How To Build A Scalable Customer Retention Plan For Growth
If you ask yourself what will make your business grow, most probably the answer will be “more customers.” Most of the marketers will also agree on the same answer, and it makes perfect sense. More customers mean more selling, and more selling means more business, and more business means growth. Right?
However, many marketers have started to have come to the conclusion that business growth does not depend on customer acquisition but retaining your existing customers, which brings us to the question of what actually is customer retention?
What is Customer Retention?
Customer retention is a process of converting your customers into returning buyers. There can be various ways to achieve customer retention. The most prominent ways are providing top-notch customer services, providing more rewards and discounts, arranging surveys, using activation tactics, and many more. No matter what you do, the main purpose of customer retention is to hold your customers for as long as you can.
Since customer retention has proved to be more beneficial than customer acquisition, many marketers are now trying to come up with different ways to satisfy their customers and motivate them to stick to them in the future. The following studies show the impact of customer retention on business growth.
- If you can achieve a 5% increase in customer retention, your business profits can increase to as high as 95%
- It is 65% easier to sell your products to an existing customer than a new one.
- Returning buyers and loyal customers are worth up to 10 times their original transaction
Why Focus on Customer Retention?
There are many reasons to focus on customer retention, but here we are going to highlight the top 3:
- It enables you to get recurring revenue.
- Position your LTV: CAC to ensure sustainable growth.
- You will achieve customer acquisition in the future.
Let’s see in detail what do the points mentioned above mean.
Suppose you are running a business, getting as many customers as you can make sense. They will buy services, and you’ll make money. But what if these customers buy your service only for once, and move on to find a new seller? You’ll end up having no business, and you will have to start over. But if you’ll make efforts to achieve customer retention, you will generate revenue even in the coming months.
A study has found that only a small percentage of about (5-30%) of a business’s revenue comes from new customers. When you are successful in holding customers, they grow as your business grows. If your company offers monthly subscriptions, your loyal customers will renew their subscription and buy upsells and ultimately bring 70-95% of your revenue.
Recurring revenue is essential for any industry. If you want to have consistent revenue, you need loyal customers that continue to buy your services every month.
Position Your LTV: CAC to Ensure Sustainable Growth
You might be thinking what LTV and CAC means.
To clarify, CAC stands for Customer Acquisition Cost, which is used to calculate all the cost that is linked with marketing and sales done for a conversion. LTV stands for Lifetime Value and depicts the estimated gross revenue customers will bring during their customer lifetime.
CAC and LTV are used as customer retention tools. Using these two tools, you can estimate how sustainable your business growth will be in the future. It would be best if you remember, higher CAC as compared to LTV is not useful, but having higher LTV as compared to CAC is suitable for your customer retention.
To increase LTV, you need to make efforts for the successful execution of your customer retention programs. Customer retention also results in decreased CAC, and you will be in an optimal position to grow your business.
Future Customer Retention
In addition to higher revenue and LTV, customer retention has some other perks as well. One of such perks is word of mouth. If your customers are happy and satisfied with your services, they will spread the word about your business and that too free of cost. Yes, you read that right. Word of mouth will generate high-quality leads and stable conversions.
Any business owner knows how difficult it is to get new customers. A lot of time, effort, and money are spent bringing a whole new lot of prospects. Sometimes the leads even turn cold. But if your customers are happy, they will automatically become your advocates and spread good things about your products/brand, which will ultimately bring in new customers. If you are successful in retaining the new lot of customers, they will bring in new customers, and the process will keep on going, and your business will keep on growing.
How to Build Scalable Retention Plan for Sustainable Growth
As marketing methods are getting expensive every day, the cost of acquiring new customers is also rising. As a result, many marketers have understood that customer retention is better than customer acquisition because it is a cost-friendly and most effective way for sustainable growth. If you are looking for the right customer retention strategies, we have gathered some of them below.
Make Your Customers Feel Like They are Important
Marketers often use the information of customers to send them different offers and deals. But if a customer is just receiving offers about buying something, he will more likely start ignoring them after a specific time.
