Customer retention refers to an organization’s ability to keep customers buying their products and from switching to other providers.
It is increasingly important in a world where consumers are more likely to switch products than ever before. The business case for customer retention is obvious. McKinsey states1 that companies need to acquire three new customers to make up the business value of losing one existing customer.
Customer retention is a key component of the overall customer journey. Organizations that succeed at customer retention will benefit by encouraging customer loyalty. Organizations that invest in customer experience management understand the importance of customer retention.
Retention is best achieved by overcoming barriers to switching, maximizing the value of products and services, meeting customer expectations and enriching the customer experience (CX).
Customer retention requires a series of initiatives and processes designed to build trust and enhance customer loyalty. It helps structure the fulfillment of brand promises through the consistent delivery of value.
Organizations should design initiatives that are either company-led (such as onboarding and customer loyalty programs) or customer-led (app download and beta testing) to encourage brand loyalty. The goal is to activate first-time buyers and then keep customers from switching to a competitor. An effective customer retention program can include the following features:
Collect, analyze and distribute customer reviews and surveys. Detect customer behaviors and trends that enhance the user experience (UX) and leverage them toward retention development.
Organizations should develop separate marketing campaigns for repeat customers who have bought recently and absentee customers. Tools they can use include personalized email marketing powered by automation to announce special promotions and updates to keep your brand fresh in the minds of customers. Additionally, they should encourage and incentivize their customers to follow them on social media so they can send them updates and offers. Organizations can also use a communications calendar to chronicle interaction and enrichment (for example, upsells and cross-sells) and to schedule special promotions and announcements.
Invest in customer success with self-service tools (such as knowledge bases and community forums) that educate users and provide solutions without requiring assistance from customer care teams. Organizations can also work with influencers to demonstrate how to best use their products or services.
As part of your ecommerce strategy, offer a new product or service that solves customer dilemmas and is superior to that of your competitors. This adds incentive for customers to commit themselves to your brand.
Organizations have several ways to meet customer expectations and keep them buying products or services from that provider.
Simply put, an organization that makes a high-quality product or provides excellent services is likely to receive customer loyalty in response. Customers are unlikely to switch if they are happy with what they currently use.
These can be things like customer loyalty programs or exclusives to repeat customers. If customers are rewarded for their patronage, it will make it harder for them to switch to another provider.
In scenarios where something goes wrong with a product or service, organizations can keep customers happy by responding to their complaints immediately. Prioritizing customer support is a must-have for organizations that want to retain their customers.
Providing cost-effective products and services is an important component of customer retention. An organization that offers high-quality products or services at a lower price point than the competition will likely find extremely high customer retention figures.
There are several ways an organization can track the health of its customer retention initiatives. Here are five key metrics that help organizations improve their customer retention.
There are several tools organizations can use to increase customer retention.
Customer relationship management (CRM) system: A CRM system unites multiple functions (for example, project management, contact management, digital marketing) into a single data-driven platform. A “unified” CRM system automates communications and streamlines internal processes to enhance the overall CX. It may include personalization features (such as targeted content, offers, alerts) that silo customer engagement within a specific context. Overall, a unified CRM provides procedural consistency and reliable data that help increase customer retention and company revenue.
Chatbots: A chatbot is an artificial intelligence-powered computer program that uses natural language processing (NLP) to decipher customer inquiries and provide automated responses. This stimulates informational exchange, which personalizes the online CX while collecting user data. AI chatbots also suggest or prompt customer actions that lead them to their desired resources. These processes help customers achieve their site visitation and purchasing goals, and build brand reliability, trust and loyalty, which increases CRR.
Loyalty programs: Many organizations have established robust loyalty programs that reward customers for their purchases. Chipotle and Starbucks, for example, have long-established loyalty programs that encourage repeat purchases through free items based on points accrued.
While every organization needs a customer retention strategy customized to their needs, there are some common best practices they should keep in mind.
Customer retention helps facilitate the growth and stabilization of your customer base and company revenue. By consistently delivering value, companies fulfill their brand promises which elevate credibility, trust and brand sentiment, appealing to the average customer.
Here are the four major benefits of customer retention:
Sources
1 Focusing on existing customers to unlock growth, McKinsey, 16, August, 2023
2 Customer Recommendations Have Only A Small Business Impact For Big Brands, Forrester, 18, November, 2020
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