The What, Why and How of Customer Retention

By on Aug 9, 2021

You’ve heard it before. It’s much cheaper to retain current customers than it is to attract new ones. Despite that fact, companies tend to focus on acquisition more than customer retention, even though it can cost 7x more to get new customers.

By focusing on retaining clients, your marketing business can save money and boost its marketing. Loyal, return customers will share positive reviews and recommend your services to their friends and colleagues. In this article, we will discuss how to improve client retention. We will also show you how review management services can help.

How Much Customer Retention and Loyalty Matter

One of the most significant benefits of customer retention is return on investment (ROI). Harvard Business Review reported some years back that in the later stages of loyal customer relationships in industry after industry, increasing customer retention rates by 5% increases profits by 25% to 95%.  This astounded even the researchers.

Another reason customer retention matters is its ability to increase customer acquisition. One customer experience agency found that, compared to new customers, loyal customers are four times more likely to refer someone. These referred customers are more likely to continue with your business (compared to non-referred customers), and on average, have a higher customer lifetime value.

How to Boost Customer Retention

89% of companies see the customer experience as a key factor in driving customer loyalty and retention. The customer experience is the overall impression your customers have of your brand throughout their buyer’s journey, but the customer experience includes more than just the sales process. It can incorporate the usability of your website, your brand’s messaging, the buying process, customer service after a purchase has been made and more. Here are some ways to improve the customer experience to boost customer retention.

Send Customer Surveys

Customer surveys are one of the easiest ways to help your business improve your customer experience and, ultimately, customer retention. By learning the pain points of your current customers, you can take action to avoid these issues for future clients.

Send customers a short survey or questionnaire and ask them to rate their experience with your company. The main question should be a variation of “How likely are you to recommend [Business Name] to someone you know?”

Secondary questions can be added for the respondent to elaborate on their rating. For example, if their rating was low, your business would want to ask questions to learn more about what disappointed them. If their rating was high, ask questions to uncover what made it such a positive experience.

Knowing why customers are leaving your business is the first step toward addressing the issue(s). By getting consistent customer feedback, you can gauge the happiness of your customers and look for opportunities to improve your business, services and processes.

To leverage this feedback, your business must take steps to address issues or pain points. This can help create an emotional connection with your customers if they feel like your business is addressing their suggestions, concerns and complaints. One study found that over 65% of participants felt emotionally connected to a brand when they felt like the company or business cared about them. This, of course, increases customer loyalty.

Practice Review Management

Review management is the process of monitoring, analyzing, responding to and generating online reviews to improve a business’s performance. Without review management in place, your business may have fewer opportunities to learn from your customers. Review management services can help businesses manage their online reputation and automate the process of sending surveys to consistently generate customer feedback.

Communicate Often with Your Customers

While their expectations and needs will vary, customers want a relationship with your business, and the key to building strong customer relationships is to engage your customers.

Constant communication with your current customers is another way to boost customer retention. Monthly newsletters or emails with company updates or product or service announcements will educate your customer base and create opportunities to build upon your relationship.

Measure Your Customer Churn Rate

While a business may think it’s building a loyal customer base, understanding and measuring customer churn will provide a more accurate representation of customer retention. Customer churn is when a customer stops using your products or services – or simply stops being a customer. Some customer churn is natural since no business retains 100% of their customer base. But if your churn rate is high or shows an upward trend month after month, you will want to be more proactive with your customer retention efforts.

To determine your monthly customer churn rate, take the number of customers you have at the beginning of the month minus the customers you have at the end of the month and divide by the number of customers you had at the beginning of the month. For example, if your business had 15 customers at the beginning of the month and only ten customers at the end of the month (15 – 10 = 5, 5 ÷ 15 = 0.333), your customer churn rate would be 3.33%. This can also be calculated on an annual level to see how your business is changing year-over-year.

Improve Your Clients’ Customer Retention

While you want to boost your customer retention, your business or agency should offer this same value to your clients. White label reputation management lets you provide online review monitoring, analyzing and generation to improve your clients’ business’s performance – all under your brand identity.

White labeling enables smaller businesses to expand their offerings to clients without having to spend time, money and resources to develop a particular product or service themselves. Beyond saving money and resources, white labeling specific services can create additional revenue streams for your business.

Grow Your Business

Customer retention is about building strong client relationships and maintaining ongoing partnerships. In order to retain customers, your business needs to learn from your current customers and take steps to improve their pain points to build customer loyalty and create a more positive experience for future customers.

Umbrella can provide your marketing agency with review management services to help you retain your clients. Of course, Umbrella can also enable you to provide the same services to your own clients through white label reputation management services that you can resell.  Contact us to learn how Umbrella can help your marketing business and your clients’ businesses with customer retention.

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