Customer retention rate is the percentage of customers who keep their relationships with your brand after a specific period of time, mainly measured monthly or annually.
Customer retention rate is very important in achieving business growth, especially considering the fact that retaining customers is cheaper than acquiring new ones.
With that being said, here we will discuss six of the most effective strategies to improve customer retention rate, which in turn, will improve your revenue and possibly profit margin.
Let us begin with the first one.
1. Communicating Your Brand Values
During a research involving 7,000 customers from the U.S., 64% of them mentioned that the primary reason for their loyalty towards a brand is to share common values.
Stand for an authentic value. It doesn’t necessarily need to be huge social causes, although they are usually the most effective. Zappos, for example, have consistently communicated their core value of delivering happiness that has been successful in attracting a loyal customer base.
If, for example, you are a toy company, you can communicate a value about making toys safer and healthier for children. If you can aim for a big vision, awesome, but you can always start with smaller ones first.
To best achieve this, we should truly understand our customers: their behaviors, needs, problems, and especially the values we often associate with.
2. Leveraging Social Proof
In this saturated digital marketplace filled with social media, social proofs like testimonials and good reviews are very important. Social proofs are the ones convincing new customers to purchase your product/service, and also the ones encouraging repeat purchases.
With that being said, encourage your existing customers to give good reviews. Offering incentives like discounts or free products in exchange for reviews can be effective for certain business models.
Another effective approach we can do here is utilizing influencers: find the right influencers according to your niche or industry, slowly build trusts and relationships, and ask them to promote your product/service or brand.
3. Deliver Your Promises
It’s very important to clearly and honestly communicate your promises, and yet actually deliver your promises. This is especially true to your customer service: it’s no longer solely about answering customer complaints and questions, but about meeting customer expectations.
Some customers expect fast and simple purchasing processes, some others expect fast responses or any other expectations.
Yet, it can be extremely hard to satisfy a brand new audience, and this is where it’s really important to understand your customers: their needs, problems, and behavior.
Based on this knowledge about your customers, we can formulate something they can look forward to: our promises. Yet, the important thing here to always be transparent and keep your promises.
For example, if you don’t keep your promises in your value proposition, your customers can regret the purchase and might not buy again from you. This is also true with your customer service: if you promise to answer a question within 2-days and don’t fulfill it, it can hurt this customer’s trust.
So, only promise the things you can deliver and set expectations you can meet. This doesn’t necessarily mean you should be static, but to always aim to improve.
4. Improving Your Customer Service
Customer service excellence is certainly effective in improving customer retention, and here we should define clear attributions and track the right metrics and KPI of the customer service activities.
This way, we can figure out the areas where you still have gaps and improve them, as well as leveraging your current strengths.
Here are some relevant KPIs to track in relation to customer service:
- Response Time
Here, we track how quickly you contact your leads through live chat, email, or sales call.
- Conversion Rate
Fairly obvious, the rate of conversions and responses you get on an engagement. For example, how many emails are opened and how many converts into actual customers.
Keep track on the last time you engage with customers and the outcome of each conversation.
- Drop Rate
The number of customers who unsubscribe from your email list.
5. Establish Trust Through Inbound Marketing
People only buy things from brands they trust, which is even truer during repeat purchases. Yet, with so many companies have online and social media presences, it is increasingly hard to get their trusts.
So, it is very important to promote this trust, and again, the most important thing here is to understand your audience.
Implementing inbound marketing is currently the most effective way to establish credibility for most SaaS and software companies: by consistently publishing relevant articles, you can establish your position as the expert or thought leader of your niche.
While inbound marketing can be a pretty broad topic, there are actually only three core steps involved:
- Developing Content
A huge part of inbound marketing is content development, and you can also reuse them through content leveraging.
- Content Promotion and SEO
Your content will only be useful when it is visible, and you will need to promote it through many different marketing channels. Arguably, the most effective content promotion is when it is visible as the top result of Google search through SEO.
- Lead Capture Form
You have to effectively convert readers into actual prospects. You can usually do this by offering gated, downloadable content in exchange for their contact information.
6. Collecting Customer Feedback
Honest customer feedback is extremely valuable to determine the current performance of your business. More often than not, we didn’t recognize our own faults before our audience did.
However, collecting user feedback can be a difficult process, and we can mainly get it through interviews, surveys, and social media monitoring. Email surveys are actually still effective, with the average response rate of above 28%.
Offering your audience a chance to express their opinion can also be effective in maximizing retention. Here, you show them that you do value their opinion and wants to offer a better service.
Obviously, you won’t get all positive feedbacks, and here you will need to maintain patience in responding to negative ones.
The six tactics we have learned above are some of the most effective in maximizing retention rate, but they are not the only ones. You can use these strategies as the foundation, before expanding to other tactics.
The key to improving customer retention is understanding your audience and delivering value to address their needs.