Most companies make substantial investments in customer acquisition strategies. However, your resources may be misplaced if your focus is on attracting new customers rather than keeping your existing ones. While both are important, putting more effort into keeping your current customers is more cost-effective and yields a higher return on investment. To cater to your current customers and build deeper relationships with them, your company will need to develop a retention marketing strategy.
Retention Marketing: What is it?
Retention marketing shifts the focus from acquiring new customers to keeping the ones you have. It is a marketing strategy that increases the profitability of a customer through relationship building and increasing the chances that they will make repeated purchases with your company. Retention marketing helps increase customer lifetime value by creating targeted marketing messages to increase both how often a customer returns to your company and how frequently they purchase a product.
Retention Marketing Strategies
There are many things you can do to get customers to return to your business:
- Improve the customer experience: Customers who have a good experience with your company are more likely to return. Make stellar customer service and positive customer experience the cornerstone of your retention marketing strategy so customers know they will be treated well and fairly when they give you their business.
- Let your customers do the talking: Happy customers are the best advocates for your company. Encourage current customers to share their experience with your company with their network and recommend your business to others.
- Offer incentives: Loyalty and rewards programs provide incentives for customers to return to your business. They help you develop a deeper relationship with your customers, which will lead to brand loyalty.
- Personalize communication: All your interactions with a customer help you learn about the needs, interests, and challenges with your product or a competitor’s. Use these data and insights to learn about your customers and personalize your interactions with them so that you directly respond to their needs.
- Pay attention to unhappy customers: Unhappy customers can provide data that is just as important as content customers. If you have customer churn, figure out what’s making them take their business elsewhere. Turn customer complaints into an opportunity to improve.
Knowing your Customer Retention Rate (CRR) helps you monitor your progress in achieving your retention marketing benchmarks. It tells you how well you’re currently retaining customers and how much you improve with retention efforts as you begin implementing your retention strategy. To calculate your customer retention rate, you need to determine a time period to measure (i.e., how many customers you retain in a month/quarter/year or whatever time frame is important to your business). Once you’ve established a time frame, you need to know how many customers you start with and then track how many you lose and how many you gain during that period. Continue measuring your CRR at regular intervals to monitor your progress in retaining customers and gain an understanding of how effective your efforts are. Use this formula to calculate your rate: CRR = ((CE-CN)/CS)*100.
- CE = Number of customers at the end of a period
- CN = Number of new customers during the period
- CS = Number of customers at the start of the period
Striking a Balance
While retention marketing is important and will lead to a greater return on investment, it does not mean that you should completely ignore acquisition marketing. Both are important to your business. The acquisition brings your customers in and retention marketing helps you maximize their customer lifetime value. Find the balance between the two that works best for your company.