Customer attrition is unavoidable, but if you accept it as a norm, your business growth will suffer and won’t stand out from the competitors. That’s why customer retention strategies need to come into play.
Being inactive in retaining your customers will depreciate your customer base. Positive customers experiences will bring you more than just higher profitability, it also translates into higher conversion rates, stronger customer loyalty/ brand loyalty, repeated purchases/ repeat customers, positive WOM & customer stories, and so much more.
So, the question is, how to know if you are doing it right? Even experienced marketers can make mistakes when running a customer retention campaign. Here is all you need to know about customer retention and how to avoid the devastating mistakes in your marketing strategy.
Customer Retention – Definition, Metrics & Formula
Definition
Customers do not buy just once, they may come back, and depending on how you treat them, they can be loyal to your brand. Customer retention is a marketing term, which refers to the process of engaging existing users/ customers to keep buying/ interacting with a business.
What sets this term apart from “customer acquisition” is that instead of trying to attract new customers, customer retention focuses on forming lasting customer relationships that were already converted at least once.
Client retention strategies involve building and implementing special programs to retain customers for a longer time. These strategies are highly important to any business, the most obvious benefit is leveraged conversion rates in the form of customer engagement.
Many marketing research evidence shows that selling to your existing buyers is 40% more likely than to those visiting your business for the first time. Existing clients also spend around 30% more than new customers. That’s why many businesses these days have been shifting their marketing effort to customer retention rather than acquisition.
Besides higher conversion rates, building customer loyalty is also faster and costs less. If people already bought from your business, it’s easier to capitalize on user experience and start building a stronger bond with them. With some simple tactics, an online store owner can save a lot of his resources on optimizing the ROI.
Last but not least, loyal customers are more willing to spread positive word of mouth, reinforcing your brand image and reputation. In other words, satisfied buyers can give you wider brand exposure, which grants you a better opportunity to reach out to many more potential customers.
Key Customer Retention Metrics
We all may know the importance of customer retention, but what does it involve and how to measure customer retention rate? The first performance indicator is customer attrition, which compliments the retention rate. If a business has a 30% attrition rate, this means the retention rate is 100% – 30% = 70%.
Other metrics when it comes to calculating customer retention rates are the number of customers at the beginning/ end/ during the calculated period.
Tracking retention rates is highly beneficial to the business. It shows you how your strategies are doing and what should be done to improve their performance depending on customer behaviors. Putting the rates side by side periodically also gives you a detailed comparison of the campaigns. This comparison is like an ab test showing you what is working well and what should be modified or even removed.
Customer Retention Formula
Different businesses may come up with different formulas to calculate your customer retention. However, the most popular formula is explained below.
Retention rate is the percentage of customers calculated by the difference between the number of customers at the end of the period and during the period, divided by the number of customers at the beginning of the period.
7 Horrible Mistakes You’re Making With Customer Retention
Mistakes You’re Making In The Attempt Of Increasing Customer Retention
Inconsistent Service Quality
If the customer already had a positive experience with your business, it’s your responsibility to delight your customers and make sure all their upcoming experiences are also positive. Inconsistent service quality can be severe damage to your brand reputation. It can also lead to negative word of mouth and increase in customer attrition.
Your offerings do not need to be the best, but they must be at least consistent over time. If there is any difference, it must be a good one. Otherwise, there’s a strong likelihood that your existing customers will eyeball other brand options. It’d then be seemingly impossible to win them back.
The same rule applies when customers interact with your team. If different people in your team promise different things, your customers will come up with nasty surprises. Their long-term relationship with your business will then be put at risk.
All interactions and transactions with your customers should be deployed with a standardized procedure (including your sales process and live chat/ social media response). As customers always feel comfortable and know what they should expect, they will become your brand ambassadors and stay with your business for a longer time.
Neglect Communicating With Your Customers
Out of sight, out of mind – this is true to all customer retention strategies and techniques. If they do not hear from you often enough, your influence on their purchase will then decrease. Let alone we are now living in a whirlwind marketplace, your buyers won’t have as much difficulty as you expected in finding an alternative to your brand.
Content marketing is one of the keys to any customer retention/ partner program. Reaching out to your audience via emails, push notifications, personalized text messages, phone calls, etc. plays a vital role in engaging them in your business. And when it comes to content marketing, personalization should be the priority, it is also an excellent technique for cross-selling and up-selling.
And don’t overestimate the magic of digital marketing platforms. Customers are human after all, that’s why you will need a human touch in your content. If you want to fail at keeping your customers close to you and increase customer satisfaction, don’t mind the importance of content marketing.
