Retaining customers is just as important as acquiring new ones.
Sometimes companies are so focused on generating new leads that they don’t put effort into retaining their current customers. The result is a high churn rate. A steady stream of customers flow in, but they leave just as fast.
Failing to keep your current customers means:
- Your company is losing potential revenue
- Unhappy customers are now telling others why they stopped using your product or service
- Your competitors are gaining the customers you lost
Fortunately, you can implement strategies to retain a higher percentage of your customers. It takes a little strategizing and effort, but it pays off in the form of more sales and happier customers.
Let’s quickly define customer retention, explain its benefits, and list a few methods you can start implementing today.
What is customer retention?
Customer retention is the practice of keeping current customers as ongoing customers.
As every company knows, landing a sale is not the end of the customer-business relationship. In many ways, it’s just the beginning.
Once a customer purchases your service or product, many things can go wrong:
- The buyer dislikes the product and asks for their money back
- The customer doesn’t know how to use the service
- The customer never uses the product to its fullest potential
- The company doesn’t develop any kind of relationship with the customer
These problems can easily lead to a customer defecting from your brand and taking their business to a competitor.
Customer retention seeks to prevent that from happening by using a variety of strategies. The goal of customer retention is to keep current customers happy, nurture them into upsells and cross-sells, and turn them into advocates for your brand.
Why Customer Retention Is Important
There are many reasons why customer retention is critical and why you should devote resources to it, but these are some of the major benefits:
It’s easier to sell to existing customers.
Existing customers are 50% more likely to try new products compared to new customers.
Instead of selling to brand new customers, try selling a new product to your current customers.
When you’re acquiring new customers, you have to convince your prospects to buy from a brand they’ve never tried before. A lot of effort goes into selling your product or service for the first time.
First, you have to raise brand awareness for prospects to even hear about your business. Then you have to use some combination of reviews or testimonials or other social proof to land a sale.
Even then, you have to go through the tedious process of explaining the benefits of your service, detailing how your process works, and persuading them it’s worth the price.
You don’t have to do any of that with an existing customer.
When you approach a current customer, they already trust your business because they’ve made a purchase before. They know your pricing, value, products, and may even have a rapport with individuals in your company.
Additionally, your company will usually already have all the information you need (e.g. email addresses or credit card information) to make an upsell or side-sell.
Current customers will likely spend more.
Not only is it easier to sell to current customers, but there’s also a higher chance that they will spend more than new customers. Existing customers are likely to spend 31% more than new customers.
The more someone trusts your business, the more comfortable they’ll be with spending money on your products.
Since the customer has already had a positive experience with your business, they are more likely to believe additional purchases will also result in positive experiences.
It’s less expensive than acquiring new customers.
It costs five times as much to attract a new customer than to keep an existing one.
Customer retention is not only a strategy that generates revenue, but it’s also easy on the marketing budget.
It’s no secret that it costs money to market and sell your products. You have to rise above the noise and clutter of the internet to get your brand name out there. You may have to conduct market research, weigh different strategies, buy software tools, purchase ads, and much more.
Once again, this is where a customer retention strategy shines. It’s about five times cheaper to retain a customer than acquire a new one.
You don’t have to raise brand awareness for an existing customer. You don’t have to invest in expensive marketing campaigns to convince prospects to buy from your company. All of this saves a ton of money.
Of course, it still costs money and time to execute a customer retention strategy. The beauty, though, is how much easier it is. Your existing customers already trust your company and have no need for reviews, case studies, or an elaborate pitch.
In many cases, simple strategies like building a help center or emailing your customer can improve your churn rate.
Happy customers attract new customers.
Lastly, focusing on your current customers naturally leads to referrals, positive reviews, and advocacy.
When you improve your buyer’s experience, they see your effort, feel appreciated, and want to tell others about your business.
You can probably think of examples of this from your own life. Ever hear a family member or friend rave about a particular experience with a restaurant or clothing brand? It makes you want to check out the business for yourself.
You can do that for your company.
So, in a roundabout way, customer retention leads to customer acquisition because it generates organic referrals.
5 Effective Customer Retention Strategies
There are a lot of strategies you can implement to retain more of your customers. You’ll have to consider which tactics are best for your particular business and customers. To get some ideas going, look at these options:
1. Send onboarding emails.
Once a prospect buys your product or service, send an onboarding email sequence to give them direction and a warm welcome. This is a series of emails that your customers automatically receive after a predetermined trigger, such as their first purchase.