This is where you should be creative and come up with something that will prove to your customers that they are essential. At many points in the sales, customers give information like name, email address, location, birth date, etc. Use this information to curate a more personalized message. Keep an eye on your customer’s birthdate; send them a pleasant birthday email. If your customers are stuck in some location that is suffering from a natural disaster, send them safety resources and well-wishes.’
So, if you want to retain your customers, one of the most important steps is to give importance to them. Don’t just keep on selling them; take off your sales hat every once in a while and interact with them as their fellow beings.
Personalization is the KEY
Every marketing blog talks about offering a personalized experience, but many people are still unable to grab the crust of this concept. Personalization does not mean you use the first name of the customer in the email. Personalization is even more than sending location-based offers to the customers.
Let us tell you what personalization means. It has become very important to collect the behavioral data of your customers to provide them with the right offers and give them a good user experience. For instance, if one of your customers is not reacting to emails about your YouTube podcast but keeps on checking your offers on eBooks and ledgers, it means that he/she might be more interested in reading content than listening or watching videos. So, you must use this data to your benefit and send them more reading content.
Sync Your Brand With Meaningful Causes
With the popularity of the internet, people expect more than good products from a brand. They look for a friend, trusted authority that cares about its customers more than their profit. You can have your customers’ faith if you align your brand with meaningful causes that your customers care about.
But keep in mind, don’t partner up with causes blindly; donating to a random charity or cause can harm your brand’s reputation. Ensure that whatever brand you are connecting yourself with, must have some sort of relationship with your brand. However, some causes can be related to any brand, such as supporting women’s rights, supporting black lives, donating for children, etc.
S.O.S: Send Out Savings
Upselling always works, but what if a customer has already bought your premium tier product? Well, for those customers, you should send out savings offers to convince them to buy another product. Give them exclusive discounts or vouchers to motivate them. This is probably the oldest and most effective method of advertising.
Send Reactivation Emails
If you have ever started an email marketing campaign, you must know that most of the customers in your mailing list are inactive. They are those customers who once bought or subscribed to your services, but since then, they haven’t been engaging. If you have tried including all kinds of email content and still haven’t hit the prize, it must be very disheartening. What should you do, give up?
No, not before one last reactivation campaign. Studies have shown that trying email marketing to your current customers can give a return of $28.50 for each dollar spent. Not bad, right? That makes almost half of the cost for acquiring a new prospect — $55.24.
If you want to wake your customers back, you need to create an email with unique and different content that will stand out in the inbox.
Most of the time, companies are making their customer strategies on what they think customers want from them. This is wrong; you are not the customer, and the person writing those strategies and mailing out is not a customer either. So, it would be wise to ask your customers what they want to see from you and no one else.
Engage with your customers and ask them for feedback. Survey and google forms can be of help, but it would be best to engage your customers personally on social media. Give them a call. Ask your customers to leave comments, feedback, and suggestions on your products or services.
Upsell and Cross-sell
It is usually very rare that a new customer starts buying big. Most of the time, new customers always start small with a plan to experiment. So, it would be best to put up a strategy to upsell and cross-sell to new clients. You will have to provide them with a great product and perfect customer service to make them happy and satisfied. Once you do that, start upselling. If your customers are happy, you won’t have to go the extra mile to convince them. Most of the time, keeping them informed of the new offerings, and add-ons will do the trick.
Do everything to make sure your customers are using your products or services to the maximum
Imagine you have put all your time, energy, and efforts to come up with your product or service, and your customers ignore it only because they don’t know how to use it or what your product is capable of. What a shame it would be.
It is your responsibility to guide your customers and educate them on how to use your product. You must have strong customer support capable of communicating and educating your clients. It would be best if you told your customer everything they can do with your product and all the power that comes from buying the membership.
The process of onboarding might seem simple, but it requires detail and delicacy. You don’t want to appear desperate when onboarding new clients, while at the same time, you must provide your customers with good options to learn the functioning of your product in detail if they want to. Plus, once you get new customers on board, you must provide proper education throughout your relationship.
If you want to grow your business, customer retention must be your priority. In this article, we tried to tell you different customer retention strategies by which you can scale your business growth.