5 Reasons why you should prioritize customer retentionOpinion ·
According to researchers, it has been found that we are psychologically wired to think that new must always be better. It's natural to constantly search for new strategies to attract the next 'new' consumer. But ignoring your loyal customers to attract new ones, can be extremely dangerous for your business.
Do you spend more money on improving your relationships with current clients or on growing your customer base by targeting new ones? The question is misleading since both are essential for growth and sustainability in their own way. Experts have been discussing this topic for a long time, but the answer is always evolving as regulations and customer preferences have changed.
Statistics by Invesp show that only 18% of businesses claim to put more emphasis on retention, while more than 44% focus on customer acquisition. Retention-boosting initiatives are frequently postponed or completely ignored. However, in most business models, retention gives a far more significant return on investment from advertising spending and is much more financially sound.
Let's dive into the reasons for customer retention over acquisition and discuss customer retention strategies.
Customer Retention vs Customer Acquisition
Customer acquisition is the process of acquiring new clients. It entails drawing potential customers to your firm and convincing them to purchase your goods or services.
On the other hand, customer retention refers to the technique and capacity of a business to maintain its clients over time. It involves keeping customers active, happy, and loyal advocates of your product or services.
Acquisition and retention work similarly to a bird's wings: It is difficult to fly without either one or the other. Similarly, to succeed in the business industry, you must first attract customers with acquisition strategies and then implement an action plan to retain them over time.
Customer acquisition expands your clientele.
It should go without saying that a business has no reason to exist if there are no clients to serve. You need to get at least a few clients to start your business. To increase your customer base and find more business prospects, you need to focus on customer acquisition strategies.
Customer lifetime value increases with retention
The lifetime value of a customer (CLV) is the projected value over the course of their engagement with your business. Repeat clients are nearly always more beneficial to your business than one-time customers.
However, there are several reasons for prioritizing customer retention over acquisition. For instance, customer acquisition is more expensive. Acquiring a new customer can cost up to five times more than retaining an existing one. In comparison, increasing customer retention efforts by just 5% can increase profits from 25% to 95%.
5 reasons why you should focus more on customer retention than customer acquisition
Let’s look at why you should focus more on customer retention strategies than customer acquisition.
1. It fosters personal connections with customers.
Prioritizing customer retention strategies is beneficial for your business because it focuses on creating valuable connections with customers. By designing a superior customer journey you can leverage touchpoints to gather data about your customers and, at the same time, to show how much value you can offer them through your products and services.
Collecting data about your customers at the different touchpoints is key to personalizing their experience with your brand, thus enhancing customer satisfaction and thereby loyalty.
Additionally, regular clients are aware of the aspects of your company that need improvement. By listening to their feedback and opinions, you'll be able to spot fresh opportunities and boost retention and sales. Such clients will eventually be more willing to pay higher prices.
2. It saves the marketing budget.
It is a simple fact. Retaining existing customers is far cheaper than acquiring new ones. Consider the amount of money you would need to invest in marketing to bring new clients to your website. Even if your marketing efforts are successful, there is no guarantee that the leads you produce will become paying clients.
Customer acquisition costs are rising, the prices for ads are constantly changing based on the number of companies that are competing in your field. Existing customers have a higher conversion rate than potential customers: Since they know what your company offers, they are nine times more likely to purchase from you.
3. It increases revenue.
Most companies' revenue depends on 20% of their current clients for 80% of their future sales. That is because repeat clients don't need to be pursued aggressively to buy from you if they were satisfied with the experience the first time. In reality, the likelihood of convincing an existing customer to make another purchase from you is 60–70%, compared to merely 5-20% for a new lead.
Long-term customers require less hand-holding, are less expensive to serve, and make pricing monitoring activities easier.
4. It improves the onboarding process.
The onboarding process is crucial to retain customers in the long run. Offering a good first experience is key to increase customer satisfaction and boost repeat purchase. Your retention strategies should focus on offering a superior onboarding process.
Make it easier for your customer to register your product and start using it. Offer informative content to help them install the product and learn how to get the most out of it. Educate them on how to leverage all the different functionalities and adapt the usage based on their needs and wishes.
Also, during the onboarding process remember to collect relevant data about your customers. This will help your personalize their experiences, thus increasing customer satisfaction and retention in the long run.