There are a lot of different types of onboarding sequences, but they can be things like:
- Giving a tutorial on how to use your services
- A tour of your website
- Tips and tricks on how to use your products
- A welcome email that warmly introduces your company
Brand new customers don’t know everything about your business and usually need guidance, even after a purchase.
A great example of an onboarding sequence is the one provided by QuickBooks. After purchasing QuickBooks, customers are sent a series of daily emails that show them how to use the software tool.
These emails help users set up their accounts, introduce them to various features, and answer a lot of commonly asked questions along the way. Since the customer is receiving helpful guidance from these emails, they are more likely to actually use and enjoy the service.
You can implement a similar strategy by writing a series of emails to new buyers.
2. Train your customers with content.
Your customers don’t understand your products and services as well as you do. You can teach them how to get the most out of your products by educating them with helpful content.
One of the best ways you can retain customers is by regularly putting out content. This content could take many forms, such as blog articles, podcast episodes, or social media posts.
When you teach your customers, they appreciate you sharing your expertise and grow to trust your brand even more. It also keeps them on your website and it keeps your business on their radar.
Take a look at this Quicken Loans blog to see an example.
Quicken Loans offers online loans, and their blog gives financial advice. Not only do customers get Quicken Loans services, but they also get a wealth of financial advice.
3. Create a resource center.
As you create content for your customers, you can compile all of the content into one location, which we call a resource center or help center.
That way if one of your customers gets stuck with your product or service, they can go to the help desk and get an answer right away. A positive example of this strategy is Zapier’s help desk.
As you can see, Zapier has a lot of help documents that explain how to use their software and manage their customer accounts.
Having a help desk also takes a lot of pressure off any support staff you might have. You will get fewer calls and tickets if you have a help desk that answers some of the major questions and problems that your customers have.
Make your customers aware of your help desk so that they know where to go whenever they have trouble. Even if they don’t take advantage of this resource, they will appreciate the fact that it’s there. They can confidently use your products and services knowing that if they ever have any trouble, you’ll be able and willing to help them.
Make sure you direct your customers to your help desk. You can do this by including a help desk link in your emails, making it easy to find on your website, and training your personnel to make full use of your resource center.
4. Send engaging emails.
When it comes to emailing your list of customers, you don’t have to stop with onboarding emails. One of the best ways to retain customers is to regularly engage them and offer valuable emails that both excite and delight your customers.
If you have any new features or products, announce it to your email list. You can also let your customers know about discounts and sales. Or, if you’ve just published some new content that would be useful to them, link them to it in an email.
Regularly sending valuable emails is a great way to continue building a relationship with your customers. They see your company name in their inbox and remember your brand more frequently. And it also trains them to be excited about your brand because every time you send an email it brings them value.
Here’s an example to study:
As you can see, this is an email announcing new frames for sunglass aficionados. When you send exciting emails like this one every once in a while, your customers want to stick around and take advantage of every new email.
5. Create feedback opportunities.
If you want to understand how to retain your customers, you will have to study your audience. The most effective way to do this is to give them opportunities to provide feedback.
There are a lot of different ways you can ask for feedback from your customers. For example, you can send a brief survey right after they make a purchase or create a button on your web page that leads them to a survey.
Also, consider segmenting your audience. For example, identify a long-time customer and approach them to ask why they’ve been supporting your company for so long.
Once you find out what keeps your customers coming back, you can use that information to advise the rest of your company. This will allow you to focus on those particular strengths and ensure that other customers stay with you for a long time too.
Key Takeaway: Implementing a retention strategy is worth it.
Like any business strategy, it takes time, money, and effort to successfully implement a retention strategy. But the payoff is well worth it. Retaining customers is cheaper than acquiring new ones and there’s a higher chance that current customers will spend more.
If you don’t have a customer retention strategy yet, you’re missing out on revenue. If you do have a strategy in place, it’s still important to determine how effective it is and whether it can be improved.
The first step toward progress is recognizing the potential of a customer retention strategy. Once you’ve done that, it’s time to implement one of the above strategies.
You may make some mistakes along the way as you figure out the best way to keep your customers happy. But, if you keep at it, you’ll eventually slow down the churn, keep more customers, and watch your revenue increase.
This article was written by Compose.ly writer Salvatore Lamborn.