While much effort is put into winning new customers, rather less is put into retaining the customers that organisations have already won. There is a tendency to believe that, once convinced to buy a product or service, good customer service is sufficient to ensure that customers remain loyal. As a result, long term customer retention strategies are neglected and not seen as a valuable measure of performance.
This week we’re looking at why customer retention should be on the radar for marketers, and how a few simple changes to strategy could work wonders.
What is customer retention?
As with many marketing terms, customer retention is often discussed but rarely unpacked. For NGData, a global provider of customer data platforms, customer retention ‘refers to the activities and actions companies and organisations take to reduce the number of customer defections.’ With the aim of retaining as many customers as possible, NGData argues that ‘customer retention begins with the first contact a customer has with a company and continues throughout the entire lifetime of the relationship.’
Business Dictionary’s definition suggests that more than simply being a question of numbers, customer retention is important ‘since satisfied, retained customers tend to spend more, cost less and make valuable references to new potential customers.’ Inc.com shares this view, arguing that customer retention ‘is a major contributing factor in the net growth rate of businesses.’ Inc goes on to suggest that the cost of customer acquisition outstrips the cost of serving existing customers, and so as such ‘the longer customers are kept, the more years over which the initial cost of acquisition can be spread.’
Why does it matter?
The question of why customer retention matters was touched upon briefly in each of these definitions, with reasons including increased customer numbers, reduced costs, continued growth and wider profit margins. If these factors weren’t convincing enough, Signal recently published a blog post arguing that customer retention is now more important than ever before.
Research conducted by Signal found that ‘over 60% of chief marketing officers are unhappy with their customer retention rates, yet nearly 75% name new customer acquisition their top priority.’ This mismatch in focus does not make for coherent customer retention strategies, and Signal argues that marketers must prioritise crafting a path to high lifetime value through paid media and key touchpoints. It suggests focusing on highly engaged customers, who are ‘two times more open to upsell opportunities and six times more likely to try a new product or service’ than those who are less engaged.
Three ways you can boost customer retention:
With so many industry commentators pointing to the need for customer retention, the question of how to shift strategy focus to meet these needs is a poignant one. Here are three simple ways marketers can begin to make the shift:
– Work hard at customer onboarding – to lessen the gulf between winning new customers and retaining long term ones, onboarding can be a good way to start. For Business2Community, rather than simply congratulating yourself on a sale, marketers should use the same marketing automation software that initially won customers to now show them around and help them get the most out of their purchase. Through welcome emails, video tutorials or feedback from others, new customers can be nurtured into loyal ones and fed into retention figures.
– Think small – No matter the size of your organisation, thinking small and personalised is sound advice when looking to boost customer retention. For Customer Think, ‘the key is to understand that the strongest bond is between two people and people are what create a successful customer retention strategy.’ It is suggested that segmenting customers means CRM platforms and strategies can be better targeted for personalisation, while team incentives for retaining customers, rather than simply for acquisition, can result in a change in organisational culture from within.
– Become a source of content – Content marketing is used for many strategy aims, but its value to customer retention should not be underestimated. With brands now seen as much more than an entity which sells products or services, content can be used to provide added value to customers demanding that extra mile. For Inc, becoming a source of information and education for customers can be a great way to maintain interest in and loyalty to your brand, in a way that goes deeper than sales figures.
Brands will always look to gain new customers, but with so much competition across sectors, perhaps customer retention could be the key to gaining that competitive edge and securing long term growth and loyalty.