Steering Business Growth through Customer Retention
To quote the famous management guru, Peter Drucker (1973), the sole purpose of a business is “to create a customer”. However, creating a customer base only spells the start of end-game, which concludes in generating the maximum Customer Lifetime Value (CLV), which will be discussed in detail later.
Importance in Sustainable Growth
Customer retention has been a topic of debate since the mid-1990s, mainly due to its significant influence on the financial performance of organizations. Customer loyalty is an affordable and viable business strategy, which ultimately leads to repeat business with existing base. According to many successful entrepreneurs, its importance cannot be overstated in today’s competitive environment. Customer retention is imperative for growing a sustainable business, but it will serve you well to understand the core concepts before incorporating the strategies in your business model. Customer loyalty begins with the first contact and continues throughout the duration of the relationship. As per current researches on business bulletins, retaining loyal customers can increase profits by up to 95 percent. Focusing on your customer retention pays off across every aspect of a business. Sometimes, the results can exceed expectations in terms of financial and non-financial benefits reaped. Customer retention should thus become a part of the strategic marketing planning process you are looking forward to for your business. A customer retention strategy is about keeping the customers a business has invested in to acquire. As per Harvard Business School report, on average, increasing customer retention rates by 5% increases profits by 25%-95%. This substantiates the importance of finding new customers, but keeping the old ones and turning those new customers into loyal buyers is even more important. Customer retention is integral to corporate success because it increases your profits, explains Entrepreneur magazine. Satisfied customers become loyal customers.
Benefits of Customer Retention:
- Increased revenue for your business
- Low customer acquisition costs
- Increased referrals for your new products
- Increased market share with your competitors
- Valuable feedback for marketing and sales analysis for more production to your business
Customer Retention Rate
Calculation of your customer retention and the attrition rate of the company are directly linked to customer retention as these provide significant influence on revenue and success stories.
To quantify the customer rate, your marketing department has to do a technical analysis of the customer reviews, not only digitally but manually too. The facts about where and when a customer left are going to be critically analyzed to figure out the retention rate of your business. This involves a thorough and detailed research from the point your business got awareness to the point you had an enough margin to retain them. In order to calculate retention rate all of your business data needs to be submitted to the marketing department, figures and graphs need to be maintained not only on weekly or monthly bases but daily routines too. This will help you to determine sales and purchase rates.
To check the loyalty of your customer, you can issue, for example, special cards to award points so that data can be maintained to note variations in the trends of existing customers as well as gathering their preferences. This can allow your marketing and sales team to set their weekly, biweekly and monthly goals in order to meet customer expectations and satisfaction. All of your calculation should start on immediate bases as soon as all critical data is collected and analyzed.
A powerful and commercially successful business like yours needs to implement strict measures to ensure that the goal of retention is monitored and safeguarded in terms of turnover. You do know your business is unique in its own manner and to ensure yours stands out in a crowd, maintain all data of loss and recovery and work along with your marketing and sales department to meet business set targets and beat the competition with a standing out revenue and customer win over. To satisfy your customers it’s important for your organization / employees to see the bigger picture and contribute their best efforts accordingly.
To support this statement for your vision we can discuss the success story of Richard Branson, founder of Virgin Atlantic, which comprises of 400 companies. Branson not only ensured customer retention but also made certain to have the best team to grow his empire. He very confidentially took extra measures and not only ensured that his turnover met his employee and customer satisfaction, but also set new records globally. All his efforts are globally recognized and his biography can set new examples and milestones for businesses that are notating on client and customer retention with a powerful team to maintain and achieve goals.
Customer Retention Techniques:
Richard Branson – A business has to be involving, it has to be fun, and it has to exercise your creative instincts.
