It’s very important.
No. It’s vital. Rather, It’s an absolute necessity.
You probably spend a majority of your time and resources on customer acquisition.
Where does customer retention rank?
My guess is that customer retention ranks somewhere near the bottom.
Am I right?
So, why should you keep reading this blog post?
Because we’re going to talk about why customer retention is so important for your business and go over some customer retention strategies you can use in your business starting today.
Sound like a plan?
- According to the Gartner Group 80% of future profits are going to come from 20% of your existing customers.
Think about that for a second.
If the majority of your future business is going to come from 20% of your existing customer base, then where should you be focusing your efforts?
This is a no-brainer.
So, why do you as a small business owner spend a bulk of your time on customer acquisition?
I know why, because you’re conditioned that new customers are the lifeblood of your business. New customer acquisition is required for your business to grow.
Both statements are true.
But you can’t neglect your existing customers because it’ll be a never-ending cycle of trying to plug a hole in a leaky bucket.
Meaning the more time you spend on customer acquisition, the less time for existing customers, which means they will leave, thus having a leaky bucket as I would like to call it.
Is that an efficient way to do business?
I don’t think so either.
- Increasing customer retention rates by 5% increases profits by 25% to 95%. (Source: Bain & Company)
Those are fantastic numbers. I would take those numbers every day of the week and twice on Sunday!
What about you?
- 82% of companies agree that customer retention is cheaper to execute than customer acquisition. (Source: eConsultancy report)
I completely agree with that statement also. You typically spend twice as much time trying to acquire a new customer. As you know time is money.
Moreover, you spend more money on your new customer acquisition efforts.
What are your thoughts?
- The probability of converting an existing customer is 60% to 70%. The probability of converting a new prospect is only 5% to 20%. (Source: Marketing Metrics)
What do you think of that statistic?
It’s pretty telling.
Focus on customer retention.
- Your return-on-investment is greater.
- You face a lot less resistance, therefore gives you an opportunity to sell to more existing customers.
Let me ask you a question.
Is it easier for you to pick up the phone, or email a customer that is already doing business with you asking them to re-order or purchase a new product from you?
Call or email a prospect asking them to buy from you the first time?
My money is on the former, not the latter.
Reason is an existing customer knows your product/service solves a problem for them or meets a need they have, which means they’re more likely to buy something else from you going forward.
Another aspect to consider here is your customer has a relationship with you. They trust that you have their best interest at heart.
It takes time to cultivate that trust, but it does not take that much time to maintain that trust.
- Repeat customers spend 33% more than compared to new customers. (Source: About.com)
What a big percentage.
If that’s the case what is going to give you more bang for your buck.
Selling a new product/service to an existing customer?
Selling a product or a service to a new customer?
Your answer better be selling a new product/service to an existing customer.
Now, that we have discussed the importance of customer retention and backed it up with statistical data. Why don’t we talk about customer retention strategies you can implement in your business starting right now.
Sound good to you?
Let’s dive into it then.
So, what is the best customer retention strategy for your business?
Statistically speaking there is not really one particular strategy that works best. It all depends on your industry, business model, etc.
What we’ll discuss what will work. Most of it is common sense believe it or not.
Customer Service and Customer Loyalty go hand-in-hand
What do I mean by that?
If you provide excellent customer service, that will increase customer loyalty.
What is an example of excellent customer service?
- A customer calls you and you pick up the phone within a few rings.
- You speak in a pleasant tone with that customer. Act like you’re happy to be there and want to help that customer.
Your customer senses that you genuinely like what you do and sincerely want to help them.
That goes a long way in making your customer feel special.
And, yes a customer can pick that up instantly in a brief phone conversation.
[tweet_box design=”default” float=”none”]If you make your customers feel special, you have cracked the code[/tweet_box]
When you make customers feel special, they’re more attached to your company, your brand if you will and will go out of their way to tell their friends about it.
This is the best form of marketing.
Not only is that going to help with your customer retention, it is also helping with your customer acquisition.
All you did was make them feel special through your interaction with them.
See how that works.
What do you think?
The example I just shared with you creates customer loyalty as well.
Like I mentioned previously customer service and customer loyalty go hand-in-hand
By providing top-notch customer service you’re creating customer loyalty.
Are you picking up what I am putting down?
Now, can you implement that in your business?
You, sure can and it won’t take a lot of time and virtually no resources.
- In 2014, email marketing was cited as the most effective digital marketing channel for customer retention in the U.S., January 2015. (Source: Chief Marketing Council World Wide)
Recommended Reading: Customer Acquisition and Retention For Small Businesses
Well judging by that information, email marketing should be part of your customer retention efforts.
Don’t you think?
How much time does it take to craft a simple email to connect with one of your current customers?
I would say minutes.
Good return-on-time there.
What say you?
You already use email marketing for customer acquisition, so you don’t have to completely re-invent the wheel to use it for customer retention.
What is an example of how to use email marketing for customer retention?
- Send a personable email asking your customers how it is going with XYZ product/service they recently purchased from you. Don’t use the standard canned response. BE CREATIVE. Make them feel special.
- Ask your customers point blank how you can improve your customer experience.
- If you’re thinking about running a particular “loyalty program” for existing customers, send them an email about what that program looks like and their thoughts on it. Also, state you’re not going to launch that program until you hear from them.
Trust me if you give your customers the ability to have a voice in your decision making process, then you’ll have those customers for life!
- Ask your customers what would prevent you from no longer being a customer?
Think of email marketing for customer retention as nothing more than a communication tool.
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Communicate with your customers.
That is the most important thing you can do in your business.
Customer Relationship Management Software
I recommend you read the following as I shared with you a lot of statistical analysis on customer relationship management software that is beneficial for customer retention as well as customer acquisition.
Recommended Reading: Customer Relationship Management Software Discussed
For the sake of today’s discussion as it relates to customer retention, there is one critical element that crm will provide you.
What element is that?
- The ability to record every interaction with your customers for your entire organization to see.
This is essential for 2 reasons.
- You can pull up the history of that customer to see what transpired on the last touch point.
- It provides you the ability to maintain continuity with that customer. You continue your present day discussion from where you left off last time.
Allows you to always be moving forward.
Does that make sense?
So, utilize your customer relationship management software in that manner as a customer retention strategy.
Do you have a customer retention process in place?
How is that process working?
If you could improve that process, would you?
Otherwise you and I should talk. Let’s see how I can get you to where you want to be.