As a local business owner, your customers are everything. So one of your biggest priorities needs to be retaining the customers who have already chose to support your business.
What Is Customer Retention?
Customer retention is a business’ ability to retain existing customers. Customer retention includes your efforts to reduce customer churn (meaning customers cutting ties with your business) and begins from your first interaction with a customer throughout the life of your relationship. Of course, you want to bring in new customers and expand your reach. But the truth is, retaining customers is critical to your business—and benefits your bottom line.
The Cost of Cutting Ties
To start, customer retention is cost-effective: acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. Plus, customer retention makes for killer ROI: only a 5% increase in customer retention can increase company revenue by 25-95%. Selling to customers with whom you already have a strong relationship with is more effective—financially and otherwise—because your business doesn’t have to spend as much to attract, educate, and convert new customers. Simply put, customer retention is just good business.
Customer loyalty is also a true marker of success for your business. Loyal customers prove that you are providing great customer service and going the extra mile to satisfy your customers. They’re an indicator of your dedication to creating positive customer experiences, providing a frictionless buying experience, and prioritizing quality engagement. Loyal customers are incredibly valuable to your business. Not only do they spend more on your business, but they also drive sales by spreading the word and endorsing your product or service to their friends and family
If customer retention isn’t currently on your business’ list of top priorities, it should be.
How to Calculate Customer Retention
Customer retention, like other business metrics, is measured with a simple formula. To calculate retention, the following formula is used:
((# of Customers at End of Period – # of Customers Acquired During Period) / # of Customers at Start of Period)) X 100
The result is a percentage of your customers that your business is retaining over the given period. Customer retention is rooted in basic—but foundational—principles that your business can implement to better retain existing customers. Work to improve your business in the following areas and see increased customer loyalty.
10 Customer Retention Strategies
With foundational principles in mind, you can start to implement tangible, real-life strategies that help you improve your business’ customer retention.
How you interact with your audience is critical to building customer satisfaction and loyalty. Quickly and completely answering customer questions, concerns, and complaints impacts how audiences view your business and the percentage of them you ultimately retain.
Business isn’t just about making sales. Consider your audience and interact with them frequently. Whether you’re tuning in on social media, responding to emails, or reaching out for feedback, actively engaging with them lets them know you care and value their thoughts and opinions. Engagement also helps you keep your finger on the pulse of the perceptions surrounding your business so you can identify any potential problems and improve your business.
3. Set a Standard
Running a high-quality business is important for building trust with your customers. Don’t take shortcuts, ignore transparency, abuse customer trust, or fail to meet the expectations and it’ll negatively affect your business and the precious relationships you have with customers.
4. Improve Relationships
Honor the trust that your customers place in you. As you value the relationship you have, you build their trust. Also work to get to know them—to understand their needs, desires, and wants and cater to them so you can provide more value as a business and retain more customers.
5. Implement Customer Feedback Systems
Like we mentioned, actively engaging with your customers is important for staying in tune with the needs of your audiences and gauging the performance of your business. By implementing feedback strategies, you can improve your business by fine-tuning processes based on the thoughts and opinions of those most important to your business—your customers. Ask for specific feedback, customize feedback requests, and make it easy for your customers to give feedback with streamlined processes. Then share positive feedback with other audiences to help them see the value of your company.
6. Incentivize Loyalty
Encourage retention from your customers by rewarding your most loyal followers. Do this by implementing loyalty programs, dishing out special offers for repeat buyers, and creating exclusive groups where customers can interact with you and other fans and get access to early or exclusive brand information. Remember, loyal customers are more likely to leave reviews and reviews help your business get found by potential customers.
A lost customer doesn’t have to be gone forever. Initiatives to bring back the wayward buyers are worth the effort. Targeted reminder emails, special come-back discounts, personalized feedback requests, social media advertising campaigns, innovative promotional activities, even emotional appeals (like creating a sense of missing out or highlighting loss aversion) can help disgruntled customers return to engage with your business. Customer outreach dedicated to highlighting a sense of need and promoting the value of your business helps you recover your lost customers—and revenue.
8. Invest in Customer Experience
Just like reactivation efforts, your work to create positive customer experiences is well worth the effort. Ensure that each step of the customer journey is seamless, from getting found to getting connected, and ultimately getting repeat customers. Positive experiences include everything from frictionless shopping processes, to the protection of your customers’ secure financial information, to clear and updated inventory information, to responsive and knowledgeable customer service. All of these components build positive experiences that make for contented—and loyal—customers that trust and see your business as the authority in the industry.
9. Analyze Data Insights
Whatever tools you use to track your business’ analytics, keeping an eye on important metrics can help you refine your business to better serve your customers. Analyze insights received from tracked data and use it to improve it on your business processes. Any way that you can adjust your business to make things better for customers will result more in more retention and greater customer loyalty.
10. Personalize Interactions
In whatever way you communicate with your customers—via social media, customer service or review responses, or contact forms—make the extra effort to personalize your interactions. Use customers’ names and refer to the specific details of their communications to demonstrate your care and concern for their needs. If they feel appreciated and acknowledged, they’re more likely to continue engaging with your business—a customer retention win.
Not only is customer retention important for your business’ bottom line, but it’s essential for keeping your customers loyally engaged with your business throughout the life of your relationship. Their loyalty translates to your business’ success as you dedicate yourself to creating positive experiences, reactivating wayward customers, and utilizing their valuable feedback to improve your business.