Understanding the Importance of Customer Retention
You wouldn’t throw your money away on the street, would you? Or drop it down the garbage disposal? If you’re not working hard to retain customers, you may as well—because you’ll be losing money.
A one-time customer is a lost revenue opportunity. Instead of becoming a loyal customer who spends money and gives good word-of-mouth advertising, the one-time customer is there one moment and gone the next. In their wake, they leave an absence that your marketing and sales teams must spend time and money to fill. Time and money that could have been saved—if you’d focused on customer retention.
New customer acquisition costs a lot. You have to pay for advertising, content creation, employee salaries, and a host of other costs. To learn how much you’re spending, add up all of your sales and marketing expenses and divide that amount by the number of new customers won. This is your acquisition cost. Don’t pay it over and over to drum up one-time customers.
Instead, use customer retention strategies to keep your hard-won customers. To get you started on the path to saving money, we’ll examine the importance of customer retention and how you can raise your retention rates.
The Importance of Customer Retention
What’s the importance of customer retention? Well, it can mean the difference between lasting success or a flash-in-the-pan startup. Your business needs a loyal, long-term customer base to become well-established and ensure future revenue. Furthermore, retaining customers just makes good business sense.
After all, attracting a new customer costs five times as much as keeping an existing one. Loyal customers are more profitable, spending more money than one-time customers. And because they enjoy your brand so much, loyal customers are likely to recommend you to their friends, family, and on social media. No amount of advertising has the authenticity of word-of-mouth referrals, and the larger your brand’s following, the more prestigious it appears.
Your loyal customers will be more willing to explore any new products and test out your initiatives. They’ll give you more feedback, which is critical data that can be used to improve your products and services—as long as you engage them correctly.
How to Raise Customer Retention Rates
Raising customer retention rates starts by tracking your customers’ progress with your product. Is a new customer using the product less and less? Are there features they have yet to adopt? These may be signs that the customer needs assistance. In this situation, you must reach out to these customers and intervene before they churn.
If a customer contacts you, respond as soon as possible. When customers call, train your customer success team to speak with a friendly voice and show empathy. This communicates sincerity and goes a long way in deepening the customer relationship.
Stay on their radar by sending regular communications, such as automated emails about webinars, product features, or enhancements. But whenever possible, personalize your communications. This humanizes the relationship with your brand and makes the customer feel like an individual.
Always answer questions quickly and double-check to make sure your team is giving out the correct information. Practice how your team addresses customers. For example, if a customer is struggling, a team member could call them up and say, “I notice you are having trouble with X, Y, and Z. Would you like to review these features? I’m happy to help.” With ongoing trainings, your customer success team should have a clear understanding of good communication.
Always be open to customer comments, even negative ones, and encourage them to voice their opinions. Rather than simply hoping customers will leave feedback, reach out to them on a regular basis. Initiating contact will give you a broader sampling of varying levels of customer satisfaction.
Ultimately, the goal is to form a relationship with customers. Treat them like family. When you make a promise, don’t just keep it—exceed expectations. When you go above and beyond, you impress customers and make them feel special.
Retain More Customers Using a Customer Success Platform
The importance of customer retention is resoundingly clear. Long-term customers require fewer advertising dollars, are more likely to want upsells, provide your business with reliable revenue, and improve your brand’s reputation. And it doesn’t just benefit your enterprise, either; customers who stick around can enjoy the stability of a long-term partnership that helps them achieve the business value they desire.
Customer retention may be tricky if you don’t have the right software for the job, though, especially if you have large numbers of one-time customers always coming or going. So, position your organization to successfully retain customers by implementing a customer success platform. That way, you’ll have all the tools you need to grow a loyal customer base that spends far more on your brand than one-time customers ever would. And that means stable profits and steady growth for years to come.
Totango offers all the functionality you need to increase your customer retention rate. It can automate communications, track customer health scores, and let your team know if customers are struggling. Request a demo or explore Spark to learn more.