talk to you, offering a service that meets their expectations, and responding to any problems well. Be there for your customer, and they will be there for you. Do not promise what you can’t deliver – instead overdeliver on your promises. You can also use a number of customer retention strategies to keep your customer happy. Which one(s) you use will depend on your business:
Customer Retention Strategies
VIP Reward Schemes One of the best ways to retain customers is to offer them constant rewards for their purchases. Every time they spend they get something in return. The supermarkets use this approach with their loyalty cards, which offer cashback and vouchers for shopping. Some popular online poker sites use a VIP reward scheme that offers a tiered points system so that everyone gets rewards, but the top players get more.
Consistent Communication – Be honest and open with your customer, yet be consistent in your communication. You don’t have to push a hard sell every time you reach out and, in fact, you shouldn’t. Just pop in to say hello when a customer hasn’t interacted with your products recently, or to say thank-you when they make a purchase. Use personalized follow-ups to build relationships and show that you’re in touch with your customer’s needs. Take advantage of blog and social media campaigns to keep it personal with your audience.
Promotions and Targeted Offers – Customers are always interested in getting more for their money, so regular promotions and special offers should keep them interested in your business, and tempted to make a purchase. You can use targeted offers to make this even more appealing to your customers. For example, if they have been browsing a certain product category a lot, you could offer a discount on the products that they have shown interest in.
Gain Feedback – Complaints are actually very valuable. They tell you where you are going wrong and highlight the times that customers are probably fleeing your business. Take note of any feedback you gain, and make it easy for customers to give feedback whenever they have paid for a product or service. Consider sending out occasional feedback forms to gain a general sense of your customer and their needs. Most importantly listen and respond.