The benefits of customer retention often get lost in all the efforts of acquiring new customers. Acquisition campaigns tend to be more attractive for many businesses - with their eye-popping numbers and results that are more quickly evident.
In fact, 44% of companies choose to focus on new customers rather than retaining their existing ones.
While getting new customers can look great for business, you will miss tons of opportunities if you also don’t recognise and prioritise retaining customers you already have. According to Frederick Reichheld of Bain & Company, increasing customer retention rates by only 5% can increase profits by 25% to 95%.
This is because your customers become more valuable over time.
Research shows that existing customers are 50% more likely to try new products. They also tend to spend 31% more than new customers. And with effective customer retention initiatives, you will get to build a solid relationship with your best customers, increasing their annual average value and boosting your overall revenue.
As pointed out earlier, your retail business is better served if you also prioritise your customer retention along with your customer acquisition efforts. You’ll be able to enjoy more sustainable growth if you acquire a steady stream of new customers without losing your existing ones.
You can visualise it through what we call the Funnel and Bucket Analogy.
The top-funnel contains the processes to turn prospects into customers - from acquisition through to conversion. This is where you measure things like Conversion Rates and a simplistic take on Return on Ad Spend (ROAS) by only counting the first transaction.
Once converted, what you would want is for them to flow through your retention bucket where you do not only keep them as customers but also grow their value. The key is to have a low churn rate (and high retention rate), keeping as many customers as you can.
Another way is to think of it like a leaky bucket. No matter how much water you pour into your funnel (i.e. new customers), you will never be able to fill your bucket (i.e. grow your business) if you keep on losing customers at a faster rate.
This leads us to the next question. So what do you need to do to improve your customer retention or keep your bucket secured and your customers happy? Below are our top 5 strategies to help you reap the benefits of customer retention.
Onboarding is the initial stage of your customer’s journey and your “one chance at a first impression” where you need to establish trust and deliver value. It’s the first 30, 60, 90 or 180 days that a customer has spent with your brand.
A positive onboarding process can increase the likelihood of long-term customer loyalty. A study from Harvard Business Review reveals "an increased focus on onboarding offers a significant or moderate positive impact over the life of the contract for revenue, client renewals, and client referrals."
Improve the onboarding experience of your customers by:
Understanding the customer lifecycle stages
Understanding the customer lifecycle framework allows you to tailor your retention strategies based on where your customers are in their journey. At Omneo, we breakdown the Onboarding stage into 3 sub-stages:
This is the point where you have to ask: “Are my new known customers purchasing for a second time within their honeymoon period or are they joining and then disappearing?”
Developing onboarding incentives
Introducing onboarding incentives is a great way to start conversations with your new customers and reduce customer churn rates and one-time purchases.
Here are some examples of incentives you can implement:
First shop incentive
This incentive is great for encouraging a quick ‘next’ shop. Try offering a cross-channel rewards program. If they shopped in-store first, give them a ‘First Online Shop’ bonus reward after their first online order is shipped.
Customers who interact with your brand in more than one channel during
the onboarding stage will have a higher engagement rate over time.
Referral incentives
Reward existing customers who share your brand with others. A Nielsen study suggests that 77% of consumers are more likely to try a new product or brand when learning about it from friends and family.
Profile complete incentive
Give incentives to customers who share the details that matter to you (i.e. email, style or comms preferences, social profiles). This will allow you to know your customers better and provide them with more personalised service and meaningful experience.
Want to learn more about how you can measure and increase the annual average value of your direct retail customers? Download our FREE eBook here.
Improving customer service is one of the most important customer retention strategies for any company. A Zendesk study shows that 65% of customers expect customer service to be faster than it was five years ago.
Further, the study also reports that of those customers who had a bad customer service experience, 97% changed their future buying decisions. More specifically:
Enjoy the benefits of customer retention by offering solutions and assistance across a variety of channels. Remember that customers may prefer a certain comms channel depending on the degree of their issue or concern. For instance, if it’s a simple information request, they are more likely to prefer digital channels like email or live chat.
It’s also important to always measure your customer service performance. Out of all your customer service interactions in a given month, how many customers are satisfied with the outcome?
Listening to your customers provides you with valuable insights to make better business decisions, and deliver products and services your customers truly need.
You can capture customer feedback through reviews as well as a listing of likes and dislikes. You can also use Net Promoter Scores (NPS) and Customer Satisfaction (CSAT) Scores to determine:
You can check out our guide to Customer Satisfaction Metrics here.
Where possible, request feedback at the time of purchase and post-purchase to get the most pertinent and timely responses from your customers. This will give you more reliable feedback than what periodic surveys or focus groups can offer.
Finally, customers who are given the opportunity to voice out their opinions feel more valued by the brand they interact with. Increasing their satisfaction and loyalty.
Personalisation plays a critical role in fostering customer relationships. By delivering the right product, service or messaging at the right time and every relevant touchpoint, you can increase:
Leverage your customer data to get a better understanding of your customers’ needs. Information like customer names, emails as well as purchase history and brand preferences will not only help you provide more convenience but also create targeted messages and promotions for each individual customer.
Learn more about how you can ensure a successful personalisation strategy here.
Happy employees lead to happy customers. According to a 2019 Glassdoor study, a happier workforce is strongly linked to a company’s ability to deliver better customer satisfaction. This is especially true in industries like retail where workers are in close contact with customers.
As you continue to strive to be a more customer-centric business, we also have to constantly remind ourselves not to lose sight of the importance of improving employee engagement and well-being.
How satisfied are your staff with their jobs? Do they see themselves as value creators for your customers? Cultivate happy and high-performing teams by clarifying work expectations, promoting a positive work environment and providing the tools they need to do their work and grow in their roles.
The best customer retention efforts are those that allow you to build strong and lasting relationships. By improving your onboarding processes, giving more focus on customer support, leveraging customer feedback, implementing personalisation strategies and improving employee engagement, you’ll be able to reap the benefits of customer retention and supercharge revenues for your brand.
