In our last blog, we talked about Customer Lifetime Value (CLTV). One of the key ingredients of growing your CLTV is having a planned Customer Retention Program (CRP). CRP is an initiative designed to increase customer value and encourage them to re-purchase your product or service. It is also designed to increase the profitability of each existing customer. It is important to remember that customer retention begins with the first contact a customer has with a company and continues throughout the entire lifetime of the relationship.
Why is Customer Retention Management important?
The easiest & most predictable source of revenue for a brand comes from the existing customers who already know your company and the services you provide.
Here are 5 key points why Customer Retention Management is so important for your business:
1. Better conversion rates
Your existing & loyal customers know your product or service & they will purchase from you again if you have not disappointed them. Your trust in them and vice versa makes it easier to identify their needs & predict their movies.
2. Less marketing
As you are selling to your existing customers, you will spend less time and effort in finding creative marketing ideas. Building a long-term business relationship with a new customer can cost 16 times more than to maintain an existing customer.
3. Room for improvement
If you have a good customer feedback service then you have an opportunity to improve your offering and overall performance. Just ask, listen & improve.
4. Higher Profits
Selling to existing customers is less focused on price, as opposed to selling to new customers. And since your existing customers trust you already, it gets easier to convince them to become interested in even more of your products or services through up selling and cross-selling.
5. Lower costs
Pitching out to existing customers will save you a lot of money. According to studies, attracting new customers costs 6-7 times more than keeping and existing customers.
Now that we know why Customer Retention is so important, let us now focus on how to have a strategic approach to increase it.
Today, customers demand competitive pricing, value for money and, above all, high-quality service. They are more prepared than ever to switch providers when they don’t get what they want and, thanks to social media, individual switching decisions can have rapid and widespread consequences.
Customer churn is a growing problem for companies in all industries. For example, in the telecom industry two out three customers have changed service providers in the last three years. While the rate of switching varies by industry, customer churn is clearly a cause for concern because the cost of acquisition is always significantly higher than the cost of retention.
Here are a few techniques on how to increase your Customer Retention:
• Set customer expectations
You should set customer expectations early and a little lower than you can usually provide to eliminate uncertainty about the level of your service and ensure that you always deliver on your promises.
• Reward customer loyalty
Consumers may have too many options to choose from, and they can sometimes suffer from choice paralysis. If you don’t want your customer to have choice paralysis, provide them with an incentive as a customer loyalty reward to buy from you again.
• Use social media to build a relationship
Use social media platforms like LinkedIn, Twitter, Instagram, and Facebook to connect & communicate with customers and give them a space for sharing experiences with your company.
• Build trust through your relationship
Build relationships with customers in a way that fosters trust. You can build this via shared values and fostering customer relationships.
• Thank your customers
Taking time out to say thank you to your customers outside of an email campaign or a customer purchase, goes a long way towards building a brand that’s loveable and memorable. Saying thank you is a simple customer retention technique, which is a very effective one that distinguishes faceless websites from beloved brands.
Hope you loved this small but informative piece on why Customer Retention is so important & how to increase it. If you need assistance in this, reach us at Insperme Consulting and follow us for more updates on Branding & Marketing on our SME Knowledge Series.