Every business should strive to cultivate loyal customers. Learn the answer to, "what is customer retention" and tips for making it happen in this guide.
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A lone loyal customer is worth 10 single-purchase customers. With a strong customer retention strategy, you can gain a loyal following. Meanwhile, a 2% increase in customer retention could reduce costs by as much as 10%.
What is customer retention, exactly, and how can you start retaining loyal customers? Read on to discover the top customer retention strategies today!
What Is Customer Retention?
Before we cover the customer retention strategies you can use to grow your business, let's cover the basics. What is customer retention?
Customer retention is a business practice that can increase your repeat customer rate. You can extract additional value from repeat customers to boost your ROI. A strong customer retention strategy can encourage consumers to make repeat purchases.
It also ensures your customers don't defect to competing brands in the future.
However, only 29% of brands nurture their existing customers beyond the initial purchase. Nurtured leads make 47% larger purchases than on-nurtured leads, too.
In order to gain a loyal following, you first need to give consumers a reason to trust your brand. If they like what you offer, they'll commit long-term and buy more from your business. You can retain that relationship long-term to improve your ROI.
In fact, companies that excel at lead nurturing generate 50% more leads at 33% lower costs. A strong retention strategy will help set your business up for lasting growth.
If you neglect to nurture your leads, however, those one-time shoppers might decide to take their business elsewhere.
Here are a few more reasons customer retention is important for your business.
Higher Average Order Value
Once consumers trust your brand, they'll feel more inclined to trust your products. As a result, they might feel more prepared to make bigger purchases with each visit.
Increasing your average order value will increase your profits.
In fact, these consumers will branch out of their comfort zone to try the other products you offer. They might look into your sister companies, too. Gaining loyal customers can help you increase profits across all product lines!
Gaining a loyal following of customers will help you forge stronger connections with those customers. Those consumers might feel more inclined to tell others about your business. You can start gaining brand ambassadors and reaping the benefits of word-of-mouth marketing.
As more people begin talking about your business, you can expand your brand's visibility and reach.
Retaining your existing customers is more cost-effective than attracting new customers, too.
For example, you can start spending less money on advertising once you increase your customer retention rate. If your current customers spread the word about your business, you can expand your reach without costly campaigns. Meanwhile, the customers you already have will make larger purchases and repeat purchases.
Your ROI will improve as you make more money and save money on advertising campaigns.
Before using these customer retention strategies, take the time to track your existing retention rate metrics. For example:
Repeat customer rate
Average order value
Customer lifetime value
The repeat customer rate measures the percentage of customers who will make a second purchase from your store. This metric can help you determine if your retention strategy is effective. A higher repeat rate indicates more people will return to your business.
Consider how many customers will make more than one purchase in a specific period of time, too. Otherwise, consider the number of unique customers versus the number of customers who make repeat purchases.
Reviewing the customer's purchase frequency will indicate how often they return. You can calculate this metric by dividing the number of orders by the number of unique customers.
The average order value indicates how much each purchase is worth. It's the amount of money a consumer spends during each transaction.
The customer lifetime value is the customer's purchase frequency times the average order value. Understanding your customer value can tell you how much each customer is worth.
Meanwhile, the churn rate is the percentage of shoppers who have stopped being your customers within a period of time. Perhaps they found a cheaper or better product or you didn't meet their expectations.
Customer Retention Strategies
To improve your customer retention rate, first improve your customer support. Happy customers are more likely to stick with your business. If you frustrate shoppers, your churn rate could increase instead.
Keep track of any complaints your customers have. Use their feedback to start making informed changes to your business. Make sure to respond when people provide their feedback to let them know you're searching for a solution to their problems.
Consider sending consumers a discount after their first purchase to bring them back in the future. Following up with a coupon code could help you remain at the forefront of the shopper's mind, too.
Otherwise, try offering more personalized experiences. Personalized experiences show consumers you care about their needs.
You can also find new ways to delight your customers. For example, share personal stories, offer a gift, or create a referral program. A referral program will allow you to reward loyal customers for their long-term loyalty.
You can also improve your delivery rate or the user experience on your website. Otherwise, people will leave if it's difficult to make a purchase from your business. Make sure it's easy for them to make a return, too!
You can also visit Kobie.com to find new ways to increase retail customer loyalty.
Use email marketing to keep customers engaged, too. For example, you can send them an email thanking them for their purchase.
What Is Customer Retention?: Your Guide to a Higher ROI
To recap, what is customer retention? It's the process of keeping customers engaged in your business to boost your profitability. With loyal customers, you can generate repeat sales to improve your company's ROI.
Start using these customer retention strategies to help your business grow this year.
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