5. It converts customers into brand ambassadors.
Today’s consumers are vocal about their experiences, which also influences other customers' buying decisions. When customers are satisfied with the experience you are offering, they will talk about your brand with their friends and family.
Therefore, you will eventually discover that client retention = customer acquisition. After all, word-of-mouth advertising is the most successful type of advertising, and it's also totally free.
By rewarding them for referring their relatives and friends, you can also encourage acquisition from your current customers. As we discussed, retention has the potential to boost your profit by 25% to 90% for this very reason.
How to increase customer retention
Now that we have discussed the reasons for prioritizing customer retention over customer acquisition let’s look at effective customer retention strategies that will work for your business.
Businesses engage in customer retention strategies and tactics to prevent customers from leaving. The purpose of customer retention strategies is to assist businesses in keeping as many clients as they can, frequently through brand and customer loyalty programs. It's crucial to remember that customer retention starts with the first interaction and lasts until the end of the relationship with the customer.
Customers can easily get irritated if expectations are not properly stated and communicated. The experience and expectations of customers vary a lot. Some consumers prefer an acceptable experience for cheap prices, while others might expect high quality services and are willing to pay a premium price for that. Based on your customers expectations, they will interact with you differently and your retention strategies could be more or less effective.
To ensure that expectations are satisfied, it's crucial to comprehend customers’ preferences and expectations and therefore communicate properly your value proposition, including your products’ functionalities and related services. By enhancing transparency, your target customers will be more satisfied, hence you will be able to retain them for longer.
Build valuable customer relationships
Customers typically get in touch with customer success agents the most. Customers and agents communicate through several conversations over the phone, emails, and chat messages. Your representatives should be aware of past complaints and complications so that the customer doesn't need to remind them every time they ask for help.
Changes in customer success personnel break these connections, which harms your business's client retention rate. To mitigate this issue, you should educate your agents on how to properly handle customers’ requests proactively. Provide them with best practices, tools and all they need to be good representatives for your brand.
Also, your business needs to ensure that proper client data is stored, so that even if an employee leaves, a customer doesn't experience any downtime. Layerise can help you capture and store all essential customer-related data and it displays them while your agents are chatting with the users.
Use the principle of reciprocity
The principle of reciprocity is a social construct that fosters loyalty. When someone does something good for a person, they feel obligated and naturally want to return the favor.
There are two types of reciprocity: trumpeted and surprise. Both of these can be utilized to improve customer loyalty in customer care.
Surprise reciprocity refers to a surprise gift or gesture. This can happen, for instance, when your business sends over tickets for a game or gives an exclusive preview.
Trumpeted reciprocity happens when someone gives or does something helpful, going above and beyond expectations. These types of responses make it clear to the client that what you are doing is something that goes beyond the regular conditions for their satisfaction. This might be as easy as giving the customer a special discount in return to repeat purchases.
Provide a consistent customer experience
Customer trust can be increased through consistency. They know what to expect and can count on your team to complete the task and provide the required outcomes, at any time. Customers don't like surprises that negatively impact their routine, especially when they are experiencing issues with your product.
Create kickoff meetings and a smooth user flow for onboarding new customers to ensure a positive experience from the very beginning. After the onboarding process, focus on creating high quality interactions between customers and your representatives. Design standard processes for your team to be more effective and helpful when dealing with customers’ issues.
Introduce a customer loyalty program
Giving customers even more value, such as through a customer loyalty or rewards program, is one of the most effective methods to encourage loyalty and retention. These programs are widely used by airlines, hotels, eCommerce, restaurants, and other companies.
Simple customer retention tactics that can greatly impact promoting loyalty include user-generated content, loyalty bonuses, gamification, and prizes for customer referrals.
How Layerise can help you increase customer retention
Making efforts to retain customers is a marathon, not a sprint. You need to thoroughly plan retention strategies to offer an experience that goes beyond all expectations and make your customers satisfied.
Layerise helps brands foster customer loyalty and revenue in the long run by leveraging the power of data.
With Layerise collecting data about your customers has never been easier. With our solution, you can get an in-depth view of your customers based on geographical, demographical, preference, and behavioral variables.
Thanks to data collection, Layerise helps you understand why your consumer is unhappy and what can be done to reduce such experiences. Insight like that helps you improve customer experience across the board.
Loyal customers can do so much more for your brand! Layerise is here to support your brand throughout the entire journey. Give it a try yourself by checking out our website or booking a demo today.
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