Customer retention is at the heart of a successful company and is often overlooked in favour of customer acquisition. Yes, acquiring customers is important, but did you know that 12 - 15% of customers are loyal to a brand but they actually represent a massive 55 - 70% of sales? Understanding customer retention and the benefits that come with it is essential for the growth of any business.
At insight6, our job is to measure, transform and improve the customer experience for any business and retention is a big part of that.
What is customer retention?
Simply put, customer retention is the process of keeping existing clients engaged and interested in the product or service you’re selling. The ultimate goal of customer retention is to keep current customers buying and investing their time and money in your business. Through customer retention, customer loyalty is built (which we will move onto shortly).
What is a customer retention specialist?
A customer retention specialist is someone who specialises in keeping existing customers engaged and invested in the business. Their job is to find ways to keep customers buying products and investing their time and money into a business’s service.
The benefits that come with customer retention
Here are a few surefire benefits that come with customer retention:
1. It’s cheaper and easier than obtaining new customers
It should come as no surprise that keeping existing customers happy and investing in your business is easier than going out and gaining the trust of new clients who may not have heard of your business. You have built trust with existing clients, so keep them engaged and keep them interested in your product or service. It’s far more cost-effective to keep current customers than to seek new ones (not to say you shouldn’t be doing both).
The concept of acquisition versus retention falls in favour of retention according to multiple data sources.
2. Word of mouth from existing customers
Loyal customers who have had nothing but positive experiences from your business and have grown to trust and respect your brand are more likely to spread the word to friends and colleagues. You could also encourage your existing customers to share their positive experience online in the form of a review. This is another free way of extending your audience reach and attracting new customers.
Of course, online marketing and advertising campaigns will help gain exposure and drive leads, but these methods cost money and time. Keep your current customers happy and they will recommend you to others for free!
3. Existing clients are more likely to offer genuine and helpful feedback
Reading reviews and acting on customer feedback is a fantastic way to positively develop your brand. It shows that you genuinely care about your clients’ opinions and experience of your business and they will value the time you have taken to improve certain aspects of your business.
4. Once you build trust with a client, you gain their forgiveness
Simply put, loyal customers are more forgiving. Every business makes mistakes, whether it’s a staff member offering poor advice on a product or accidentally overcharging for an item. These human errors will be more forgivable with a loyal customer because you have spent the time gaining their trust.
New customers whose first experience was poor are far less likely to forgive your mistake unless it is immediately rectified. In fact, research has shown that customers who have made a complaint but swiftly seen their problem fixed are 84% less likely to decrease their spend.
5. Loyal customers actually enjoy marketing alerts
Of all the emails you receive from websites you have subscribed to, I’m sure there’s a few that you actually enjoy receiving. Be it a free coupon from your favourite restaurant or a newsletter from a local charity you support, as a loyal customer, you enjoy receiving updates and offers from brands you have shared positive experiences with.
What is customer retention rate?
This is the term given to the percentage of customers a company has managed to keep hold of or ‘retain’ over a specified time period. It is the opposite of the ‘churn rate’, which depicts the amount of customers lost during a specified time period.
What is the difference between customer loyalty and customer retention?
These two terms are commonly confused; customer loyalty looks at a customer’s stance and opinion of your company and the reasons why they buy or invest their time and money into it. Customer retention (as mentioned above) looks at ways to keep existing customers buying your company’s product or service.
What are some good examples of customer retention strategies?
So far, it’s clear that ‘churning and burning’ customers is a surefire way to lose money in the long run.
Here are a few customer retention strategies that can help you get the most out of your customers and keep them engaged and interested in your service:
1. Surprises
We’re not talking about sending promotional offers and deals through email or direct mail (although these will improve customer retention rates), we’re talking about sending your customers something more personal. For example, sending a ‘thank you for sticking with us’ letter or email shows you’re grateful to all your existing clients for their continued trust and support in your business.
For smaller businesses, you could send hand-written notes or even small gifts to show you care about them and their partnership with your business. Being personal goes a long way to keeping customers happy and invested in your brand.
2. Build trust and watch your customer retention rate rise
The first port of call for all positive customer retention practices. Essentially, there are only two people in your business; you and the customer and you need to gain their trust to retain their custom. Reviewing customer behaviour data is a great way to understand how your customers behave and interact with your product or service.
Additionally, a recent report by Forbes stated that marketers should use data to build trust with customers.
3. Learning from customer complaints
No one likes receiving a complaint from a customer, but complaints are a vital component to better your service and retain customers - if you act on them. Understanding the negatives your customer(s) experience will help you to fix or improve upon these issues going forwards.
Additionally, the fact that a customer has complained shows they were invested enough in the product or service to take the time to offer feedback, and as mentioned on our ‘customer retention strategies’ section, research has shown that customers who have made a complaint but swiftly seen their problem fixed are 84% less likely to decrease their spend.
Learn how to increase your customer retention with insight6
Understanding the ins and outs of customer experience is absolutely essential which is why you need to first understand the importance of customer experience.
Our article ‘What is Customer Experience?’ goes into detail about the importance of providing positive customer experience alongside other key components of the customer experience journey.
If you’re looking to improve your customer retention rate or want to learn more on the benefits of customer retention…
Then speak to one of our customer experience experts! Our team is on-hand to deliver expert advice on customer retention and how to keep your customers engaged in your brand. Get in touch with our team today to learn more about how our customer retention systems work and how we can help increase your customer retention rate.