A customer retention program is the best way to increase retention, reduce churn and grow revenue for your business. You need to discover the right mix of strategies that work and increase revenue along with customer base. The easiest way to grow your business is through repeat customers. The average business loses around 20 percent of its customers due to not being able to differentiate their needs and wants. Bringing in new customers is hard, but losing them is easy (and costly). That’s why customer retention is critical if the business needs to grow. Developing programs to increase customer loyalty will play a crucial role to enhance business. Small businesses are increasingly focusing on customer rewards and loyalty programs as a retention strategy. Identifying how to retain customers is one of the most important tasks a business faces.
- Courtesy – the fundamental key to maintain your customers
- Proactive – Your Business will have to be proactive. Researches are needed to be done on all competitors to compare pricing and marketing strategies for your records.
- Employees – The front line representatives of your business will need to have great insights into your customers’ needs and wants.
- Communication and Feedback – No one knows better than your customers. Survey new customers and then repeat the surveys to confirm your processes are effective. Often google your business name and see what comes up.
- Social Media – Keep track with your customers through social media.
- The “Extra Mile” – Reward repeat your customers, focus on your rapport building to show that you do CARE. Add extra gift bags/ hampers and ensure your quality comes with satisfaction.
- Calculate – Customer churn, customer lifetime value, dynamic incentives, email personalization, texts, Loyaltymarketing can be used to further retain your old customers and to spread word of mouth for your new customers.
- Advertise – Brochures, pamphlets, leaflets, billboard advertising can be very handy too in order to make sure your business remains in focus.
Customer Retention Marketing
The primary objective of Retention Marketing is to keep customers engaged and interested in your products and services. Retention Marketing should become a part of the strategic marketing planning process for your firm. It is important to define your customer retention and also to make sure a proper guideline is set for marketing analysts of your business so that they are able to monitor and improve it from all aspects. Customer satisfaction should be at the basic core of your business planning. Having an extensive customer retention strategy in place will help to expand and create new opportunities to grow and generate revenue for your company.
The concept of customer value is the most important factor which contributes toward the prosperity and success of your company and it should be under consideration as an important source for a competitive advantage over any sort of organization (Woodruff, 1997). For any marketing activity we should understand that customer value plays a vital role in attracting and retaining customers and it has been widely realized that equipping yourself with the proper strategic tools is an important one (Wang et al., 2004). Customer loyalty and customer retention are closely related factors that have some general rules.
Customer trust in a brand has a very positive relationship with brand trust (Sahin & Kitapci, 2013). Hence, to make monetary gains, customer satisfaction plays a very important role (Hauser, Semester and Wornerfelt, 1994)
By keeping track of a few factors, your retention marketing can be easily improved and worked upon:
- Quality- Maintain it throughout your business
- Customer satisfaction, be nice unexpectedly.
- Customer Value
- Customer Trust
- Conducting surveys
- Online presence and acknowledgement should be made necessary and a team of professionals will be required to get this set up so that customers know your values and form a connection
- Pricing mix
- Switching barriers
- Online business coverage , Social media sites coverage and Email Marketing
- Time your services and set expectations so that your customer can be delighted of the fact that you cover necessary details to acquire not only new customers but retain the old ones.
Marketing strategies should focus on asking your team of professionals to actively monitor your CUSTOMER
REVIEWS. Bright Total had a local consumer survey in 2015 which shows that 92% of the customers now rely on online review before any sale /purchase. Keeping a close tab on your competitor’s offerings and services and maintaining online presence plays a significant role in this regard. Post Millennials are familiar with mobiles, tablets, laptops etc. and these smart devices are providing competitive edge for your businesses to grow. Furthermore, it is also offering customers a choice to select from a range of vendors available online.
Targeting customer concerns and ensuring on-time delivery not only spreads the word-of-mouth but retains old customers and generates new leads for your business to outshine. Building trust in this manner creates a strong influence towards the targeted customers.
A through and through analysis of bright local for 2015 has confirmed 88% of consumers read less than 10 reviews before they form an opinion about a business. Overall ratings of your business, qualitative reviews, and sentiments of the reviews and business responses matters the most if your customer retention programs are making through the headlines.