Communication is also a useful approach to train your customers about your offerings. There can be updates, new features, and modifications, customer surveys, letting them know will help them set the expectations and stick around with your business.
Overestimate Customer Acquisition’s Value
Some marketers place all their bets in customer acquisition, which is actually not the right way to focus their marketing effort and estimate customer value. If you keep losing your buyers after their purchases, even high traffic won’t matter. At the end of the day, what we should really care about is the conversion and ROI.
An effective retention campaign can make a huge difference in the lead generation cycle. It brings you stable conversion, which builds up the revenue base for your business. If you are leaking traffic through customer retention, it’s time to revise your campaign’s head start.
Not trying to get your customer back is synonymous with ignoring your customer lifetime value. These retention metrics can bring more profits than the number of customers you can acquire at a given period of time. In other words, customer acquisition should not be the top priority, if conversion and sales are your business focus.
Besides, gaining new buyers is much harder than keeping current customers. Capitalizing on customer retention will save you from draining your resources as it is both costs effective and efficient.
Ignore Customer Feedback
Both positive and negative feedback should be equally treasured. They give you a clear view of how you are doing in the eyes of your customers. Some people rely on sales volumes to judge business performance. While it’s not wrong, this approach is not enough if you want to improve customer retention.
There can be mistakes you don’t even notice you’re making them over and over again until somebody tells you. Pay attention to your customer contributive comments, even if they are negative, the good thing is that they showed that they cared.
Happy customers are the biggest profits, but complaints are the push directing you toward the better. They contribute to your business’s knowledge base, strengthening your customer service quality. Professional marketers recommend addressing the common ones and grouping them into categories. This helps your customer care staff become more active when dealing with customer complaints.
Ignoring customer feedback means you are not making your clients feel valued and respected. In this case, expect to lose your customers for good. Customer complaint handling then requires ASAP response, comprehensive solution, respectful attitude, and promise-and-action consistency.
Over Promise And Under Deliver
Many store owners/ app developers (such as WooCommerce or Shopify store) choose to hype their offerings in the attempt of attracting more people to buy from them. If you are doing the same thing or planning to, you are setting yourself up for customer attrition. Over promising means you are granting your customers the right to expect something you may not deliver. And when their expectation is not fulfilled, the disappointment will destroy your customer retention rate.
Making your offers look like shiny objects that may attract the customers at first, but it won’t be effective in the long run. Once the customers set expectations then realize the actual quality is not up to what they are promised, it won’t take them long to give up on your business.
The approach should then be the other way around – under-promise and over-deliver. When you set realistic expectations for your customers, it’s much easier to exceed it, shorten the customer journey, and create a delightful experience.
As customer expectations are exceeded, they have more reasons to stick around and repeat their purchases with your brand. In short, the tip here is to always align customer expectations to reality and try to accomplish it better than they thought you could.
Waste Your Resources By Trying To Do All Works Manually
Even if you are running customer loyalty programs for small business, don’t try to do everything manually. Your time is limited, and there are more important things to invest your resources in. A marketing automation tool will be a great help to free you from repetitive tasks. There is now an ocean of plugins and apps out there, choose wisely before you settle down with one.
Ecomfit is a favored choice by both newbie and professional marketers. And if you don’t want to experience a steep learning curve, this plugin is right up your alley. It’s a foolproof marketing tool that can improve your customers retention campaigns with push notifications, emails, newsletters, etc.
This plugin is also packed with analytic features, ab testing, customer segmentation, and content customization. It can be your assistant to grow your business and make sure you have more happy customers. The best thing about Ecomfit is that it won’t take much time and effort to set up. And you can enjoy its free plan for your first 1,500 unique subscribers.
A marketing tool will free you from stress and a mile-long pending to-do list. Whether you just started building relationships from scratch or trying to leverage your campaign performance, marketing management tools are always must-have items.
Take Your Customer Loyalty For Granted
People have reasons to choose your brand, they also need reasons to stay with your brand. They won’t be there forever if you don’t treat them right and care about their purchase frequency. Customer reward/ loyalty programs should be frequent enough so that your customers always feel they are valued and appreciated for their repeat purchases.
Unique deals for your special customers will do wonders for your brand image. As people feel they belong to a special group, they are more confident in their purchase and spreading word of mouth.
Continuous customer relationship management is an important task in any customer retention strategy. It is a great way to convince people to stay close to your brand and reinforce the reasons for buying from you.
So What Now?
Customer retention is an art that needs a lot of practice to master. At the end of the day, you want to make your customers feel that they are important, welcomed, and listened to. Keep in mind the above 7 mistakes and make sure you are not going to make any of them.
