Customer retention is a key aspect that all businesses should strive for, and yet not enough understand just how important it is to foster relationships with long-term buyers. Too many business owners don’t think beyond acquiring customers or keeping their existing ones.
Unlike acquisition, customer retention is harder to achieve. Converting new customers to loyal consumers requires personalization, smart targeting, and proper implementation. Thankfully, there are tools that can help you do these things, and more.
A customer relationship management (CRM) platform is one of the best customer-centric tools on the market that will help redefine the way you interact with your buyers.
So, why is CRM considered the best customer retention tool? With functions like lead scoring, email marketing, and analytics, decision making is easier and customer service becomes more streamlined. These things result in improved customer experience, which can convert buyers into long-term consumers.
Why Customer Retention Matters
Customer retention is the art of keeping existing customers and increasing their lifetime value by becoming their go-to source on goods and services. To outsiders, it might seem like acquiring new customers is more crucial than keeping old ones. After all, getting a new customer means acquiring someone new who can spend on your business, right?
While that’s technically true, you have to remember that customer retention and customer acquisition provide different values.
Acquiring new customers isn’t so straightforward – you are likely spending some of your resources on ads and marketing campaigns in order to target new leads and convert them to new users or buyers.
On the other hand, existing customers cost zero resources in exchange for their business. Think about it this way, if your average ad spend comes down to $100 per customer, a buyer who purchases your product or service for $200 will have an initial value of $100. If this customer buys goods and services worth another $200, they would have repaid their acquisition costs and given you $300 in profits.
Acquisition VS Retention: Which One Is Cheaper
Businesses can spend anywhere from a couple hundred to thousands of dollars on ads, which could drive some new traffic and revenue into your business.
As effective as this strategy may seem, keep in mind that profit and revenue aren’t essentially the same thing. If you’re not careful, your company could end up spending more than what the average customer is worth when acquiring new customers.
Customer retention isn’t just about saving on ads. Here are other reasons why you should consider making this your new top priority:
- Long-term customers tend to spend an average of 67% more than they did during their first year. Existing customers will eventually trust you more and keep coming back for related products and services. In the long run, they’ll start buying products or services that had nothing to do with their initial purchase, increasing their overall lifetime value.
- Loyal customers remain loyal for a long time. In a survey, 77% of customers said they remained in business with a company for more than 10 years. If a majority of your customer base consists of existing customers, you’ll have a consistent revenue stream while saving on acquisition costs.
- Long-term buyers not only increase their own value but attract new buyers. Customers with an emotional relationship with a brand not only have a 306% higher lifetime value but are 71% likelier to recommend the brand with friends and family.
- Retaining customers is one of the easiest ways to increase profits while cutting down costs. At least a 5% increase in customer retention leads to a 25% increase in profit.
Customer Retention Challenges
Creating a customer strategy isn’t straightforward, otherwise more businesses would be doing it. It all begins with knowing what the common roadblocks are.
Retention strategies differ depending on your industry, business size, and customer base, but the common issues that increase customer churn more or less remain the same:
1) Terrible Customer Service
Bad customer service is the quickest way to lose existing customers. Whether it’s unanswered inquiries or rude customer reps, bad customer service can easily convince your buyers to look the other way.
In such a saturated market, buyers won’t have a hard time replacing your company with another one that has better customer service. In fact, customer service is so important that some buyers base their decisions on interactions with the company alone. A survey reveals that 72% of customers remain loyal with a brand because of friendly reps. That’s not all; a whopping 93% of buyers are likely to make repeat purchases with the same brand following a great customer experience.
On the other hand, good customer service isn’t just about being nice to your customers. Your representatives’ ability to actually provide knowledgeable, helpful solutions, while being time-efficient are two hallmarks of amazing customer experience.
2) No Improvements On Products and Service
This is especially true for B2Bs. Over time, your customers will start looking for more complex solutions as they start to develop more comprehensive needs. If you don’t evolve with your customers, there will eventually be other businesses that can offer what you can’t.
Good customer service isn’t just about adding new value. Most of the time, customer retention can be improved simply by listening to what they’re saying based on goods and services that already exist.
Customer testimonials are a great way to measure customer loyalty. Using social media, polls, and email marketing campaigns, you can gauge customer satisfaction and understand how they perceive your service. If you have these channels open but still fail to provide improvements, your customers will eventually feel like you aren’t listening to them and move on with another provider.
3) You Don’t Show Appreciation
Customers want a dynamic relationship with businesses. This means that buyers want to work with businesses who know what they’re worth. If you’re offering a loyal customer of more than two years the same discounts and deals you’re offering a new buyer, your existing customers won’t feel appreciated, which may cause them to feel a little bit neglected.
Appreciation isn’t just about rewarding them, either. At the very least, some form of engagement between your brand and the customers is needed to sustain the relationship. If your interactions are strictly transactional, your customers won’t develop an emotional attachment to your brand, making it harder to convert them into loyal customers.
The Role Of CRM In Customer Retention
Customer retention is a multifaceted aspect of sales. There are so many factors that go into customer loyalty, which is exactly what makes it overwhelming.
Thankfully, there are tools that make managing relationships with customers easier. Nowadays, most customers are expecting personalized, targeted service, and it’s difficult to do that without the appropriate tools to make customer support more seamless.
A customer relationship management (CRM) software is a tool that can help you manage relationships with clients and stay on top of each person’s interaction with your business. This way, fostering relationships and converting individual customers to local buyers becomes more manageable. – Read more