As customer acquisition is always quite challenging and requires money for every business (especially small ones), it becomes essential to use specific marketing strategies and tactics that will keep customers coming back again and again. In this article, we will name the advantages of customer retention and give practical tips based on examples from smaller and well-known brands.
What is customer retention?
Businesses use customer retention as an indicator of customer loyalty over time. Companies apply various strategies to improve customer experiences and increase retention over a given period of time.
The formula for calculating the customer retention rate is as follows: mobile number list the total number of customers (CE) minus the new customers acquired (CN) divided by the total number of customers acquired at the beginning of the period (CS).
You may be wondering: isn't it more efficient to invest in acquiring new customers than to allocate resources to retention?
Both actions are equally vital for business growth, and in an ideal world, salespeople and customer service specialists work together to achieve both goals. After a new customer is acquired, marketing and customer service specialists start working with them. The customer support team resolves their issues, offers onboarding support, collects feedback, and makes sure they get the most out of their purchase. Marketers work to find ways to re-engage customers, such as special offers, discounts, newsletters, and other customer retention tactics.
This prevents people from writing bad reviews or asking for refunds. If your customers are satisfied, they will continue to do business with you, provide testimonials, recommend you to their friends, and post favorable comments about you on social media and independent review sites.
When allocating budget to acquisition and retention activities, keep in mind that developing a new customer is much more expensive. According to Forbes, it is up to five times more expensive than retaining existing customers. This happens because new customers do not yet trust your business. It costs time and money to get their attention and even more to convince them to buy from you.
Benefits of customer retention measures
Implementing customer retention takes resources and time. But it is worth it, as retaining customers has many benefits. It can increase long-term profitability and improve the perception of your brand among your target audience.
Increase in average order value and repeat customer rate
Not following up with customers to upsell or cross-sell more items and services is a standard mistake businesses make. These follow-up activities can increase the average order value and improve the repeat customer rate.
For example, a consumer came to you for a PSI (PageSpeed Insights) audit of a Magento store. Why not contact them after it’s finished to see if they want to place an order with Magento Google Page Speed Optimization or other related services?
Education Brand Advocates
Consumers develop a sense of loyalty towards goods and services when they frequently turn to your company. First, they start spending more on your products, which increases customer lifetime value. They then recommend your company to friends, family and acquaintances, expanding your customer base.
Reduce acquisition costs
Loyal customers often leave positive reviews, which also serve as advertising. These comments will surely attract new customers and you will be able to reduce acquisition costs.
7 ways to retain your customers
1. Offer material incentives: loyalty programs and coupons
If customers don't feel valued, it won't take much effort for them to switch to another producer or service provider. You need to nurture your customers and never take them for granted. Express gratitude by rewarding them for staying with you:
Offer discount coupons and bonuses when a consumer makes their tenth or thirtieth order.
Measure customer loyalty by how long they have been your customers. You might consider giving out more gifts at significant intervals, such as a year.
Set up a loyalty program. This way, customers will know that they will save more by ordering from you consistently.
Show them exclusive discounts via exit-intent popups to encourage them to visit even before they leave your site.
Sephora’s Beauty Insider program is one of the brightest examples of loyalty programs. Customers who participate in it can accumulate points for every purchase they make and redeem them for rewards of their choice, usually in the form of samples or exclusive products.
But most importantly, customers can access the Beauty Insider community, where beauty-minded people exchange tips, ideas and their new favorite items.
Over time, customers gain access to greater benefits for their loyalty, including tickets to top-tier special events. Plus, during sales, higher-tier consumers get additional discounts.
The 7 Best Customer Retention Strategies for a Small Business
Screenshot taken from the official Sephora website
2. Build closer connections: user-generated content
According to a report by Stackla, over 60% of consumers think they would be more engaged and inclined to buy from a company if the company asked them to participate in a customer advocacy network and actively help create more user-generated content (UGC) for the company.
Brands can then use this content for marketing campaigns, encouraging cooperation between customers and businesses. By offering customers rewards such as branded merchandise or a discount for subsequent purchases, businesses can encourage their customers to send the content directly to the brand to activate this collaboration. Alternatively, UGC content generation can be inspired by holding a contest. Businesses can give consumers a voice through these acts, building a strong sense of trust. When customers feel valued and heard, they are more likely to patronize a business in the future and recommend it to their friends and family.
