Is It Possible To Improve Customer Retention?

Think about the last thing you purchased. How willingly would you make that choice again?

We often don’t think about the purchasing choices we make, loyalty to (or away from) a brand feels kind of automatic. Maybe that’s why customer retention strategies are overlooked by many businesses.

There is a big focus in business on getting customers in the door – which might be a virtual door if you have a work-from-anywhere set-up. This is all great stuff and it needs to happen, but you also need a strategy for how to keep customers coming back regularly and referring you to others. Why is this such a big deal? Because attracting customers costs a hell of a lot of time and money, while retaining them is cheaper and more efficient. 

Return customers are more likely to make purchases and referrals because they already know and trust you.

I’m a big advocate for business metrics (blame my engineering background), for me, the way to improve customer retention is to set goals using data and then measure what’s happening. It’s the blueprint you need for deciding which direction to build your business, yet so many business owners don’t bother with metrics and strategies. 

My question is, how do you know what marketing processes to use if you have no idea who’s coming and going? When you can measure customer retention you can put action steps in for how to improve it.

What is customer retention?

Customer retention is a business metric that gives you a percentage (usually quarterly) of how well you are able to retain customer loyalty. 

What you want is high retention and a low churn rate. Your churn rate (the pace that customers leave your business) is determined by a number of things like:

• No repeat sales
• Cancelled subscriptions
• Opting out of notifications

If you don’t have anything that would measure a churn rate you are in trouble, that means you have no way of keeping your customers in touch with your brand so very little to entice customers to stay with you for the long term.

Why is customer retention important?

Customer retention is important for your business for two big reasons: One, it costs less to keep existing customers than to win new ones, and two, customers who know you already trust you, so they are more likely to purchase and refer.

Obtaining new customers can be 25 times more expensive than keeping existing ones. 

There are other benefits to retaining customers as well. Existing customers are easy to reach out to, you have their permission for marketing so updates and offers are warm, not cold, so they are more likely to listen and respond.

You also want to keep building your customer base. By holding onto existing customers while bringing in new ones you grow your audience and have more people eyeballing your products or services – that’s kind of the point of businesses, right?

Here’s the thing, a loyal customer doesn’t consider alternatives. They buy again, no questions asked. Even if you increase your sales price or subscription fees (within reason) – they’ll stay.

How do I calculate customer retention?

To crunch the numbers and calculate customer retention you’ll first need to have the numbers- I’m saying that because so many businesses hit a wall because they have no tracking system for their business performance. Yes, it takes a bit of time but it keeps you on track and helps you change direction if the numbers are going the wrong way.

For this exercise you’ll need:

• A period to measure – a month, a quarter or 6-months
• The number of customers you had at the start of the measured period (S)
• The number of new customers acquired in the measured period (N)
• The number of customers you have at the end of the measured period (E)

The formula looks like this: [E – N] /S x 100

[End number of customers subtract new customers] divide by start number of customers x 100

So for example, imagine that you had 90 customers at the start of the quarter (S). During that quarter you gained 30 new customers (N) but lost 15. That makes the end total 105 (E).

[(105 – 30)/90)] x 100 = 83  so your customer retention rate is 83%

When you have detailed business data you can get retention rates on specific products and sales channels too. This can let you know if your retention is better or worse for premium products or subscriptions compared to standard or new products.

From there you can decide the best direction for your marketing to go in – with high customer retention being one of your main goals.

What is a good customer retention rate?

Obviously you want your customer retention percentage to be as high as possible. What a “good” rate is will depend on your industry but just as a gauge, the average customer retention rate across all industries is 75.5%.

Customer retention by industry

How can I improve customer retention?

It is possible to improve customer retention through dedicated strategies that are really just about running a great business. As well as netting you a higher customer retention ratio, these key steps will improve brand performance and get you to your business goals faster.

#1 Improve customer experience

Customers now look for amazing experiences as part of their purchase. It’s not enough just to give them what they want, there needs to be an interaction that is memorable and unique. What this translates to will be different for every business and target audience – think about your business Why, your values and your mission statement as well as your offering and the problem you solve.

