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July 28, 2020

Tips to Improve Your Customer Retention

Customer retention is an extremely important factor for your business. While acquiring customers is a primary concern, many businesses struggle with retention. The mark of a growing business is the ability to attract repeat business and loyal customers. Customer retention isn't simply a matter of chance. Certain practices can help you bring customers back over and over again.

Man holding coffee cup and phone with loyalty cardWhy Customer Retention is So Important

There are several reasons that you should consider customer retention as a priority for your business.

  • It's expensive to acquire new customers. Customer acquisition cost (CAC) is a critical metric for any business. It's five times more expensive to acquire a new customer than to retain an existing one. Retaining more customers helps you save money with marketing and advertising.
  • Returning customers are profitable. Returning customers tend to spend more than new ones, making customer retention more profitable than customer acquisition (though you need to focus on both). Bain & Company reports that in financial services, a 5% increase in customer retention increases profits by more than 25%.
  • Loyal customers are brand ambassadors. A new customer is trying out your product or service. Returning customers, on the other hand, are already aware of your business and are satisfied or at least prefer it to any alternatives at the moment. Loyal customers are more likely to discuss and recommend your brand.

How to Calculate Customer Retention

With a metric so essential to your bottom line, it's good to be able to identify your customer retention rate (CRR) as precisely as possible. HubSpot provides a convenient formula. You simply take the number of customers at the end of any particular period, subtract the number of customers you acquired during this period, divide that number by how many customers you had at the start of the period, and multiply by 100. For example, suppose you started the period with 100 customers, gained 10 additional customers, and lost 5. So at the end of this period, you have 105 customers. Using the formula, you have (105-10)/100 × 100 = 95. In this case, your CRR is 95%, which would be exceptionally high.

You may wonder what an acceptable or good CRR is. This depends on many factors, such as your industry, how long you've been in business, and economic conditions. What really counts is to know your CRR so you can track it over time. That way you can test various practices and strategies in areas such as marketing and customer service to find out how to bring up your CRR. Conversely, you may find certain actions bring that number down.

How to Improve Customer Retention

How do you retain as many customers as possible?

Understand that Customer Churn is Inevitable

A certain amount of customer churn or attrition is a reality of business. Customers have a variety of reasons for returning or not returning to your business, not all of them within your control. Customers may move, die, no longer be able to afford your product, or no longer need it for any number of reasons. For example, a single person drops his or her subscription to a streaming service after getting married and using his/her partner's subscription. Economic and societal factors also play a role. It's worth noting that customer churn is not always your fault. However, it's crucial to take a hard look at all the customer retention factors that are within your control.

 

Focus on Customer Experience

Customer experience (CX) includes but is not limited to customer service. It's the sum total of a customer's interaction with a business, whether it's a physical store, office, or website. CX is at least as important as the quality of customer service is and almost as important as the quality of a product or service. According to one study, 86% of customers are willing to pay more for a better customer experience. Here are some top CX issues that can help you improve your CRR.

  • Prompt customer service. No one likes to wait, whether it's in a physical line, on the phone, or for a response to an email. If your response time to questions, orders, or problems is lagging, do whatever is necessary to speed it up.
  • Friendliness and empathy. There's no substitute for genuinely helpful service. This must go beyond employees repeating canned lines. Customers can sense when sales associates or customer support reps are really interested in helping and treating them as individuals.
  • Convenience. Amazon has raised the bar when it comes to convenience, with its overnight shipping. Today's customers are demanding and want fast and flexible service. In addition to speed, this includes multiple shipment and payment options and user-friendly checkout.
  • Design, atmosphere, and UX. CX includes everything that customers experience, such as design elements on a website or the layout of physical space. Such elements should be tested so you can make improvements.

Elicit and Act Upon Feedback

Feedback is essential for telling you how customers feel about your products, website, customer service, and every aspect of your business. Some customers will go out of their way to voice their opinions. Many others, however, have to be asked or cajoled to tell you how they feel. There are a number of ways to get more feedback and make the best possible use of it.

  • Manage reviews. Public reviews on sites such as Amazon, Yelp, Facebook, Google, and others are one type of feedback that can greatly help or harm your business. Always read reviews and, when appropriate, respond in a polite and rational manner. Correct any misconceptions but don't get into arguments with customers. You can also remind customers to leave reviews after a purchase.
  • Use polls and surveys. Getting customers to answer polls and surveys on your website or social media pages can give you quick feedback on important issues. Keep these short and focused as this will increase participation. Ask customers to answer a short survey after a customer service interaction. Sending surveys via text message is another possibility if you do any kind of mobile marketing.
  • Pay attention to feedback on social media. People are often at their most spontaneous and honest on social media sites. Pay attention not only to what customers write on your own pages but also what they post elsewhere. Use social listening tools such as Google Alerts to monitor conversations about your brand, your competitors, and products and trends in your industry.
  • Take action based on feedback. Don't have the stereotypical suggestion box that no one ever looks at. Feedback only helps you if you act on it. Look for patterns in customer feedback. If you notice that many reviewers are complaining about a certain issue, take a close look and see where you can make improvements. Carefully consider suggestions.
    Customer retention supermarket rewards card

Create a Customer Rewards or Loyalty Program

A rewards or loyalty program provides tangible incentives for customers to return. Large companies have long used this strategy. Airlines offer passengers air miles. Starbucks has a card that lets customers earn free drinks. Retailers offer both online and in-person customers points that can be used towards future purchases. North Face VIPeak is a good example of the latter, with 3 reward levels to keep customers motivated.

With today's technology, it's possible to build a customer loyalty program that's omnichannel or strictly web-based. Identify what type of rewards will be most appealing to your customers. This type of program can't replace other essential steps such as delivering outstanding service. It can, however, give customers an extra reason to return to a business they already like for one or more reasons.

Make Customer Retention a Priority

After acquiring customers, your next job is to retain them. Loyal customers cost less to reach than new customers; they buy more, and they spread the word about your brand. It's important to have a customer retention strategy in place. Test your results and identify what motivates your customers to return and what may be preventing them from coming back.

About Eniture Technology

Eniture Technology specializes in helping e-Commerce merchants grow by providing useful information, digital marketing services, off-the-shelf apps that solve common problems, and custom programming services. If you're interested in accelerating the growth of your online sales, please contact us. You might also enjoy this free information on the 10 reasons why you should be using HubSpot to grow your e-commerce business.

10 Reasons Why You Should Be Using HubSpot

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