No matter what type of business you operate, attracting customers is always one of your top priorities. In most industries, however, new customer acquisition alone isn't enough. Instead, it's essential to retain existing customers to keep your business moving forward. But, how can you make current customers loyal and encourage them to keep purchasing from your business? Find out how to improve customer retention and learn why client loyalty is so important to your business.
Why Is Customer Retention Important?
Although acquiring new clients can help you expand your business and meet your revenue goals, retaining existing customers offers several key benefits. Effective customer retention can lead to:
- Easier Conversions: When you sell to an existing customer, you can expect an average success rate of 60 to 70%, while you can expect a 5 to 20% success rate when selling to new customers. It's easier to sell to existing customers because they're already aware of your brand and your product line. In contrast, educating new customers and moving them through your sales funnel requires time and resources.
- Lower Marketing Costs: Reaching out to new customers often requires a substantial budget, while marketing to existing customers tends to be much more cost-effective. On average, acquiring new customers costs five times as much as retaining current clients.
- Higher Profit Potential: Focusing more on client retention than customer acquisition can also lead to bigger profits for your business. In general, improving your customer retention rates by just 5% can contribute to a 25 to 95% increase in profits.
12 Strategies to Help Your Business Improve Customer Retention
Although there's no magic formula for customer loyalty, you can try key tactics to boost your retention rates. Try the 12 customer retention strategies below to determine what works best for your business.
1. Watch for Common Signs of Customer Churn
One of the most effective ways to keep current customers active is to watch for signals that they're going to stop purchasing from your business. If you recognize the warning signs early enough, your team may be able to take steps to retain them as current customers.
To find signs of customer churn, you'll need to review your current and former clients' behavior patterns. If you use a customer relationship management (CRM) tool to track transactions and other interactions, you can easily determine normal purchasing and customer service patterns. From there, you can identify abnormal behaviors and stop churn before it happens.
2. Collect Customer Feedback
When you don't know why some customers stay while others leave, you might never be able to improve your company's retention rate. In addition to reviewing data and identifying behavior patterns, try connecting directly with customers. Make a point of asking for customer feedback about everything from satisfaction with your products and services to the ease of using your website or payment processing system.
Install survey tools on your website to handle the technical aspect, and review the results to find trends. Once you identify what attracts customers and what pushes them away, you can better retain your current customers.
3. Send Special Offers to Targeted Customers
It might not benefit your company's bottom line to offer big discounts to your entire customer base. However, your business might benefit substantially if you targeted customers for special offers instead.
To identify the right customers to target, review your CRM data. Try to identify customers who are at risk of churning, and send them a special offer inviting them to purchase again at a discount. You can also target leads who haven't purchased yet and then continue to send them special offers to retain their business.
4. Personalize Your Communication
Whether you have a hundred or a handful of loyal customers, remember that each one is an individual person or business. If your customers have different needs and purchasing patterns, sending the same marketing materials to each one isn't likely to help your clients or your business.
Instead, get to know your customer types and find out what makes each one tick. Then, customize your marketing campaigns so that they appeal to various client groups. Strive to make your promotional emails as relevant as possible so that your customers have an increased chance of opening your emails and responding positively to your marketing campaigns.
5. Offer Free Gifts or Rewards to VIP Customers
Since an effective customer retention policy can boost your profits by 25 to 95%, it follows that focusing your efforts on your best customers can help you reach the high end of the range. As you target groups of customers for special offers, take the time to identify your VIP clients, which are those who make the largest or most frequent purchases.
Then think about free gifts or special rewards that your VIP customers would appreciate. Be sure your VIPs understand that you're sending these rewards to a select group of customers only so they understand how much you appreciate their business.
6. Create a Loyalty Program
Not every reward has to be tailored to your VIP customers only. Consider creating a loyalty program that rewards all your customers every time they purchase from your business.
Depending on the nature of your business, you might offer a modest discount code each time a customer completes a purchase or allow clients to take advantage of a higher-value award after making a certain number of transactions. Either way, encouraging client loyalty is a smart way to cultivate customers for life, which can boost your revenues in a big way.
7. Develop an Onboarding Program
When you sell high-tech software or a line of complex products, one of the easiest ways to retain customers is by showing them how to use their purchases effectively. If you neglect this step, your customers could end up confused about their purchase and frustrated about the time and resources they've wasted trying to figure it out.
In contrast, an onboarding sequence can ensure customers understand the basics of the product while helping them get more out of their purchase. By helping clients maximize their value, you can develop happy customers who are excited to buy from you again.
8. Consider a Customer Education Program
Even if your products don't require a lengthy how-to manual or an onboarding sequence, you can still improve client retention by providing educational resources. Consider creating a collection of educational materials that customers can access only after making a purchase.
If you'd rather make your educational materials more widely available, post them as a series of in-depth blog posts on your company's website. You can also use them in your marketing campaigns to get more value out of your assets while delivering helpful information to potential buyers.
9. Write a Company Newsletter
If your company tends to take a hands-off approach after making a sale, you can't expect to be top-of-mind with your customers. After all, client retention is all about building relationships. If your business doesn't make an effort to stay in touch, you can't expect your customers to make future purchases.
To keep the lines of communication open, try writing a company email newsletter each month. Use this platform to share information about special discounts, new products, or educational resources you've developed. Take this strategy to the next level by using the customer data you've gathered to segment clients into different interest groups and tailoring your newsletter accordingly.
10. Provide Customer Support
When your business doesn't support customers after the point of sale, you can't expect them to return for additional purchases. Customer support is essential for companies in every industry, especially when client retention is a priority.
If your business plan doesn't include hiring new customer support staff, try a more technology-focused tactic instead. Consider tracking and following up on support requests with your CRM or using chatbots to field customer issues on your website. Once you have a solid understanding of the issues you need to support, you can think about building out a team or investing in more robust technology.
11. Increase Accessibility
If your products and services aren't convenient or easy to use, your customers might be tempted to shop around for alternatives before repurchasing from your company. Rather than losing clients to the competition, think about how you can make your offerings more accessible to your target market. From making your services available on more platforms to adding more features to your product, small changes can increase accessibility and improve customer retention significantly.
12. Keep Your Promises
As a business owner, you might make a wide range of promises to keep your customers happy. To earn their trust and their repeat business, make a point of keeping every one you make. Task your team with tracking promises big and small so you can stay on top of your to-do list and make sure nothing slips between the cracks.
While acquiring new customers can certainly continue to propel your business forward, it's important to understand the value of client retention. Use the tips above to develop a strong customer retention strategy and start cultivating customers for life.