Positive ratings and reviews matter the most when the traffic needs to be generated through online marketing strategies as 44% people visit the website/business after going through these reviews.
(Source: http://www.hubspot.com/marketing-statistics )
Developing an online presence and maintaining the reputation will generate more leads. Key findings through recent surveys and online business reviews have selectively highlighted that the consumers are retainable only if your businesses deliver Reliability, Good Value & Professionalism with exceeding consistency. Here the vital role is played by your customer service representatives. Nowadays consumers are more concerned of good value than the expertise of the business, hence again highlighting your customer satisfaction. Lastly Friendliness and being welcomed are added benefits for all reviews for your company.
Customer Retention Programs
Bill Gates quoted – Your most unhappy customers are your greatest source of learning
In order to retain more customers, your business needs to focus on addressing issues and evaluating how you can use a professional team to take care of all the existing and new customers and ensure the ability to meet deadlines. Your requirements to deliver proactive customer service and conducting surveys will give your analytical department ideas regarding major concerns your customer are facing. This allows you to ensure that they are fixed, and then you can pat yourself for a happy customer that you have saved. A few of the below mentioned steps will enable you to complete customer retention program and to ensure your business is well aware of what your competitors are offering and what your strategy should be in this regard:
Consistency – It is very important that you meet the expectations of your customers and your customer service staff is well trained to ensure that consistence is delivered in a timely manner.
Exceeding customer expectations – Meeting your customers’ expectations will always set a bar not only for the business popularity but also it will be setting a benchmark for your competitors, allowing you to be the pioneer of excellent customer service. A few additives will assist your business in accelerating the process such as sending a movie ticket, a free event ticket for a favorite sport, some gift hampers, and some weekend playtime for the kids. Showing efforts to remember your customers’ most important day like birthdays, anniversaries etc. and sending cards or messages to let them know that you do value them will be helpful in creating customer affinity with the business.
Using customer Feedback tools to carry out the customer need analysis and using it as a stepping stone can help you securing their loyalty.
Target Social Media, Search engines etc. These days everyone is online and being able to use the internet on the go with various apps on smart gadgets makes it very easy to target a huge crowd and whole of the world in just a few minutes. Personalization through emails, customer widgets, and in-app feedback can be very useful to record suggestions and improve. Drop boxes can be used to monitor customer feedback. With the improved technology and internet marketing, a huge crowd can be covered through by creating a business page, community groups, discussion boards, and blogs to make sure you receive the customers’ direct feedback which will in fact be less costly than other means of gathering data to enable customer marketing of your company to do qualitative analysis over what might be missing and what might be the most popular product of your company which enhances and provides services and quickly generates revenues.
Business Marketing charts have surveyed that Word of mouth is still the most popular way to recommend your business. Other search engines do play a vital role but Google being the pioneer has to rate your business so make sure to get positive ratings to ensure your business keeps on increasing. Research has shown for your local businesses’ reputation that the reviews from Yelp and Google+ have a direct impact, therefore explaining why white-hat SEO technique is mandatory to maintain the business coverage for all online consumers as 85% business is generated from the ratings provided on the search engines and social media.
Unique Selling Proposition (USP)
A lot of small business (usually with 300 or so employees) are working these days to get a sustainable position within the giants in the market and explore more options to excel themselves. A lot of them forget the basic key to GROWTH and CUSTOMER RETENTION: to create a Unique Selling Proposition (USP) – the basic ingredient that defines your business from your competitors. This is the unique edge that you have over your opponents. USP defines your business identity and how you maintain “what we say is what we sell” delivery to your customers. The uniqueness your business implies will attract more customers and if you will be keen on retaining the old customers this key feature will allow new customers to try your business too.
There a lot of USP examples in today’s market, I have mentioned a few for you to do the research for action implementation on your business growth:
- Saddleback Leather – Its USP is tales of Mexican bullfighting, travel in third-world countries, simple pleasures and touching stories about the owner’s beloved Labrador named Blue.
