You can help your bottom line by knowing your client retention rate and how to increase it.
- Customer retention occurs when a previous customer makes another purchase from you.
- The ratio of consumers you have retained to all of your customers during a specific period is known as your customer retention rate.
- You may employ social media, customer feedback surveys, loyalty programs, and other incentives to increase client retention.
- This article aims to help business owners determine and enhance client retention rates.
Marketing frequently places a lot of emphasis on luring in new clients. However, taking care of your current clientele should still come first. If anything, keeping existing clients might be more straightforward and less expensive than looking for new ones. According to research, most firms make sales to new consumers in the range of 5% to 20%, but for current clients, that number rises to 60% to 70%. Understanding your retention rates can help you determine whether you need to put more effort into this area because you stand to benefit much from high client retention.
Customer retention: What is it?
When a first-time consumer returns to make another purchase from you, you have retained that customer. You have kept the consumer if they consistently purchase the same product or various items on a sporadic basis.
Innovative customer retention strategies stress this recurrent business and work to increase the profitability of each client for your business. Most client retention techniques facilitate the purchasing experience and benefit your consumers. This results in a win-win situation where both you and your consumers benefit from increased value from one another.
It is impossible to overstate the importance of building strong customer connections. According to one study, a 5% increase in client loyalty increases profits by 25% to 95%, with repeat customers accounting for 65% of all sales. According to other research, keeping consumers costs seven times less than finding new ones. By evaluating your client retention rate, you may ascertain whether your business is efficiently utilizing this power.
What is the rate of retaining customers?
Your company’s customer retention rate is known as the percentage of your clients that do not make the first purchase within a specific period. Collect the following information to determine your client retention rate:
- The variable S represents the total number of customers you had at the beginning of the term.
- The variable E represents the total number of consumers you had after this period
- The variable N, which represents the total number of new clients you obtained during this time,
Remember that N refers to the total number of consumers you acquired, not the number of lost customers. As a result, use 30 for N rather than 30 – 12 = 18 if you gain 30 clients but lose 12. Only when figuring out E—the product of S and the difference between clients you gained and lost—does your number of lost customers come into play.
How to determine client loyalty
This is the customer retention rate (CRR) formula using the factors mentioned above:
(E – N)/S = CRR
Your client retention rate will be expressed as a decimal when you compute it. This decimal may be changed into a percentage by multiplying it by 100.
How to increase the percentage of customers you keep
If the client’s retention rates seem too low for your taste, there are various steps you may take to raise them. Here are a few examples:
❇ Client loyalty schemes
The enrolment of clients in a loyalty program is a systematic strategy businesses use to retain their patronage. When you think of customer loyalty programs, you might initially picture giant companies with rewards cards, but even the tiniest firms can use this tactic.
❇ Customer satisfaction polls
Ask clients to complete a feedback form after they purchase so you may learn about their experience. The probability that consumers will make more purchases might rise if they feel appreciated and listened to. However, you risk coming off as heartless and losing clients if you collect customer feedback without making adjustments.
Notably, the fact that there are several ways to perform customer satisfaction surveys makes them handy. After a customer service contact, you may ask them to complete your survey. After an e-commerce transaction, you can send an email with a link to the study or a QR code.
❇ Online networks
Most company owners know the advantages of utilizing social media for marketing, which can be just as effective for providing customer service. To make your business easily accessible on channels your consumers probably already use daily, you may utilize clever hashtags or dedicated customer service social media profiles. Customer retention frequently comes from combining this presence with prompt replies and valuable solutions.
❇ Additional rewards
You’ve seen the effectiveness of incentives for customer retention if you’ve ever stopped buying things from a company only to get an email offering you discounts if you come back. To increase the possibility that you’ll keep consumers you’ve recently lost, employ marketing automation and email marketing to identify them and provide incentives. Again, retention is much simpler than acquisition, so this strategy may be just as helpful for converting first-time purchases into loyal customers.
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