What is Customer Retention?
Losing clients is costly. It far outweighs the expense of earning new ones by up to twenty-five times. Therefore, it pays handsomely to hold on to customers that are faithful over a long time. The opposite of customer retention is customer churn, where businesses keep losing customers no matter how hard they try to keep them engaged. You know you have churn when customers don’t re-sign contracts, cancel subscriptions, and noticeably fall off at touchpoints along their customer journey. In short, customer retention is a big part of management’s responsibility in the digital era.
Calculating customer retention
Managers can calculate their Customer retention rate using a set formula as follows:
Customer Retention Rate = (# of customers at the end – # of customers added during the period)/the number of customers at the start of the period x 100. In so doing, you must decide:
- What a makes a period (e.g., three months,a year, maybe longer)
- Work out the customer retention rate percentage for the period just past.
- Use the set formula to calculate the same for periods going forward.
Why is customer retention so important and why is the customer retention formula crucial to marketing success?
Any percentage below 100% indicates some customer churn.
For example: If the bottom line is 50%, it means that half of the customers that you thought were long-term at the beginning of the period instead abandoned your brand. The big question is, why?
Getting the answers is a priority because:
- With only a 5% jump in customer retention, you can boost your customer revenue by at least 25%, and probably a lot more.
- Your retained customers spend more with you than new customers. Moreover, they do it without the need for promotions to keep buying momentum up. More revenue with lower costs is a double benefit to your bottom line.
- Loyal customers tell others about your brand, becoming natural ambassadors who create valuable market gains that are sustainable.
Improve customer retention at every opportunity.
It’s common sense to look after what you have. Unfortunately, in our eagerness to find new prospects, most of us don’t. We take the loyal customers for granted, even as they slip away beneath our very noses. In the USA today, some startling statistics make you sit up with a jolt.
The average customer retention in three mainstream industries are:
- Media 25%
- Finance 25%
- SaaS just over 35%
The above shows that competition today is intense, and customers continuously look for better options. For customer retention to help improve your ROI, sales enablement teams
must sell to your customers the way they want to buy.
Customer Retention Programs
The secret to improving customer retention – indeed, the definition of customer retention – rests in customer feedback working together with the formula for customer retention rate calculation (see above). It also plays into one’s ability to map customer journey touchpoints and connect with the customer experience. They also go hand-in-hand with relying on a recognized customer retention survey as a principal CX tool. It makes customer feedback a meaningful gauge of a company’s market efficiency.
There are many ways to structure a customer retention program.
Still, the common goal is to transform them into customer retention strategies that uplift customer value. It’s the job of customer success teams to spur customers into the company’s loyalty circle. Once there, customers spread the good word about the brand to friends and family – more valuable than 1000 paid promotions. Another viewpoint is that customer retention programs (and strategies) are ways to engage customers at all touchpoints on their journey to the cash register and beyond. Here are the most popular:
- Onboarding – a customer success activity – aims at prospects or first-time customers, teaching them the ins and outs of using the product. It helps to reduce frustration and stress, mainly when there are complicated instructions.
- Customer Loyalty initiatives that offer rewards and bonanza discounts to long term clients. The airline companies with their travel miles and hotels offering accommodation points are good examples. As a customer, if you want to get the best loyalty benefits, you have to commit to the brand almost exclusively over the long run. It’s a compelling customer retention program that lends itself to specific audiences and industries.
- Communication is a crucial aspect of customer retention. Talk to customers through the media they use the most with messages that move them instantly.
Communication techniques and approaches that often work well include:
- Communication Calendars help you assess if the customer is still in your camp or has fallen off the bandwagon. If the time that lapses between touchpoints in a customer’s CX is too long, perhaps it’s time for a “reach out” or targeted promotion.
- Going through case studies in social media and customer forums so that prospects can see the product in use in ways they relate to. There may be a case study for every customer category as an avenue for them to engage with the brand.
- Don’t overpromise, instead pleasantly surprise. When promoting to potential buyers, realistic expectations help sustain customer retention. There’s nothing like buyer disappointment to derail the customer retention process.
- Communicate accurately and often when it comes to products and service performance versus competitors. The more you are in the face of your target audience, online and via mobile, the better. It works amazingly, especially if you can show exceptional comparatives as customer retention metrics.
- Let customers see the road ahead. Show them innovations and new technologies in the pipeline or on the drawing board. The promise of rewards down the line can be more motivating than using the brand currently. Customer retention is a natural byproduct if loyalists see themselves closely associated with a market rainmaker,
- Don’t be shy in celebrating successes at every opportunity to create customer excitement. Everyone loves a winner, wants to be with the leaders. Unless you show that your business is in those categories, the customers may never know.
- Don’t hold back in connecting the customer with the entire sales enablement team. Make sure that customer support on chat forums and the phone are top class. Sales reps must meet with customers directly or indirectly at every vantage point if it moves things along.
Companies at the cutting edge of CX and customer mapping, should explore every avenue to connect with customers in an engaging way. Content and design on websites and pitch decks, podcasts and webinars, YouTube videos and infographics all contribute to attracting new customers and maintaining them once in the fold. The examples given here are not exhaustive by any means. Use your creativity to keep the ball rolling so that customer retention never becomes a swear-word in your company.
SoGoCX is a choice resource when it comes to customer retention.
The SoGoCX team is ready to help you in all the nooks and crannies of customer retention and reducing customer churn from your business. They have the software and the online applications to enable you to keep loyal customers engaged without losing sight of prospects knocking at the door. Customers leaving to try a competitor’s offer is front and center of Sogolytics’s agenda and one of most concerning issues in their guidance. You can’t find any better than this professional entity when customer retention surveys and other CX tools are up for discussion.