2- The Mast Brothers – The uniqueness to make each and every bar of chocolate, from the Cocoa to packing and maintain 18th century styled working
3- TOMS Shoes – Being the unique, simple and inexpensive style they still give a pair of shoes to a needy child once you purchase one with their company.
4-OUTSPOKEN MEDIA- The Company made of 100% female’s only and standing out publically to express this unique selling proposition.
Customer Retention Examples
Researches have enabled figuratively for your businesses to get an insight into why customer retention is important and how to achieve it and set company targets. A recent study has explained with calculations to show why customer retention needs to be significantly highlighted for your business. 70% of companies agree that retaining customers is cheaper than acquiring new ones, a Consultancy report on cross-channel marketing found. Forty-nine percent find that building existing customer relationships brings a bigger return on investment than acquiring new customers. Gathering and building marketing reports also have confirmed that 80% of business will come from the 20% customers you retain or try to maintain. Prioritizing your customer retention means increased profit.
Here are a few examples which were gathered as live specimens to customer retention success stories:
- Microsoft: We all love to boast about the extra 25 GB we received from Microsoft in the form of OneDrive loyalty bonus. When highly successful enterprises like Microsoft recognize the importance of customer retention, other businesses should take the cue. This not only provides the existing customers with an extra “wow factor” but gives an incentive to the new ones to stay connected to your business.
- Starbucks: Targeting customers through digital media has allowed Starbucks to generate revenue along with customer retention as they have covered all aspects of being with their customers and available where ever needed be. It has also seen success in US customers with mobile apps and payments and deal around 9million mobile transactions weekly. Hence customer loyalty increases more capital for Starbuck to not only merge partnership with various other companies like the ride-sharing company, Lyft, and The New York Times quotes that this merge has increased more customers and has also increased success ratio.
- Zappos- THEY NEVER ARGUE ABOUT RETURNS is the signature statement if we research online or hear from word of mouth about Zappos – This high profile business has maintained its reputation as one of the best customer services provider ever. They encourage their customers to buy and experience their products and have a 100% return policy if any of the purchased items are not required by the customer. Zappos’ reputation is generated due to the fact that they have always exceeded their customers’ expectations in retaining and delivering which not only ensures a lifelong customer but excellent ratings and guaranteed revenue.
- Amazon- Extra fast delivery and beating their customer’s expectations has made Amazon a hot cake. One of the best customer services presented ever, which made customers appreciate the fulfillment of their needs. A lot of their customers have shared their joy stories on the online platform just due to the fact that they delivered not only the product but care for them too. This has increased the turnover and milestones have been set by other competitor’s to generate customers.
On one such Amazon review blog I came across a piece of information which is worth a share as 99% of the other companies would have ignored such support and understanding for their customer. One of the loyal customers shared the loss of a $300.00 worth PlayStation 3, which was delivered but due to not being available at home, was stolen from the doorstep – the customer took the chance and let Amazon know of this loss – and guess what, Amazon DELIVERED him another PlayStation 3 without any shipment charges just before Christmas Eve making him their loyal customer for a lifetime. Such incredible piece of customer reviews will not only spread the word of mouth but increase internal and external ratings – which shows how Amazon delivers the best considering customer retention factor in their delivery.
- UNITED AIRLINES – is yet another great example of customer retention strategies. Going extra mile to let your customers know of the delays in their flight schedules or grabbing a seat in case they might get late ensures “customers for lifetime”. Small calls placed to the customer, letting them know of the time frame or change in the plan not only makes sure that the customer remembers your company but also explains why good customer service pays-off in the end.
Hence, we can gladly deduce that customer retention is a small yet extremely powerful strategy in gaining financial success, turning the variances favorable and increasing the profitability/ shareholder value of your business. Incorporating very small measures can lead to a very high success rate; all you need is the proper knowledge and the required skillset along with perfect timing and success is surely on its way.