Where does the true value in your customer base lie? Is it with the newly minted customer, or with the customer who has stuck with your brand for a number of years or through a number of purchases?
The answer is, of course, that there is true value in both new customer acquisition and in customer retention. However, empirical evidence indicates that it is those customers who develop a loyalty to your brand that provide the most value over time.
Customer Retention Provides Greater ROI
The Forbes article "Customer Retention is King: The Future of Retention Marketing" notes: "Retention Marketing efforts have recently gained more traction. Consumers today have short attention spans and an excess of options, and marketers have had to adjust accordingly. This trend is beneficial: according to a study by Bain & Company, increasing customer retention rates by just 5 percent increases profits by 25 to 95 percent. What's more, 82 percent of companies agree that retention is cheaper to execute than acquisition, according to an eConsultancy report."
Retained customers are not just worth more because they continue to purchase products over time, they also are worth more because they tend to make larger purchases every time they purchase. In other words, when comparing a new customer to an existing one, existing customers spend more money on your products and services in both the short-term and the long-term.
The Key to Customer Retention
Forbes' "Why Customer Retention is King: The Evolution of Retention" states: "The key to effective customer retention lies in understanding and anticipating the needs of customers and structuring their campaigns accordingly."
Data-driven technology is central to this process. The more data you capture about your audience, the more targeted your marketing campaigns can be. In the case of customer retention strategies, you have a leg up in this process because, in the act of acquiring a new customer, you have gathered a virtual storehouse of essential data about that customer. Retention strategies, then, can piggyback on the information you already have to retain existing customers.
Marketing Tools Designed for Customer Retention
There are a variety of ways to improve your customer retention rates. The most obvious way to retain customers is to provide outstanding products and exceptional customer service before, during, and after the sale. Though the internet may have changed the face of business, the basic principles of excellent customer service still produce results in terms of the loyalty of your customers.
In addition to superior customer service, here are some other tried and true methods of boosting your customer retention rates and improving your bottom line in the process:
Loyalty Programs: Everyone appreciates being rewarded for good behavior. For your customers, a loyalty program indicates that you appreciate their business and that you value your relationship with them. If your loyalty program offers real value to your customers, it may be that your program is the very thing that stops a customer from looking elsewhere and locks that customer in to doing business with you rather than your competitors.
For best effect, loyalty programs should be carefully designed to reward specific customer behaviors that will net you a positive ROI. You must measure the cost of administering the loyalty program against the results it will yield in terms of increased customer retention and overall value. Otherwise, your loyalty programs can become a drain of your resources. Balance is key.
The Marketing Donut notes that the loyalty program "should be simple to use and the rewards should be attractive and attainable. If customers have to spend a lot to get a small gift, they will be insulted. At the same time, make sure you can recover the cost reasonably quickly."
Personalization: Customers today expect to receive information tailored to their particular tastes and interests. This is a reasonable expectation, considering the technologies that now exist to make that happen. Whether your company is big or small, you can manage at least some level of personalization in your marketing messages, from something as simple as including a person's name on an email to formal re-targeting strategies.
Gamification: Regarding gamification as a customer retention tool, Hubspot notes: "With gamification you are encouraging shoppers to complete actions by making it more enjoyable and adding a sense of competition. Sites that incorporate gamification often have leaderboards, status, and badges so shoppers can showcase where they stand relative to others. Gamification is great because it can be incorporated into other things like promotions and even loyalty programs."
Positive Social Proof: Humans inherently want to be part of a group. Use this basic human tendency to bolster your customer retention by providing positive social proof concerning the benefits of your products and services. By using social media marketing and leveraging user generated content, you can make existing customers fall in love with your company all over again simply by demonstrating that you have other loyal brand advocates as well.
Have you tried gamification to entice customers to stay loyal to your brand?
Focusing on customer retention strategies is a cost-effective way to drive sustainable growth for your business. Customer retention tools like loyalty programs, personalization tools, gamification, and positive social proof help you to retain and delight customers throughout the entire customer lifecycle.
For more helpful tips on how to improve customer retention and ensure sustainable growth, contact us today. As inbound marketing specialists, we look forward to partnering with you to design campaigns that promote customer loyalty.