Without customers, you won’t have much of a business.
The tricky part is, most companies make the mistake of focusing so much on customer acquisition that they don’t know what to do with them once they get them—something that hurts a company’s ability to their grow business, provide great customer service, and turn customers into repeat customers and brand ambassadors.
Customer acquisition is only part of doing good business. Keeping them with a strong retention marketing strategy is a more cost effective and efficient way to do business.
A high customer retention rate will bode well for your bottom line, however, it is one area where many companies can afford to place more focus.
It’s 6-7 times more costly to attract a new customer than it is to retain an existing customer.
That’s at least true according to the White House Office of Consumer Affairs. Jerry Jao from Forbes chimes in saying that, “In a recent Retention Science study, 70% of marketers said that their Retention Marketing is average at best, with room for significant improvement. More than anything, the fact that marketers are acknowledging the need for growth in customer retention is a sign of the changing times – and the rising importance of Retention Marketing.”
Not to mention, that according to the Gartner Group, 80% of your company’s revenue will come from just 20% of your existing customer base, and a simple 5% increase in customer retention can increase business profits between 25% and 125%.
This statistic alone communicates just how important your customer retention rate and retention marketing strategies are for your company’s future growth.
Adobe echoes the importance of retention marketing. They found that close to 80% of companies’ marketing budgets are spend on acquiring shoppers; however, for every 1% of shoppers who become repeat customers, a company’s revenue will increase by about 10%.
So the big guys say it’s a big deal, but before we get into retention marketing strategies you can implement, let’s dig a little more into the importance of working on customer retention.
Importance of Retention
Repeat customers spend 33% more than new customers.
The importance of customer retention can be summarized by the following statistics compiled by Alex McEachern from SweetTooth:
Repeat customers are more likely to buy from you: Repeat customers are more likely to shop with you again. Additionally, the more customers buy, the more likely they are to buy more in the future.
Repeat customers are an easier sell: The average conversion rate typically falls between 1% and 3%; however, a repeat customer significantly increases potential conversion rates. According to Marketing Metrics, repeat customers spike conversion rates to about 60%-70%.
Adobe had similar findings. They found that customers who have previously made 2 purchases in the past were 9 times more likely to convert when compared to a first time shopper.
Repeat customers spend more money: Repeat customers spend more money per purchase than new customers. If you have given them reason to return and they like your products, they will have more faith and confidence in your ability to serve their needs.
An RJMetrics study found that your loyal top 10% spend 3 times more per order than the lower 90%; and your top 1% of customers spend 5 times more than the lower 90%.
Repeat customers spend more during important times: Repeat customers are there when you need them. They are the customers who drive sales during the holidays and other important shopping seasons.
“According to Adobe, the average shopper spends 17% more per transaction during the holiday rush. This is great news, but your repeat customers spend even more. Your store’s repeat customers actually spend 25% more per transaction during the busy season. But that is not all. Repeat customers help you through the tough times as well!” says McEachern.
Repeat customers provide great word-of-mouth marketing: Turning your customers into brand advocates is one of the most effective marketing strategies, and focusing on retention marketing can help make this happen. Bain & Company found that “after 10 purchases, you refer 50% more people than a one-time purchaser to a store. This study by Bain shows that repeat customers can actually increase their profitability by attracting more clients,” McEachern summarizes.
Now that we have covered why you need to invest more time and resources into retention marketing, let’s look at some strategies that can help your business improve your customer retention rate, customer service, and drive revenue in the right direction.
Benefits of Retention Marketing Strategies
A 10% increase in customer retention levels results in a 30% increase in the value of the company. (Bain & Co)
Not convinced yet? Here is a summary of the benefits of putting more focus into retention marketing. Implementing retention marketing strategies provide the following benefits:
Increased revenue
Lower customer acquisition costs
Increased referral rates and the creation of brand advocates
Building of stronger relationships with existing customers
Improved approach to customer service
Identification of new business opportunities and ways to serve your customer base
Gaining deeper insights into your customer’s needs
And Finally, 6 Retention Marketing Strategies
As we’ve just covered with a bunch of fancy stats, retention is one of the most important strategies for your business. Once you put the time and resources into getting customers in the door, retention can ease the burden of finding new customers.
