Want to Increase Revenue? Focus on Customer Retention
Businesses generally focus on generating leads and growing their customer base. But did you know that acquiring new customers is 5 to 25 times costlier than retaining existing ones? Increasing retention can also lead to exponential revenue growth. To quantify, a mere 5% uptick in customer retention can translate into a massive 25-95% increase in profits. (Source: Bain & Company)
As an increasing number of brands discover the positive impact of customer retention, it is fast becoming one of the pillars of growth. Companies are adopting newer strategies to maximize retention and scale it up to 100%. However, though ideal, this is quite impossible to achieve. As a rule of thumb, a retention number below 15% needs attention. This brings us to the next logical question: how to stop customers from leaving?
In this article, we’ll discuss the underlying reasons for attrition and strategies to increase retention.
1) Meet customer expectations
The #1 reason for attrition is customer dissatisfaction. The only way to find out how happy customers are with your service is to ask for feedback. Implement a feedback gathering system with regular customer surveys and polls. Encourage honest ratings and reviews from customers. One-on-one interaction over the phone will give you deeper insight into their experience and how it can be improved. Keep an eye on metrics such as customer satisfaction score (CSAT), net promoter score (NPS), Play Store and Google ratings, etc.
Another possibility that might result in a subpar customer experience is if your product is not what your customer expected it to be. This could be because of unclear communication in your advertisements, on your website, or other platforms. A regular audit of your messaging reduces miscommunication. Aim to keep your messaging as succinct as possible to avoid unnecessary attrition.
2) Prioritize customer-centricity
The way you treat your customers leaves a lasting impression in their minds. Providing an excellent experience is also likely to land you more customers. According to a report, 97% of people are likely to share great customer experiences within their circle, thus increasing your organic reach. Good service also helps increase the lifetime value of existing customers. Close to 70% of people engage in repeat transactions with a brand that offers them excellent customer service.
Apple sets the bar really high when it comes to customer-centricity. Their design thinking focuses on giving users exactly what they want – convenient and intuitive products. Their customer-centric design is the reason why people hardly ever switch from Apple to any other brand. To achieve this, Apple refuses to let its tech team lead product design and innovation. Instead, the designers are encouraged to create something that they would themselves love to use.
3) Research your competitors
If your competitors have a stronger offer in terms of product, price point, or both, you could lose customers. Constant market research will help you identify your competitors’ strengths & weaknesses, enhance your offerings, and stay on top of your game.
4) Provide a seamless experience
Your customers may reach out to you for support on multiple platforms. You can enhance their experience by providing seamless omnichannel support. Consider building your presence on widely used social media platforms as well as instant messaging platforms.
It is also a good idea to check your product for bugs and glitches that could be contributing to attrition. If you are an e-commerce store, having a seamless checkout process is crucial for acquiring new customers and retaining existing ones too. To quantify, an average e-commerce store loses over 75% of its sales due to cart abandonment.
5) Offer a subscription-based service
If you sell a high-frequency use product, increasing retention can be as simple as adding a subscription option to your website.
Dollar Shave Club leveraged this model beautifully to capture the $4 billion shaving industry. They identified that having to re-order razors each time was a pain point for customers. They solved this by delivering subscription-based razors to customers’ homes each month. They packed additional value by providing an inexpensive solution compared to their competitors. While others brands charged upwards of $4 per razor, Dollar Shave Club kept their prices as low as $1. They succeeded in building a loyal customer base by giving their customers no reason to leave.
For products that do not intrinsically have a repeat use case, consider adding ancillary products to your catalogue that will keep the customer coming back for more. As an example. if you sell teaware online, consider offering subscriptions to tea leaves that will keep your customer coming back for more.
6) Reward loyalty
Customers that feel unwanted are not likely to stick around. Around 79% of customers stay loyal to brands that care about them. Rewarding their loyalty will help you strengthen your relationship with them. Airlines have been rewarding customer loyalty in the form of miles for a while now; these loyalty programs today are so valuable that they were utilized as collateral for raising financing in the early months of the pandemic.
But a good loyalty program goes beyond complimentary services and discount coupons. The key is to build a relationship with your customers. Go the extra mile to know their likes and preferences. This will help you offer customized experiences that will leave a lasting impact.
7) Keep your customers engaged
When customers feel connected to your brand, they are more likely to engage in repeat transactions. Periodic communications via emails, messages, push notifications, chatbots, in-app messages, and social media can all work towards keeping the conversation with your customer going.
Starbucks does an insane job at keeping customers engaged. They’ve gone the extra mile and built a website where people can submit their Starbucks ideas. This way, customers feel a sense of belonging. Starbucks, in turn, receives awesome food and drink suggestions to enhance its menu.
We hope this article helped you understand the importance of building on existing customer relationships. If there’s a topic that you would like us to cover, do let us know in the comments.
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