5 Customer Retention Strategies to Transform Your Business
In the world of business, transformed by Covid, the phrase ‘Customer is King’ has never been more profound.
It’s an inconvenient truth, but no matter how excellent your product or service is, if there’s no one to buy it, you’re in hot water!
With decent onboarding and acquisition strategies, you can build up a solid consumer base, which is great news. However, to keep customers engaged past that all-important first purchase, adopting effective customer retention strategies is crucial.
This may sound reasonable to large businesses with infinite resources and cash flow, but how can smaller businesses retain their consumer bases without extensive CRM systems and a team of trained customer service specialists?
Having untold cash to throw at customer retention techniques is beneficial, but there are also ways for smaller businesses to keep on top of churn metrics, customer behaviors, and response times to come out on top.
If you want to learn more about how to retain customers in business and why the retention of customers is instrumental to any company’s success, simply read ahead!
The top customer retention strategies to boost your business
Understanding Churn Metrics
Before you can implement effective customer retention strategies, you’ll need to pinpoint why customers are leaving in the first place.
To do this, start by looking at churn.
In simple terms, churn is defined as the customer attrition rate for a business and it shows the rate at which customers stop doing business with an entity.[1] Churn is a reactive metric, meaning you’ll often be attacking problems slightly too late if you rely solely on traditional models.
If you instead use predictive customer churn models to predict and assess problems that appear in the onboarding and acquisition phases of the customer journey, it’s far more effective. This is because they can extrapolate data from previous churn periods and show what the future may hold for customer engagement.
Before you set an extensive plan into motion, it’s worth noting that effective customer churn models needn’t be complex or expensive. They simply require access to customer profiles, purchase information, interaction information, and complaints that customers have made about your products or service.[2] Once you have a predictive churn model, you can capitalize on this information and set a plan into motion.
Are customers leaving seasonally? Perhaps it’s time to roll out post-Christmas offers. Are they finding response times abysmal? It’s worth pouring more capital into customer service.
Customers don’t always lose interest in a business for the same reasons, but unfair treatment, inflated prices, and a lack of customer service are three major issues identified in Callminer’s 2020 report on Customer Churn that are worth keeping tabs on.
With UK businesses losing approximately £33.4 billion per annum due to overall churn and £4.95 billion due to unplanned churn,[3] it’s important to keep track of your unique metrics and place the retention of customers at the forefront of your business model.
Monitor Competitors
The saying “‘keep your friends close and your enemies closer” has never been truer than in the business world.
Alright, so your competitors may not be your enemies per se, but you’ll want to consistently monitor their behaviors, sales tactics, and marketing ploys to one-up them where possible.
Flexibility and evidence of continuity are excellent customer retention strategies for staying ahead of the competition, as they help your long-term growth prospects by building trust and creating a positive customer experience.
By creating loyalty and impressing customers from the word “GO”, you’re discouraging them from seeking alternative suppliers. What would be the point if they’ve had an excellent experience with you?
In time, this will reduce your churn rate and maximize profit through increased sales per customer and improved customer lifetime value.[4] As you have a 60–70% chance of selling to an existing customer, preventing them from jumping ship is in your best interest!
Whether your unique edge comes in the form of extended return policies on goods or impressive courier services that customers can rely on, it all adds up. Just make sure your competitors don’t pip you to the post by offering the same service!
Loyalty schemes
One of the best customer retention strategies is a simple loyalty scheme.
These schemes benefit both the customer and the business, as you get the boost from their repeat orders, and they get more value when they shop.
These are easier to implement for those who operate solely in the e-commerce world through online systems, but ‘hands-on’ businesses can make punch cards work just as effectively. Both methods should allow you to track the dollar value of your customers by their frequency of engagement.[5]
It’s tempting to set loyalty programs into motion immediately, but this is a customer retention strategy that works best once you’ve acquired customers and gained traction with them. When paired with automation and targeting advertising, loyalty schemes enable you to maximize the profit potential of each customer that purchases from you, turning them into lifelong buyers.
When you first create a loyalty program, keep an eye on your repeat customer rate and purchase frequency to check how well your retention strategy is working.
Even minimal time investment into these two metrics will allow you to tweak your approach and improve sales, making any costs associated with the program worthwhile.
Sentiment Analysis
Sentiment models are a modern miracle for marketers.
Relatively simple to create and run, they allow users to take note of customer feedback in real-time. As it’s been shown that online reviews and customer feedback influence up to 90% of customer decisions, you can’t bury your head in the sand when it comes to brand perception.
These days, digital data is available from various sources, including social media, review sites, chatbots, and internal CRM platforms. As a result, it can be difficult for manual processors to pick out patterns of unhappiness and respond to negative engagement in good time.
It may require a small cash investment at the outset, but data-driven insights gleaned from customer feedback are invaluable and crucially,within reach for even the smallest businesses.
Using machine learning and natural language processing, these AI algorithms help businesses gather insights from large reams of customer data without breaking a sweat. They can even operate independently and be managed without any technical know-how, which is ideal for smaller teams.[6]
Not only do sentiment analysis models provide the data needed to segment your customers into demographic and lifestyle subgroups that help gauge promising leads, but they automatically give relevant product recommendations that make purchases more likely. With constant advances in modeling, prediction accuracy from insights is now over 96%.
Are you unsure of when to implement a seasonal promo code, adjust your prices, or gear up for a big sale? Sentiment analysis helps you pin down the best times to strike.
As only 15% of business leaders currently use customer data to inform their business decisions, you must get ahead of the pack with a customer-first approach. This enables you to turn insights from various channels into innovative and meaningful actions that take your growth objectives to new heights.[7]
Personalization
These days, there’s no excuse for sloppy and impersonal marketing.