So, how do you do it?
Start with a free trial
A free trial or simplified free version of a product is a great way to get customers in the door and keep them around, while also allowing them to explore what you can offer. When they discover the value of your product on their own, they will be more willing to become a customer. Dropbox offers a free version and free trial:
“The freemium model can help convert users into paying customers if your business offers a 30-day trial allowing customers to test the value of your product, a free version of your offerings limited to only certain features, or free incentives if a user invites friends to sign up via email or social media,” says Brian Honigman on Entrepreneur.com.
Get personal
No one knows your customer better than your customers. Therefore, it’s imperative that you talk with your customers, collect data and insights and learn as much as possible about their wants, needs, problems and how you can position your products and services as a solution. The more you can help, the more likely you will be able to retain them.
Here are ways to learn more about your customers:
Surveys and customer feedback
Talking to your front line employees
Monitoring social analytics and collecting user profile data
The more you learn about your customers, the more you can shape your web content, promotional offers, landing pages and marketing messages to speak directly to your customers’ needs.
“You can start personalizing your experience from a user’s very first visit to your site based on the referring source. For instance, altering product pricing and promotional offers, images on landing and product pages, or the amount of text on a page to make an experience as relevant to a user as possible. The added relevance can intrigue visitors to stay on your site longer, but the big engagement increases come from altering your offerings based on each user’s behavior on your site,” states Honigman on Entrepreneur.com
Do more than sell
Offering a product or service is not enough anymore. With so much competition and with so many similar offerings, companies need to differentiate in other ways. If you want to build loyalty and keep your customers, you need to become their trust advisor. You can do this in a number of ways:
Email marketing campaigns
Blogging
Being active on social media
Free reports
Creating an education centre on your website
Becoming an industry expert and providing additional information that is related to the products and services your customers seek will add more value to your relationship with them, making them more likely to buy from you over competitors.
Monitor social media sites and build relationships online
Your customers are online, and you need to be online too. The rise of social media has changed how companies attract and build relationships with customers. Through Facebook, Twitter, and many other social platforms, you now have the opportunity to connect with your customers 24 hours a day, and without them having to visit your store or website. It gives you the opportunity to create a one-on-one bond with your customers.
“Connecting with customers and building communities takes more effort and time than typical social media acquisition strategies,” says Debra Ellis from Social Media Today. Take advantage of social media to see what your customers are saying, learn more about them, and develop your relationship with them.
Reward repeat customers
Customers love to be rewarded for their loyalty, and they love feeling appreciated. Whether it’s through special offers or through a rewards card, your customers will be more willing to come back if you give them reason to.
Programs such as Air Miles, PETRO POINTS, SCENE Card, and Shoppers Optimum Card all drive repeat business because customers know they will receive something extra when they shop at these stores.
Build KPIs around customer service
One of the most effective ways to retain customers is to provide customer service that goes above and beyond. Give your customers the experience they are looking for. “68% leave because they are unhappy with the service they receive, and 14% are unhappy with the product or service,” says Ross Beard on Client Heartbeat.
Building key performance indicators around customer service will help you better understand if you are providing the level of service your customers expect. If you are not, it will provide you with some insights into where you need to improve to boost your customer retention rates.
What we’re trying to say is…
Retaining customers and doing business with your current customer base is more effective and affordable than prospecting for new business. Companies tend to focus on acquisition more than customer retention marketing, even though it can cost 7 times more to acquire new customers. Shifting the focus and putting more resources into retention marketing will ease the stress of trying to find new customers, lower acquisition costs, and help you increase revenue.