A business must attract customers to scale fast and thrive in the industry. But the ultimate goal is to make acquired customers repeat or regular buyers. After all, it’s cheaper to retain a customer than to acquire a new one. Statistics say that retaining an existing customer costs five times less than acquiring a new customer.
With this in mind, you must build a cohesive customer retention strategy if you’ve only focused on customer acquisition. On the other hand, you have to optimize your customer retention strategies if they aren’t fully efficient. Reliable customer retention strategies complement customer acquisition to stimulate a record-breaking growth rate in your business.
This article reveals the meaning of customer retention, why it is vitally important for business growth and six retention strategies that can drive your brand to new heights. Let’s dive in.
What Is Customer Retention?
Customer retention is the practice of engaging existing customers so that they can continue buying your products or services. Customer retention is associated with:
- Customers not defecting to your competitors
- Your business satisfying customers’ needs
- Customers making repeat purchases
Customer retention can help a business build a large army of loyal fans. It ensures that the customers you worked so hard to stay with your business, have an excellent experience, and continue to obtain value from your offerings.
Customer retention is different from customer acquisition. Customer acquisition builds a foundation of customers, while retention creates relationships with these customers to maximize revenue.
Customer acquisition is associated with customers making their first purchase, while retention is related to repetitive or regular buying, which is critical for business growth.
Why Is Customer Retention Crucial to Business Growth?
Customer retention is crucial because of several reasons:
First, retaining existing customers is more affordable than acquiring new ones. In addition to cost-effectiveness, returning customers are more likely to buy your recently launched products or services than new customers.
After all, they’ve learned the value of your services or products, so they keep returning again and again. The pre-existing trust (as a result of customer retention strategies) between your brand and return customers also explains their interest in your newly launched products or services.
Returning customers also spend more and buy more often than new ones. Most importantly, repeat buyers are more likely to refer you to family and friends because they are satisfied with what you offer them. For this reason, repeat buyers can help you acquire new customers and take your return on investment (ROI) to a new level.
Here are statistics that show how vital customer retention is to business growth:
- Retaining existing customers is 6 to 7 times cheaper than acquiring new ones (American Express).
- Retained buyers spend more and buy more often than new customers (Bain & Company).
- Increasing customer retention by 5% can boost your business’s return on investment by 25–95% (Bain & Company).
- Loyal buyers are more likely to refer their family and friends to your business (Hubspot). Such referrals bring in new buyers free of charge.
Numbers don’t lie. Ensure you implement solid strategies to nurture customers and build a loyal fan base in the industry. Loyalty primarily determines how fast your business grows through brand advocates.
Why Do Customers Churn?
While you want 100% of your customers to remain loyal to your business, that’s simply unrealistic—and that’s where customer churn pops up.
Customer churn is the percentage of buyers that stopped using your products or services in a specific time frame. You should calculate the churn rate to get a picture of customer retention in your business.
That said, why do customers churn?
- Lack of engagement includes customers underusing your products or completely ignoring them. Poor engagement is associated with not educating your customers enough. The result is knowledge gaps on how to use your products.
- Customers may churn due to high prices that don’t match the value customers get from the offerings.
- Products or services that aren’t living up to customers’ expectations.
- Your customer may churn if your competitors offer more appealing products or services.
- Lack of proactive customer support.
How to Prevent Customer Churn
- Analyze churn in real-time. Identify when and how customer churn occurs in your business. Then, use this information to understand why customers are abandoning your business. Lastly, take necessary measures.
- Focus on your best customers. Focusing on loyal, profitable buyers can be more beneficial than offering incentives to buyers who are likely to churn.
- Connect with your customers before they reach out to you. Then, communicate your offers and show buyers that you care about their experience in your business.
6 Customer Retention Strategies That Work
Retaining customers doesn’t have to be complicated. Simple strategies will do the trick. Here are the top six customer retention strategies to consider implementing in your business.
1. Apologize to Customers When You Make a Mistake
Business owners strive to offer flawless services, products, or experiences. But mistakes happen.
Data breaches, billing errors, downtime, and product outages are common mistakes that may put you at risk of losing your valued customers. When you make a mistake, apologize honestly and rectify the situation to retain your loyal buyers.
2. Leverage Customer Service Tools
Your business may be committed to offering excellent customer services. But that standard becomes more difficult to meet when your customer base grows. That’s where technology comes in. Instead of hiring more customer support reps (which is expensive), customer relationship management tools (CRMs) can streamline your customer service.
3. Identify Your Unique Value Proposition
Cut-throat competition is real in nearly all industries. If you don’t set your business apart from competitors, winning your fair market share becomes difficult, let alone thriving in the industry. When establishing your unique value proposition, ask yourself:
What makes your business, products, services, or offers to stand out from the competition? Why should a customer choose you over your competitors?
4. Leverage Social Proof
Take advantage of testimonials, reviews, and customer stories to show your product’s value to new buyers. Customers are more likely to hang around if they see the positive impact of your products. The best part is that you won’t be the one showing the positive impacts but people who benefited from your products or services.
5. Educate Your Customers
The single most crucial thing that engages customers is offering them value. One of the best ways to do that is to educate your customers. Since you know their problems, desires, and dreams, use them to inform customers about what to avoid, how to make better decisions, or update your fans with the industry trends on your website, social media accounts, or email.
6. Surprise and Delight
You want customers to love your brand and choose you over your competitors whenever they need the products or services you offer. One of the simplest ways to achieve that is by exceeding your buyer’s expectations.
This could mean additional benefits or gifts your customers won’t forget. These surprises don’t need to be big or expensive. For example, a simple handwritten letter or a free sample of your new product will do the trick.
Which Customer Retention Strategy Is Right for You?
You need the right strategy to win your audience’s attention. While every strategy won’t suit every business, prioritizing your customers’ needs will boost customer retention. That way, they’ll happily buy from you over and over again.