With customer expectations increasing over the last decade, over 71% of customers feel frustrated that their purchasing experience isn’t individual enough.[8] As a result, personalization has become one of the most successful marketing tropes for businesses to engage with, as it allows customers to find exactly what they want.
If your business is very small, you may be able to investigate customer preferences manually, but using sentiment analysis and segmented email marketing is much more time and cost-effective, as the level of data you’re dealing with is likely to be unmanageable.
According to Chelsea Cohen, a co-founder of Amazon inventory management software provider SoStocked, “segmented email marketing encourages repeat purchases via personalized post-order journeys. Personalized order sequences keep the customer’s experience consistent with their individual needs”.By only recommending relevant products and services and keeping all email marketing targeted, you can more easily grab your customer’s attention and capitalize on their purchase history.
By personalizing your approach, you automatically make the customer experience more tailored, making disconnected, mass marketing a thing of the past.
With the potential rewards from personalized marketing more apparent than ever before (91% of consumers have stated that they prefer to shop with brands who provide targeted offers and recommendations!), it’s well worth considering.
Chatbots and Customer Support
Effectively resolving customer concerns is crucial if you want to maintain a decent reputation in the business world.
With 65% of people surveyed stating that their experience with customer service departments had been negative, there is much work to be done in this area.[9]
Even if you have enough manpower to handle customer queries at present, AI-powered chatbots improve response turnaround time by up to 500%, resulting in a 66% reduction in customer service costs. Appealing, right?
It’s not just turnaround times that are affected by the efficiency of chatbots. They can also capture useful information from customers that can be fed back to relevant marketing teams.
Furthermore, if your business receives a quote request, automated chatbots can quickly access a list of your company’s services and price points, offering an accurate figure in a fraction of the time that a human would take to perform the same task.
By providing reliable customer support and near-instant solutions, chatbots massively improve the overall customer experience and can boost conversion rates by up to 100% depending on the industry in question.[10]
How to retain customers in business: the key takeaway
Raising revenue per customer from an existing base can be a difficult mountain to climb, but it can be a rewarding venture when done correctly.
Regardless of your initial budget, if you invest in effective customer retention techniques for your business, you will gather invaluable insights that drive real, lasting change and pay dividends years into the future.
This is not to say that customer acquisition isn’t an important part of any business model. However, the retention of customers is far less time-consuming, and great word-of-mouth reviews afford your brand greater trust and credibility.
Believe it or not, it costs businesses 5 to 7 times more to find new customers than it does to resell to existing ones. If that wasn’t convincing enough a statistic, it’s worth noting that reducing lost customers by even 5% could raise your profits by up to 75%![11]
By consistently reviewing your customer retention techniques and figuring out how to adjust them to reduce customer churn, you’ll be rewarded with a steady stream of happy and satisfied buyers every quarter.
Cheers to that!
[1] Jake Frankenfield, “Churn Rate”, last modified November 27, 2021, Investopedia, https://www.investopedia.com/terms/c/churnrate.asp
[2] Patrick Campbell, “Why a Customer Churn Model for Prediction is Challenging, But Worth It”, last modified December 8, 2020, Profitwell, https://www.profitwell.com/customer-churn/models
[3] Corporate Ink for CallMiner, “British Businesses Lose Nearly £5 Billion due to Unplanned Customer Churn, last modified May 11, 2020, Investegate, https://www.investegate.co.uk/corporate-ink-for-callminer/gnw/british-businesses-lose-nearly---163-5-billion-due-to-unplanned-customer-churn/20200511090010H8118/
[4] Lindsay Willott, “4 Foolproof Ways to Increase Customer Loyalty”, last modified 21 July, 2021, Customer Thermometer, https://www.customerthermometer.com/customer-retention-ideas/how-to-sustain-customer-loyalty/
[5] Alex McEachern, “Customer Retention 101: Grow Your Business by Selling More to Current Customers”, last modified Jul 9, 2020, Shopify, https://www.shopify.co.uk/blog/customer-retention-strategies
[6] Nick at Retention360, “How to Improve Customer Retention With Sentiment Analysis”, last modified October 26, 2021, Retention360, https://www.retention360.com/2021/10/26/how-to-improve-customer-retention-with-sentiment-analysis/
[7] Agi Marx, “Customer retention analytics: 5 strategies to reduce churn”, last modified unknown, Thematic, https://getthematic.com/insights/5-ways-data-and-text-analytics-improve-customer-retention/
[8] Epsilon Pressroom, “New Epsilon research indicates 80% of consumers are more likely to make a purchase when brands offer personalized experiences”, published January 9, 2018, Epsilon, https://www.epsilon.com/us/about-us/pressroom/new-epsilon-research-indicates-80-of-consumers-are-more-likely-to-make-a-purchase-when-brands-offer-personalized-experiences
[9] Matthew Dixon, Karen Freeman, and Nicholas Toman, “Stop Trying to Delight Your Customers”, last modified July-August 2020, Harvard Business Review, https://hbr.org/2010/07/stop-trying-to-delight-your-customers
[10] Santtu Kottila, “Are Chatbots Any Good At Increasing Website Conversion”, last modified February 21, 2021, Leadoo, https://leadoo.com/blog/chatbot-conversion-data-bots-increase-conversion/
[11] Brandon Gaille, “27 Surprising Customer Loyalty Statistics”, last modified May 28, 2017, BrandonGaille, https://brandongaille.com/25-surprising-customer-loyalty-statistics/
