Most marketing strategies are geared toward customer acquisition, that is, attracting and converting people into customers. It is true that the growth and profitability of a business relies heavily on the steady influx of new customers. This is why a lot of companies spend most of their marketing budgets on generating new customers, even though, in reality, it can cost seven times more to acquire a customer than to retain an existing one.
While attracting new customers remains a fundamental premise of maintaining a successful business model, what is frequently overlooked is the value of retaining and profiting off of your existing customers.
All businesses will experience some kind of customer churn in their lifespan
The side of business relations that we don’t like to talk about because of the negative connotation of the idea – customer churn, lost opportunities and fractured partnerships – are unfortunately quite common and inevitable elements of your business. When too many customers start leaving you, it not only makes your acquisition efforts fruitless but also breaks out the drawbacks in your products or services to the world. Good news is, with an understanding of the reasons behind these events, you can formulate a solid customer retention strategy and take prevention against such a scenario.
The most common reasons for customer churn are:
- A poor customer experience. A poor customer service is one of the biggest reasons behind customer turnover. A study says 71% of customers stopped doing business with a company due to bad customer service.
A purchaser chooses your company because of the convenience, appreciation, and availability of otherwise hard to find products/services. A lousy support team can lose you not only the most forgiving of the customers, but push away the new browsers with good buyer potential.
- Lack of support. Even with the best brand, sometimes things go wrong. It is an unavoidable part of business. The prosperity of your business lies in how you respond to these problems and how soon you resolve them effectively. If there is a functionality problem with the product or service that you sell or the customer is unsatisfied with their purchase, it is your business’s responsibility to resolve these issues in a timely manner.
- Poor User Experience. An inferior user-experience can make a lot of customers run out of patience and give up on your brand. If there is a recurring theme to the complaints, it is imperative that you look into it. If your resolution to these issues is consistently unsatisfactory, it is extremely unlikely that your customers would ever purchase from you again.
Your existing customer base can be a bigger asset than you think
Did you know that most new customers leave your business within the first few weeks of acquiring them? Keeping your friend interested in your product is surely much simpler than holding a complete stranger. Your existing customer base is your biggest asset in minimising acquisition costs and reaffirming your own brand authority. Customer retention methods refer to strategies to inspire loyalty from these purchasers.
- Having an excellent customer retention program means being accountable for your customer turnover rates. Since you would be storing all the purchase data and the feedback from your buyers, a SWOT analysis of your product/service will be much easier. Moreover, the Lifetime Value (LTV) of a customer can be readily measured from this data itself. LTV can tell you a lot more than just profit, it’s actually a great way to measure resonance, engagement and future growth. This broad information in hand, you can design a much more effective marketing plan.
- A successful retention strategy will actually feed into your customer acquisition strategy, as your happy customers turn into walking, talking referrals. A whopping 65% of all new businesses come from referrals, till date, even amidst the huge rise of technologies. Customer retention is the best way to secure recurring revenue as well as supercharge your acquisition strategy.
- Word of mouth affirmation has also had a resurgence with the proliferation of online reviews. Positive reviews happen when existing customers inadvertently turn into brand promoters.
- Turning your existing customers into brand promoters and ambassadors is an excellent way of overcoming lost opportunities and recovering from past mistakes. The people you have already convinced to invest in your business, chances are, they will be much more receptive towards your marketing measures for new products.
- According to the book Marketing Metrics, selling to a new customer has a 5-20% success rate, while the odds of selling to an existing customer, however, rise to about 60-70%. This makes customer retention a much more cost-effective strategy.
So how do you keep customers engaged in your business and turn them into brand promoters?
Customer retention remains the missing ingredient for most companies when it comes to increasing sales and revenue. However, oddly enough, customer retention is a fundamental aspect of customer acquisition. The magic happens through a multi-pronged approach where your existing customers generate referrals and new customers whilst still investing in your business.
- A terrific customer service. A professional and satisfactory customer experience is fundamental to encouraging repeat purchases. As a matter of fact, this experience initiates the moment a customer shows interest in your business and stays on till long after the purchase has been made. You will say your customer service was successful when customers will begin to refer your business to their friends and family. Even if a customer encounters problems down the track, they are much more likely to resolve these issues alongside you, when they feel their issues have been heard and also feel appreciated for buying from you.
- Encourage customer stories. Create case studies, interviews, reviews and user-generated content to authenticate your positive referrals and positive customer experiences. Highlighting these stories on your website and social media platforms will boost your customer acquisition strategy and will also cement your existing customers as valuable lifetime investors. It is also a good practice to promote and to show your customers your success stories, before & afters, statistics or progress shots – whatever is applicable to your product, service or industry. This gives your existing customers a narrative to attach to your business whilst also functioning as verification for prospective customers.
- Engage regularly with your audience through social channels and website blogs. This is where a content marketing strategy becomes instrumental. Interacting with your audience through relevant, industry-specific content will strengthen your relationship with your existing customer base. Regular social media posts, blogs and articles will assign authority to your business, making your audience much more likely to trust and invest in your business.
- Discounts, Special Offers & Loyalty Programs. It is important to reward loyalty. By measuring the LTV of your existing customers, you should be able to determine a promotion or discount that is economically viable for your business and that demonstrates how much you value your returning customers. Loyalty programs are incredibly cost-effective and they They can also be harnessed to obtain more feedback about your product or service (eg. Fill out this survey to receive 10% off your next purchase) or as a referral-based reward (eg. Refer a friend and receive a $20 voucher).
Returning customers add value to your business that cannot be replaced by new customers. Instead of conventional methods like investing heavily in lead generation methods, oftentimes it can be way more beneficial to allow your existing customer base to fuel and inspire new customers. Positive customer relationships are the basis of successful businesses. Investing in customer loyalty is the way you begin to establish returning customer relationships that add infinite value to your business.