In business settings, customer retention is one of those terms that never goes out of style. Research shows that a 5% increase in customer retention can increase profits by up to 95%. According to other studies, the cost of retaining an old customer is five times lower than that of acquiring a new one. The key takeaway here is, there is value in holding on to your existing customers.
What is customer retention management?
Customer retention management is a process that culminates to customer success. It refers to all the actions you take to keep your customers from becoming somebody else’s customers. In its core, customer retention management represents a managerial approach that inspires customer loyalty over long periods of time.
Why is customer retention management important?
Loyal customers positively impact your bottom line. This is because of many reasons but, here are the most important ones:
1. Customer retention management is cost effective
Customer retention costs are lower than customer acquisition costs. The lower investment either means larger profits or more money to reinvest in other initiatives. Meanwhile, you are not losing any customers and your get larger ROI.
Since it’s cheaper to retain than acquire, customer retention management is particularly beneficial if you are operating in saturated markets where it is harder to achieve further growth through other strategies.
2. Loyal customers buy more
Customer satisfaction and loyalty are no easy feats to achieve. But, once you’re there, you get to enjoy exponential growth. Customers that have been successful with the use of your product or service and their interaction with your company will not only buy again but they will spend more. This is because they’ve been with you long enough to recognise the value of your business and trust the quality of your product(s). In the long-term retention increases customer lifetime value.
3. Happy customers bring in new business
Low churn rates and repeat customers indicate that you are consistency providing an elevated customer experience across the customer journey. Offering a great customer experience will turn your customers into brand advocates. Word-of-mouth is the most effective advertising you could hope for and your existing customer base is one of the most powerful marketing tools you have at your disposal.
The role of customer data in customer retention management
Usually, companies go about measuring their success with customer retention by tracking customer churn rates. Customer churn rates calculate the percentage of customers that end their relationship with the company over a specific time period. Companies, typically, look at churn as a symbol that something is working well or that something has gone wrong and customers are deflecting. Churn rates as a metric, however, cannot show how well something is working or what exactly has gone wrong and where.
Successful customer retention management heavily relies on customer data and feedback to hone in on customer needs and figure out how to meet them to keep customers coming back. Every aspect of your business, from sales to customer support and beyond, impacts retention. As a result, you need to collect customer feedback from different touch points across the customer journey to get a holistic image of how your customers feel about your brand and whether you have managed to meet expectations or not. This is one of the main reasons companies get busy listening to the Voice of the Customer (VoC).
While data aggregation is important to boost your customer retention efforts, it is equally important to implement solutions and act on the insights customer data delivers. This boils down to how you manage your relationship with customers that are in danger of churning.