Acquisition and retention are both crucial in boosting profits. While getting new customers is great for business, keeping existing customers has a better ROI. In fact, profits increase by as much as 95% with just a 5% gain in retention.
Over time, a customer provides more value to your business as they spend up to 67% more than new ones. Customer retention costs 5x less than customer acquisition as well. Thus, having robust customer retention strategies will not only bring profit but also cost savings!
Understand the importance of customer retention and how you can keep your buyers for life with this guide!
What is Customer Retention?
Customer retention is how one wins customers for life. It points to how you’re able to maintain your relationship with existing customers and keep on yielding income from them.
To improve customer retention, you can employ many tactics such as providing great after-sales services, discounts, or other perks.
Why Customer Retention is Important to Your Business
Winning customers for life means they’ll keep coming back to your business and even choose your brand over others.
These loyal buyers provide not only profit but many other business benefits. Take for instance, word-of-mouth which is, in effect, free ads for your business. Customer feedback is great for building the credibility of your business to prospects.
To highlight the importance of customer retention to your business, here are four benefits you can gain from lifetime buyers:
1. Save on Marketing Costs
Get more value from your marketing efforts and spend less money on them by focusing on existing customers.
As per the marketing stats this year, boosting your retention rate by 5% can drive your profits by 25% to 95%. This means that you can allot $7 for ads to repeat buyers compared to the $34 it costs to market to new buyers. That’s nearly 80% reduced costs!
Repeat buyers can save you money because they have clear brand awareness early on. They also know your business and how to use your product enough to depend less on your customer support.
2. Repeat Buyers Spend More
Being able to provide lifetime value to your buyers gives them a reason to keep coming back to your business. With this, you can even profit more in the long haul! In fact, repeat customers tend to spend around 67% more than new ones.
Repeat buyers already know the quality of your product. Coupled with good customer support, this makes them less likely to be concerned about prices. Also, 50% of them are more open to trying new products.
Many people think that pricey products mean high quality. One such trend is that 70% of buyers are willing to pay premium prices if they offer other perks such as discounts or free shipping.
3. Get Free Advertising
Patrons are likely to put in a good word for your business to their friends and family. Referrals can effectively attract new customers. In fact, 92% of buyers trust word of mouth above all other forms of ads.
This also won’t cost you anything as people will readily endorse your business if they trust it. That said, you can boost the chances of gaining word of mouth through referral marketing campaigns.
4. Gather Feedback for Improvements
Measuring customer satisfaction such as conducting a survey allows you to gain insights from your buyers.
Listening to and acting on their feedback makes buyers feel important to your company. This can boost your brand loyalty and lessen customer turnover.
Take the startup, Glofox, as an example. They changed their whole product roadmap to meet the need for a guide to shifting to online fitness classes. After a month, they launched software to help customers join fitness classes. As a result, they are now one of the best gym management software platforms in 2021.
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5 Proven Customer Retention Strategies for Your Business
Knowing the importance of customer retention is only beneficial with a proper plan. Employ these surefire ways to keep customers coming back to your business for the long haul:
1. Build a Positive Customer Experience
A good and consistent customer experience (also known as CX) creates a positive image of your business. Starting your customer retention strategy with an outstanding CX can turn first-time buyers into loyal ones.
A positive CX can be produced by identifying and eliminating customer pain points. You should also look into ways to increase customer satisfaction such as having a smooth customer onboarding process.
Building an online community can also improve your relationship with buyers. This can be built on social media or e-commerce platforms like Shopify. A community allows them to have a platform to discuss and ask anything about your business. It can also give them an emotional tie to your brand.
2. Personalize and Maintain Communication
Personalization adds a human touch to your brand. It also ensures that your message is relevant to your buyers. Using your customer data and creating audience personas for your preferred channels can provide a more personal approach to connecting with people.
You should frequently engage with your audience on social media. Be sure to show that you are actively listening and empathizing with them by using positive scripting.
Stay connected with your existing customers through email newsletters to build lasting relationships with them. It can be about your latest product or feature, promos and offers, partnerships or company milestones, blogs, and other exclusive content.
3. Incentivize Customer Loyalty
One of the simplest but most effective ways in winning customers for life is by making them feel appreciated.
Reward your current buyers with free subscription periods or introductory pricing. This can lessen their odds of jumping to your rivals. Gamification is also another way to improve customer retention.
By using people’s competitive spirit in a fun, engaging way, you get a win-win situation for both parties. Customers can get gifts and discounts while your business gets customer data, insights, and social media engagement.
4. Deliver Excellent Customer Support
A great scope to focus on in your retention plan is having reliable and timely customer support. Based on Khoros, 83% of customers are more likely to be loyal to brands that respond to and resolve their complaints.
Provide customer support through various channels (e.g. phone, email, website, social media, etc.) to make it easy for people to get their problems solved. A live chat feature can also help you provide quick assistance to buyers and prospects.
Customer service also extends to knowing how your existing customers feel, so take time to collect feedback. It’s also important to close the loop with your customers by sending a personalized thank you message.
5. Monitor Customer Retention Metrics
Improve your customer retention strategies by tracking their performance over time. This way, you’ll know which parts of your customer retention plan need focus or tweaking. Customer retention management metrics you should monitor include:
- Churn rate – customers lost in a certain period. This is computed by dividing the number of customers lost in a given time by the total number of buyers at the start of this time frame.
- Repeat customer rate – customers who have made at least two purchases in a certain period. This is computed by dividing the number of return buyers by the total sum of buyers and multiplying it by 100.
- Customer lifetime value (CLV) – how valuable a buyer is to your business. This is computed by multiplying all the averages below:
- Average Purchase Value = Total Revenue divided by Total Number of Sales
- Average Purchase Frequency = Number of Purchases divided by Number of Unique Customers
- Average Customer Lifespan = Sum of Customer Lifespans divided by Total Number of Customers
Add Magic to Winning Customers for Life
With a well-planned customer retention strategy, you can better gauge what your customers need to win their loyalty.
Winning customers for life doesn’t have to fall on your shoulders. Magic is here to help scale your business in any way. Focus on what matters most in your business and offload tasks to a virtual assistant!
Get matched with a Magic Virtual Assistant to win and retain customers. They can take on a wide range of roles such as:
- Administrative Assistant – Email management, CRM clean-up, basic social media posting, research work, and documentation
- Sales Assistant – Cold calling, lead generation, data mining, and lead qualifying
- Bookkeeping Assistant – Data entry, invoicing, basic financial reporting, refund processing, balance sheet
- Customer Support Assistant – Phone support, chat support, escalation management, and quality management
Bring into play the importance of customer retention with a Magic Virtual Assistant. We’ll source and screen virtual assistants best suited to your business needs.
In just 72 hours, Magic will handle the entire hiring process so you don’t have to. All you have to do is book a call with us to discuss how we can help!