Did you know 82 percent of companies agree that customer retention is cheaper than acquisition?
It’s a no brainer, really. A bird in hand has always been worth more than two bush. Most business owners know this, but you’d be surprised to learn that several businesses have poor customer retention rates.
There are a couple of reasons this is the case, but let’s not get ahead of ourselves. First things first, what is customer retention? If you can’t clearly describe what it is, you can only do so much to retain your customers.
In this article, we’re telling what customer retention is, as well as fleshing out a couple of steps you can take to improve your retention rate.
Read on:
What Is Customer Retention?
Customer retention, typically expressed as a percentage, is the rate of customers your business manages to keep after they first make a purchase.
Here’s a real-world illustration.
Let’s say you launch a business this month. By the end of the month, you attract 100 customers.
In the next month, you gain 50 new customers but lose 20 by month’s end. This means you ended up with a net of 130 customers.
Your rate would be 130-50/100 * 100. This gives us 80 percent.
So, is this a good retention rate? There’s no industry standard for a good or bad rate, but anything above 60 percent can qualify as a good rate. However, if your rate is below 50, which means you’re losing more customers than you’re gaining, your business could be in trouble.
Now that you know how to calculate your business’s customer retention rate, we suppose that you’ve already done the math. If your business is still new, you’d want to give it a couple of months before making the calculation.
Let’s focus on what you can do to improve customer retention.
1. Offer a Product That Fits the Bill
The key to having a good customer retention rate is offering a product that meets your customers’ needs. They’re coming to your business because you’re offering a product they want. If it doesn’t solve their problem, do you think they’ll come back?
On the other hand, if your product works as advertised, there’s a good chance they’ll come back. However, it’s not that simple.
You see, you aren’t the only business offering that product. Your target customers have options. Your product could be perfect, but there’s a high chance there are also other perfect products that do the same job.
Given this condition, a customer will start looking at other factors before deciding whether to come back to your business. This leads us to the next customer retention strategy.
2. Price Your Product Competitively
Consumers don’t always go for the cheaper product, but where there are two or more products of the same quality, the price might just be the determining factor.
As such, price your product competitively. Don’t just slap a price tag on it because it’s what you think it should cost. Consider your target customers’ financial ability.
Also, consider your competitor’s pricing. Go too high and your risk coming off as a premium brand even when you aren’t in a premium niche. Goo too low and you risk coming off as an inferior brand.
While still on price, don’t shy away from throwing your customers a discount here and there. Most consumers are always looking to save a buck and they’ll love your brand more if you give them opportunities to save.
3. Offer Loyalty Programs
You don’t have to be a credit card company or supermarket to run an effective loyalty program. Every business can run a loyalty program that gets its customers excited. You just need to be creative and find rewards that will make your customers happy and loyal customers.
For example, let’s say you run a handmade crafts store. An effective idea for a loyalty program would involve offering gift cards to customers who reach a certain spend.
Think of a loyalty program as an incentive. What is it that you can promise your customers to make them keep coming back to your business? Answer this question and you’ll be in a good position to design a program that will help improve customer retention.
4. Monitor Your Customer’s Shopping Habits
You can learn a lot about why your customer retention rate is low from observing your customers’ shopping habits.
If you’re a physical store, this is easy. If it’s a clothing shop, for example, it’s easy to establish whether they’re displeased with the ambiance in the store, your range of products, or something else. Better still, you can ask them and get their views.
What if you’re running an online business? You don’t have the ability to see their shopping behavior, right?
Wrong!
There’s a lot you can tell from your ecommerce site. You just need the right technologies. For instance, did you know you can get a replay of a customer’s activity on your site? This feature, known as session replay, is handy when you want to gain insights into how users interact with your site or mobile application.
With this information, you’ll be in a better position to make changes that will help improve customers’ shopping experience. With a better experience, they’re more likely to come back.
It’s Time to Improve Customer Retention
So, what is customer retention? To recap, it’s the ability of a business to retain a customer over a certain period of time.
Your goal should be to have a high retention rate (close to 100 percent). It’s not unachievable. With this guide, you now have a couple of steps you can take to ensure that customer keeps coming back.
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