If you are feeling lost on this one, investigate really great businesses (both within and outside your industry) to see what they do and what they have that keeps customers engaged and coming back. You don’t necessarily need to replicate their experiences- I wouldn’t recommend it, but it can inspire you to find your own unique customer journey.

Some key experience points to consider include:

• Easy purchase
• Fast turnarounds
• Quick complaints resolution
• Customised communication based on purchase history
• Great communication (and active listening)
• Empathy and connection – they feel you really care about their experience and satisfaction

#2 Make onboarding easy

This is a really easy concept that business owners often leave out. If you want subscriptions, feedback and testimonials, you have to ask for them, and not just ask, make it easy for them to sign up, click through or post. Anything that is complex, confusing, time-consuming or doubled up will annoy your leads and have them abandon carts or not even bother completing subscriptions.

Think about who your target market is when you are designing your next steps and actions. What kind of media do they prefer, are they going to want someone with them to walk them through it or take responses in person?

Your onboarding strategy might include resubscribing after a certain time frame, upgrades and surveys. Make this pain-free and as enjoyable as possible.

#3 Stay in touch

Stay in touch with your existing customers and let them know you are still there, still current and still important. Social media makes this one a breeze but you can reach out with any number of tools to stay connected.

The trick to getting this part right is not to ask for anything, just be there and offer as much information, guidance, support or care as you can.

Think about how you can use:

• Customer satisfaction surveys
• Newsletters
• Hints/tips/user guides
• Follow-ups if there has been an issue
• Social media platforms
• Reviews
• New product releases
• Sales/member-only benefits

4 Reward loyalty

Rewarding loyal customers goes beyond just loyalty rewards schemes – these aren’t the right fit for every business and should only be used if you have something genuine to offer. Instead, think about what you want most – i.e. referrals, repurchase of the same product, purchase of a new product – and find a way to offer extra value to customers to make the deal really enticing.
How to show appreciation for loyalty

• Subscription email discounts
• Free postage
• Member events
• Previews or sneak peeks
• Referral rewards
• Affiliate program

Focus on the parts of your business that make you unique and successful – this is what your customers are coming to you for.
Is It Possible To Improve Customer Retention? – Conclusion
While big businesses might have a team of people working on creating, monitoring and maintaining customer retention strategies, small businesses tend to overlook how important customer retention is. It can make a huge difference to your business success if you pay attention and put in a bit of work to keep the clients you already have – which is a walk in the park compared to winning over new customers because these guys already love what you do.

My biggest tip is to have fun with this, not everything about business needs to be a slog. Retaining customers can be a lot of fun and reflect your personality. These are your friends and allies so give them your best and pay them some attention.

If you would like to learn from business owners who are leading the game of customer retention, make sure you join our free Facebook community today.

Is It Possible To Improve Customer Retention? – FAQs

Q: How can customer retention be improved?
A: Customer retention can be improved through a variety of strategies, such as offering personalized experiences, providing exceptional customer service, creating loyalty programs, and regularly communicating with customers through targeted marketing campaigns.

Q: How customer retention can be achieved?
A: Customer retention can be achieved by understanding the needs and preferences of your customers, offering high-quality products or services, building a strong relationship with customers, addressing their concerns in a timely and effective manner, and continuously improving the customer experience.

Q: How do you solve customer retention problems?
A: To solve customer retention problems, it is important to identify the root cause of the problem. This can be done by analyzing customer feedback, reviewing customer interactions, and monitoring customer behavior. Once the problem has been identified, appropriate measures can be taken to address it, such as improving the quality of the product or service, enhancing the customer experience, or offering incentives to loyal customers.

Q: What does it mean to improve customer retention?
A: Improving customer retention means increasing the likelihood that customers will continue to do business with your company over time. This can be achieved by building strong relationships with customers, providing high-quality products or services, and offering exceptional customer service.

Q: Why is it important to improve customer retention?
A: Improving customer retention is important because it can lead to increased customer loyalty, higher customer lifetime value, and improved profitability. Loyal customers are more likely to refer new customers to your business, provide positive reviews and feedback, and continue to make purchases from your company over time.