Being in the world of business, we must admit that acquisition often takes the spotlight. It’s a somewhat heroic feat when a member of the sales team closes a deal.
What gets lost amidst all that hype and excitement is unfortunately customer retention.
Business acquisition is definitely a good thing, but in a world filled with fierce competition, the ability to retain customers defines a successful business.
In fact, 70–95% of forecasted revenue comes from additional purchases. This means that if you are not able to make loyal customers in the long run, this could eventually lead to huge financial losses.
There are plenty of benefits of customer retention. In fact, just type it in your search bar and you’ll see hundreds of articles talking about it.
Here are some of its benefits, especially to B2B businesses:
- You save on costs: Compared to pursuing a new business venture, keeping existing customers happy could potentially cost less. Think about it: you’d have to do everything just to capture the attention of your prospects, but maintaining existing customers could take less work and cost less because they already know you.
- You can generate more sales: According to the book Marketing Metrics, 31% of your repeat customers spend more than first-time customers. In other words, current customers are a more reliable source of revenue than new ones.
- You drastically increase profits: Bain & Company’s study found that increasing customer retention rates by just 5% can lead to profit increases of more than 25% — this, of course, depends on the industry and your sales cycle length.
SaaS companies are known for investing a lot in customer retention, particularly in improving their customer experience, so perhaps we can take a cue from them.
Take Autodesk, for example.
After analyzing its data, Autodesk found that potential clients are more likely to buy the licensed version if they use the free trial at least three times. So, in addition to offering a 30-day trial, Autodesk gamified its tutorials by rewarding them with points each time they use the free version of the software and complete specific tasks.
Because of this, Autodesk was able to increase their free trial conversion rates by 15%, equating to a 29% increase in revenue.
Piqued your interest? Learn more about some customer retention strategies that can benefit your company below.
Steps to Track and Measure Customer Retention and Loyalty
Before diving into what you can do, you must first learn how you’ll be able to tell if your customer retention and loyalty strategies are actually working.
1. Identify the key metrics you’ll measure
Measuring customer retention is important because it essentially tells you how well your business is retaining customers. Part of knowing how well you are performing is knowing what key metrics to focus on.
An effective way to do this is by revisiting your current marketing goals. Your customer loyalty metrics should align with your marketing KPIs so that you can quickly reach your marketing goals.
For instance, if your primary marketing goal is to establish your brand as an industry leader and expert, the customer loyalty metrics you choose should reflect and support that.
2. Set your benchmarks
Once you’ve identified the metrics you’ll use, the next step is setting benchmarks.
While it may be tempting to benchmark according to how well the top performer in your industry is doing, take note that this is actually a bad practice.
Setting a benchmark needs research from both inside and outside your company. The common mistake when it comes to benchmarking is failing to evaluate your own company first and comparing yourself with another business that’s way up or below your alley.
It’s great to set benchmarks so that you’ll be motivated to hit realistic goals, but don’t let it define your destiny. Companies don’t let their competitors tell them what success means — exceptional companies should figure out what success means for them.
3. Choose the method for how you’ll measure customer loyalty
Now that you have the variables with you, you can now proceed with choosing a method to measure customer loyalty.
- Net Promoter Score: NPS measures the willingness of a customer to recommend your products and services.
- CAC to CLV ratio: The cost to acquire a new customer (CAC) and customer lifetime value (CLV) rates gives you an insight into the return you should expect from your investment in a new customer.
- Churn rate: Churn measures how successful your company is in retaining existing customers. It can be measured at an account level (how many customers you retained) and by revenue (the amount of dollars you retained).
- Customer referral revenue: Customer referrals could probably be the strongest source of revenue. You can track these referrals by using the right marketing attribution tools.
4. Calculate and evaluate your customer retention rates
The last step is to familiarize yourself with how to calculate customer retention rates.
The formula for customer retention rate is this:
When computing your retention rate, you essentially evaluate the number of customers who remain at the end of a time period compared to the number of customers you had at the beginning of the period.
Note that the customer retention rate shouldn’t include new prospects you acquired. The focus is on the percent of your total customer pool who stayed in a given period.
Strategies to Boost Customer Retention and Loyalty
Improve your website’s user experience
Studies show that there’s a direct relationship between customer retention and the user experience your website provides, especially when they view your site on mobile devices. Just take a look at these stats:
- 38% of consumers will immediately leave a poorly designed website (Big Commerce)
- 79% of site visitors will leave if they can’t quickly find what they’re looking for (Tech Jury)
- 53% of your website visitors will hit the “Back” button if your site doesn’t load after three seconds (Blue Corona)
- 40% of clients will shift to your competitors having a bad experience using your website on mobile (Fundera)
Two important things that affect user experience are website uptime and loading speed.
Website uptime is the length of time your website is available and functioning properly. Ideally, your website should have 100% uptime so that it’ll always be available whenever your customers need it. How reliable and trustworthy you are as a company is sometimes determined by how helpful and available your website is.
The good and bad thing about the internet is that users can get information in just a few clicks. Because almost everyone got so used to how fast everything is online, having a slow loading speed could greatly affect your customer experience. It’s best to think that anyone online has a short attention span. No one likes to wait.
Therefore, when building your website, make sure you find the right host that’ll guarantee high website uptime and fast loading speed, at the very least.
Invest in the right tools
The secret to keeping customers happy is how you’re able to make them feel appreciated as well as valued. This can be made possible by finding the right tools to invest in.
For starters, you can lower your churn rate by using a customer review software such as Weave. What’s great about customer review is that both positive and negative reviews can help improve your business.
You can use customers who left positive reviews about your service and turn them into brand ambassadors, which makes them feel more valued by your company. You can also highlight their testimonials to draw in new prospects and even strengthen your credibility with current or former customers.
Negative reviews can primarily help you address pain points. To fight churn, browse through negative reviews or use a review insights tool to help you determine the root problem. The beauty about this is when those who left negative reviews about your business find out you addressed their concerns, it can turn their negative experience into a positive one because of how proactive you are in improving your services according to their reviews.
Launch an exclusive loyalty program
Another way to boost customer engagement with your business is by building an exclusive loyalty program.
That’s because 63% of consumers are willing to spend more so that they can qualify all of the benefits offered by the loyalty program.
Customer referrals and other loyalty programs also provide you with user-generated content from your satisfied customers that’ll help you get more leads and customers.
More importantly, launching a customer loyalty program gives you the chance to nurture your relationship with your existing customers based one shared principles and values.
HP’s Planet Partners and Recycling Program is a perfect example of this.
Each time that HP users send back their used ink cartridges, toners, business equipment and even printed media, they earn points that they can use as vouchers towards their next purchase. So, users aren’t only getting huge discounts, but are also helping the environment.
Go the extra mile with your customer service
Depending on what products or services your company offers, you can create a customer service strategy that takes care of your customers from pre- to post-purchase.
To be able to have an effective customer service, you must learn to listen to your customers’ needs, challenges and pain points. In this day and age, your customers will also be yearning for that “human touch” – try to connect with them emotionally and understand their experience to be able to find more ways to improve your customer service.
When you find the right customer retention strategy that fits your company, you’ll be able to understand your customers’ needs better. With this, you may be able to find ways to convert them into repeat or loyal buyers.
Customer retention is all about keeping users happy and constantly making them feel valued using the right tools available online. While it’s great to keep acquiring new customers, you must not forget those who have been loyal to your business. They can be much more valuable than prospects in the long run.