Have you ever wondered what the lifetime value of a client is to your business? Building great relationships with your customers can help to increase your customer retention figures and, according to smallbizgenius, an increase of just 5% can boost your profits by 25% to 95%.
Here at The Business Village, we really focus on building long-term relationships with our tenants, providing support above and beyond that given by many other business centres. The result is tenant loyalty, some of whom have rented office space from us for more than 25 years.
Your best customers will buy from you again and again, trusting you with their hard-earned money because you’re giving them value!
What is customer retention?
The Chartered Institute of Marketing’s definition of customer retention is “Continuing to meet an existing customer’s needs, usually be ensuring they are satisfied with recent purchases and by innovating products to meet their changing needs.”
Whilst there’s always a certain buzz to acquiring new customers, it’s actually easier (and less expensive) to retain your existing customers. Add in that the probability of selling to your existing customers is 60-70% as opposed to a 5-20% likelihood of converting someone who hasn’t bought from you before (source here) and it’s clear to see that there are many benefits to developing a customer retention strategy.
However, customer retention is more than being nice to people, answering the phone and responding to their enquiries. It’s about creating a process which begins with their first interaction, communicating well, creating a relationship of trust and building mutual growth.
How to measure your customer retention rate
By measuring your customer retention rate, you can benchmark it over time and audit why customers are leaving, whether there’s a common reason and if there’s anything you can do about it.
The first step is to choose a reporting period (eg. monthly, quarterly or annually) and then calculate the numbers using the following formula:
|Number of customers at the end of the reporting period||–||Number of new customers during the period||/||Number of customers at the start of the period||x||100|
Make sure that you check the expected percentages for your industry as there can be big differences between sectors.
With your figure in hand, you can then set sales goals and decide how much you want your customer retention rate to increase. Your product/service will help determine this – toilet roll sales, for example, should generate higher repeat orders than enticing customers to purchase a new range of differing products.
Customer retention strategies
Knowing the importance of customer retention is one thing but how do you implement a strategy which keeps your customers happy and engaged? Search for customer retention strategies on Google and you’ll uncover a whole host of ideas. We’ve picked 8 of our favourites below:
First impressions matter
Remember that you only have one chance to make a good first impression, so build systems and procedures with your customers in mind. Ensure that the order, checkout and delivery processes are smooth (if you shop regularly on Amazon, you can buy a product with just a couple of clicks). Always thank your customers and say how much you appreciate their business.
Set expectations early on
A good onboarding process with new clients will have information and training (if required) on how to use your product or services. For example, if you expect all your client conversations and project management to take place with specific software, detail how to access and use that software. The onboarding process can also specify how you’ll keep in contact (and when), along with the dates of key milestones.
Be consistent with the customer experience
Ensuring consistency in how you relate to your customers will help them to know what to expect and trust that they can rely on you to deliver your product/service. However, it’s also important to recognise that individual customers are likely to have differing expectations (for example, one may want a weekly update whereas another is happy to let you get on with the job), so build in responses which give both of them a good customer experience.
Communicate and ask for feedback
If you’re not speaking with your customers regularly, they’re not going to know about any new products/services or keep you in the forefront of their minds when looking to purchase. By keeping in contact, via a newsletter for example, you can keep them up to date with what’s happening. Even better, ask them for feedback on their experience so that you can analyse and improve your systems.
Don’t put all your eggs into one basket
If you have a team of employees, ensure that your customers have a relationship with more than one person. That way, if their main contact moves on or leaves the company, it will not pose a problem for your customer and reduces the risk of them leaving when your staff leave. Using a CRM system to record notes from meetings, phone calls, projects, issues and customer preferences, will also help to avoid any disruption should your staff team change.
Empower and educate your customers
Sharing useful content which helps to educate your customers will get them talking about you with their friends and colleagues. It also helps to empower them to do small jobs quickly rather than waiting for a response from you (for example, how to make a quick and simple update on their website). Emails, newsletters, blog posts and tutorials are all good ways to share your knowledge and build loyalty.
Increase customer loyalty
Giving your customers rewards for referrals to their friends and family or a retention reward for loyalty can really help to build your retention rates. Another tactic to increase loyalty is giving a surprise gift, sending a hand-written note, or demonstrating that you’re going above and beyond in your work with them. Ongoing subscriptions are also a great way to bring repeat business in to your company.
Pay attention to your brand values
The perceived value your business offers is almost as important as the actual value of your products/services. Customers engage with brands and through CSR (corporate social responsibility) your business can connect with them on a deeper level. One great example is the outdoor clothing brand, Patagonia, who pledge “1% of their sales to the preservation and restoration of the natural environment”.
Customer retention is an important strategy when it comes to building your business and it’s important to train your team in how to engage with your existing customers.
By forming lasting relationships with them, your customers will become loyal brand ambassadors and share your products/services with their friends and family.