As the cost of acquiring new customers exceeds the cost of retaining existing customers, implementing an effective customer retention strategy should be a top priority.
But developing a customer retention strategy isn't always straightforward. Maintaining that relationship may be more work than getting them in the door in the first place. This is why fostering customer loyalty and retention should be a core aspect of any organization.
What is a customer retention strategy?
Customer retention strategies are the activities used to improve customer loyalty and increase repeat business. The approaches and tactics are an essential aspect of an organization's overall business strategy. However, not all methods work for every organization. An organization must determine the approach that fit its needs -- and the needs of its customers -- and effectively implement them.
Retention is an essential aspect of an organization's business strategy and provides several benefits.
An organization's customer retention rate includes measurable activities such as:
Purchase frequency: Number of orders placed divided by the number of unique customers
Repeat customer rate: Number of customers that made more than one purchase divided by the number of unique customers
Average order value (AOV): Total revenue earned divided by the number of orders placed
Customer lifetime value (CLV): Purchase frequency multiplied by the average order value
There's a relatively easy equation that shows what the customer retention rate is.
An organization must determine which metrics are most appropriate for its needs. Given that all organizations do not operate the same, organizations should evaluate what data sources they have and can use to create a view of the customer's value and loyalty.This is best handled through the use of a CRM application such as Salesforce, HubSpot CRM or Zoho CRM.
1. Education and training via videos and live webinars
Depending on the products or service, education and training videos and webinars can be an effective self-service channel that puts a solution to a customer's problem in their hands. Additionally, engaging videos can be an excellent tool for lead generation, because potential customers can see firsthand how the product or service works.
A customer loyalty program rewards customers for the continued support of a company. The more customers shop and interact with an organization, the more they are rewarded.
4. Set and exceed customer expectations
When making customer promises, organizations should strive to overdeliver on contracts by setting and meeting customer expectations with a service-level agreement (SLA) that are reasonable to the organization and work toward them.
5. Use customer feedback and satisfaction surveys
Customer feedback and satisfaction surveys can provide keen insight into what's working and what isn't. While they may look dull, people like giving feedback -- especially if the input rewards them somehow. Surveys can also be a key factor in identifying unhappy customers and offers organizations a chance to solve the issue before churning. Survey tools such as SurveyMonkey, Typeform, JotForm and AskNicely are built to streamline the process, analyze the gathered data and feature multiple pricing tiers and potential integrations.
6. Create a community and customer advocacy program
Provide a forum for customers to communicate and share. Platforms like this encourage advocacy and community among users, promoting engagement by discussing important topics and asking questions about a brand's products and services.
7. Develop a customer communications plan
Use a customer communications plan to reach out to customers strategically via their preferred channel. This can ensure customers receive important information promptly and keep them informed about any developments or changes.
8. Personalized communications
The expectations for personalized customer service have grown as customers don't want canned responses. Organizations can use customer data to create an experience that feels tailored to the individual. That same data can inform targeted sales and marketing communications to deliver the most interesting products and services to the customer.
9. Customer feedback loop
Implement a customer feedback loop to collect, analyze and distribute feedback. Customer feedback -- especially complaints or issues -- is incredibly valuable for improving a product or service. By using metrics like a net promoter score, an organization can better understand current customer loyalty.
10. Customer reviews and testimonials
In addition to sending customer surveys, an organization can use unbiased customer reviews and testimonials to gauge brand sentiment and loyalty. Many customers rely on online reviews when it comes to making a purchasing decision. Therefore, favorable reviews of an organization and its offerings could make or break customer retention.
11. Inspire customers who are mission-driven
As various social activism and policies take center stage, consumers are starting to look more closely at an organization's mission and stance on certain topics and make purchasing decisions accordingly. For example, Toms has famously built an entire business model around donating a pair of shoes to someone in need for every pair purchased.
12. Subscription services
While there are several ways to employ a subscription service, the key is to make the offer worth the price of admission -- even if it's just a weekly newsletter in the customer's inbox. A subscription service is also an effective tool for reciprocity. The customer gains access to exclusive content, deals or services, and the organization can gather customer data that informs business and strategy decisions.
13. Marketing events
Examples of marketing events range from activities and kiosks offered at trade shows, demos and unique customer-only events. These events must fit the brand and allow the customer to engage with the product or other customers, or it should give them access to something related to the product that the general population cannot access. This can help put a personality to a normally faceless organization and give customers direct access to staff.
Finding which customer retention strategies best fit a particular organization is only the first step. Implementing those strategies and adjusting the results as needed is crucial to long-term success and improved customer retention.
