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Improving Your Website’s Customer Retention Strategy
Has your company’s customer retention rate increased, decreased or remained status quo over the past five years?
Have you outlined and initiated a formal customer retention strategy? In a study by Harvard Business School, it was found that increasing customer retention by even 5% can increase profits between 25-95%. And yet…Forrester found that 70% of CMOs did not list retention as a top priority.
It’s too bad, because a report by local & small business locator, Manta.com found that 61% of the small businesses surveyed indicated more than half of their revenue comes from repeat customers.
Furthermore, the study found that repeat customers spend 67% more than a new customer.
Why Do You Need Customer Retention Strategy on Your Website?
How much have you invested in sales and marketing over the last few years? Thousands? Tens of thousands? Millions? Tens of millions?
Your customer retention strategy is about keeping the customers you’ve invested in to acquire. And if you’re in an industry where your customers make multiple purchases over the years, your entire team should be very focused on retaining those customers:
- Delivering service that’s consistent with your value proposition and brand
- Cross-selling, up-selling and asking for referrals from existing customers
- Developing programs to increase customer loyalty and decrease turnover
- Knowing the lifetime value for different segments and using that data to improve your marketing
- Prioritizing retention as a major focus in your annual marketing plan
[Note: You can download our free customer loyalty measurement calculator that uses the RFM method by creating a preview account.]
Studies show that it costs ten times more to generate a new customer than to maintain an existing one. If you have a small number of customers, losing a few could cripple your company. Even if you have a large number of customers, a small increase in your customer retention rate should dramatically increase your profits. In his book The Loyalty Effect, Fred Reichheld writes that “a 5% improvement in customer retention rates will yield between a 25 to 100% increase in profits across a wide range of industries.”
With a strong customer retention strategy, it’s much easier to grow your revenue and profitability.
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How Important is Customer Retention
Customer retention is on the minds of small and medium-sized businesses across the world. With rising customer acquisition costs, businesses need to innovate and assume a proactive role in retaining clients.
Studies from the U.S. Small Business Administration and U.S. Chamber of Commerce have found that acquiring new customers can cost as much as five to seven times more than simply retaining existing customers. The fact that customer profitability tends to increase over the life of a retained customer is added incentive for businesses to allocate more resources to sharpening their customer retention strategies.
Three Reasons Why Customers May Leave You:
- 68% leave because they are unhappy with the service they receive.
- 14% are unhappy with the product or service.
- 9% decide to use a competitor.
What strategies can you use to keep those loyal customers coming back time and time again?
Provide Exceptional Customer Service
Buffer is an app designed to make it easier to schedule content to share on social media sites. It’s hardly the only player in this industry; in fact, it even faces competition from free alternatives. How does it differentiate itself from the crowd? It provides exceptional customer service.
Buffer documents the progress of its satisfied customers in something called a Happiness Report. This report provides detailed statistics of how Buffer has helped its customers. Looking at January’s Happiness Report, we can see that 78 percent of people who emailed Buffer received a reply within just six hours.
The happiness report keeps Buffer’s team members accountable, while letting its customers know just how seriously the company takes customer service.
Use Email Marketing
Studies show that email offers some of the highest return on investment (ROI) of any form of marketing. According to The Power of Direct Marketing published by the Direct Marketing Association, every $1 spent on email marketing provides an ROI of $41.
One of the main reasons email produces such great ROI is its ability to efficiently keep customers coming back to your business. Email can keep your company at the top of their minds while nurturing the customer relationship, introducing new offers and offering valuable content.
Lens.com is one example of a company successfully utilizing the power of email marketing. As anyone who wears disposable contact lenses knows, they aren’t items you can purchase once and then forget about. So to ensure customers use its service rather than a competitor’s to refill their prescription, Lens.com sends email newsletters letting people know about discounts and special deals. These reminders keep Lens.com at the forefront of customers’ minds, and effectively make the company the first choice when it’s time to purchase new contacts.
Introduce a Loyalty Program
If you’re a regular coffee drinker, you’re likely familiar with the idea of loyalty cards. Each time you get a cup of joe, you’re rewarded with a stamp. Fill up the card with enough stamps, and presto, you get a free coffee.
Loyalty cards work because customers keep coming back to collect their stamps. One UK supermarket, Waitrose, has even gone a step further. Join its loyalty program, and you’ll get your daily coffee—for free.
Waitrose knows that when people stop in for a free coffee, they will usually purchase the rest of their groceries as well. It’s a great way to keep customers coming back and offer something of value at the same time.
Create a System for Complaints
Creating a system for complaints is a good idea for two reasons. First, if there’s a problem with the way you’re serving your customers, you need to know about it in order to fix it. Second, if your customers are still willing to talk to you—even if it’s to complain—you can still do something to make them happy again. If you’re able to fix their problems and impress them with outstanding service, you might just win an even more loyal customer.
Just because customers don’t vent their anger to you doesn’t mean they aren’t going to talk about it. Social media has given consumers a megaphone that allows them to share their displeasure with a wide audience. You want to address the problems—and fix them—before your reputation is damaged beyond repair.
Develop an Outstanding Product or Service
The single greatest way to retain customer loyalty is providing the best possible product or service. To do this, the entrepreneur must focus on answering the question:
“What can I do today to provide my customers or clients with a greater advantage or benefit, to get them closer to the ultimate result they are after?”
In essence, when you provide your customers with the greatest possible benefit and advantage, you become the natural choice for first-time and repeat business.
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Benefits of Retention Marketing Strategies
A 10% increase in customer retention levels results in a 30% increase in the value of the company. (Bain & Co)
Not convinced yet? Here is a summary of the benefits of putting more focus into retention marketing. Implementing retention marketing strategies provide the following benefits:
- Increased revenue
- Lower customer acquisition costs
- Increased referral rates and the creation of brand advocates
- Building of stronger relationships with existing customers
- Improved approach to customer service
- Identification of new business opportunities and ways to serve your customer base
- Gaining deeper insights into your customer’s needs
Other customer retention strategies include:
- CRM Systems
- Loyalty Programs
- Magic Moments
- Overcome Buyers Remorse
- Personal Touches
- Premiums and Gifts
- Questionnaires and Surveys
- Regular Reviews
- Social Media
- Welcome Book
By mid-2009 Marketing Wizdom’s knowledgebase contained more than 3.1 million words in 2,392 documents relating to 20 individual customer retention strategies. That’s equivalent to nearly 11,000 pages, or 44 full sized books.
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This post was written by David Moceri