7 Ways to Improve Customer Retention through Marketing Automation
If you were under the impression that attracting new customers is the simplest way to grow your business effectively, it’s time for a “refresh.” As much as it’s vital to acquire new customers, it’s more profitable to retain your existing customers. Of late, I’ve been seeing how customer retention doesn’t get the significance it deserves. So I wrote this blog around what customer retention is, how to measure it, and a few retention strategies you will find beneficial for every customer you onboard.
What is customer retention?
Customer retention is the process of nurturing and engaging customers to retain them over a period of time so they continue purchasing products or services from a business. The number of customers retained is directly impacted by how many new customers were acquired and how many existing customers churned.
Why is customer retention important?
Customer retention is critical to gauge how good you are at satisfying your existing customers. And this is important because, in a study by Gartner Group, statistics show that 80% of your company’s future revenue will come from just 20% of your existing customers.
Take a look at the benefits:
- Receive free word of mouth advertising.
- Save money on marketing.
- Get honest feedback from retained customers.
- Long-time customers tend to be less price-conscious.
- Retention strategies reduce the risk of churning.
- Upselling is easier amongst loyal customers.
It isn’t enough if you invest in lead generation and customer acquisition. If you want your customers to place their trust in your website or your offerings, you have to take the effort and time to build good relationships with them.
After all, the customer is king!
Cost of acquisition vs. cost of retention
If you anticipated a tug of war between these two, you were wrong.
It’s all about finding the balance. Acquisition costs involve bringing in new prospects and expanding the customer base whereas customer retention costs help boost customer loyalty and brand awareness. Sadly, only 40% of companies and 30% of agencies have an equal focus on both- acquisition and retention.
How can a business calculate its customer retention rate (CRR)?
You may be receiving a lot of attention from potential leads and onboarding multiple customers, but how long are you able to retain them month after month?
The formula to measure CRR is relatively straightforward.
You don’t have to be a math whiz to solve this one! Here’s a simple example:
Say, the time period under observation is the past fiscal quarter. At the start of the quarter, your business had 20 customers(S). In this time period, you gained 5 new customers(N) and also lost 1 customer. Hence at the end of the quarter, you were left with 24(E) customers.
The CRR for our example is:
= ((E-N)/ S)*100
=((24-5)/ 20)*100= 95%
This means your business successfully retained 95% of its customers in the previous quarter.
What is a good customer retention rate?
“A 100% customer retention rate!”- As good as it sounds, we have to come in terms with the fact that it’s an unrealistic standard since churn is indispensable. If that’s the case, then what’s the ideal conversion rate?
Some companies attain higher retention rates than the rest, it’s because each business is unique and retention strategies vary from one industry to the other. If you run a B2C company, expect inevitably higher churn rates than the B2B folks.
The most pragmatic approach to establish an excellent retention rate is to measure and compare your current CRR against your past performance.
An increase in customer retention rate by 5% increases profits by 25% to 95%.- According to research done by Frederick Reichheld of Bain & Company.
So, even a slight improvement in your retention rate over time can boost your revenue manyfold.
How can you improve your customer retention rate?
Here are seven ways to deploy customer retention strategies using your marketing automation tool:
1. Onboard the newbies:
Once a prospect purchases a product or service, they become your #customer. Here is when the window to perform customer retention first opens as there is a high risk of churn involved at this stage. A new product can be quite intimidating, and customers get frustrated at the smallest inconvenience. A robust onboarding process helps your customers to warm-up and successfully adapt to the new environment. It could include a welcome email, product walk-through or demo request email, case studies, tutorials, and other educational content.
This is an example of a B2B SaaS company automating its onboarding process.
By automating your onboarding process, personalized journeys replace time-consuming manual steps.
Now that your customers have settled in, remember that there’s more to customer retention than just solving their queries and helping them on board with your product.
2. Utilize customer satisfaction surveys:
It’s safe to say that your customer knows best! They use your products and face real-time problems that your product development team may have overlooked.
Gathering these insights, analyzing them for trends, and sharing your inputs with the rest of the team is a great way to keep them aligned.
“Customer feedback helps you determine if your clients are satisfied with your service and detect areas where you should improve.” – Source
A good practice is to periodically follow up with a customer satisfaction survey. Your survey could be as short or extensive as you like but make sure you get their honest feedback. You could also retrieve feedback by inviting them to focus groups or by conducting user tests.
Another great practice is to send NPS email surveys. NPS (Net Promoter Score) is one of the simplest ways to gauge your relationship with a customer. Respondents give a rating between 0 (not at all likely) and 10 (extremely likely) for the question you ask. Based on their responses they are categorized as promoters, passives, and detractors. You can read more on NPS surveys here.
Get qualitative feedback from your customers with customer feedback emails created and sent through your automation tool. Here’s how:
3. Delighting your customers:
You cannot deny enjoying the pampering you receive on your birthday. It sure does make you feel special. Wouldn’t it be great if you could make your customers feel the same way?
Online businesses can now deliver moments of ‘wow’ on your customer’s fondest occasions. It could be their birthday, anniversary, or even the day they first purchased a product from your store! With marketing automation, send personalized emails or notifications to commemorate their special milestones.
Here’s how you can send personalized emails to your customers effortlessly through your email marketing software :
4. Distribute newsletters
Emails are as crucial for marketing today as they have been for the past decade.
It’s a no-brainer for your organization to send email newsletters to your customers. It’s a great way to keep in touch with them irrespective of how long they have been on your customer list.
A newsletter’s content varies from business to business. It could be regarding product updates, seasonal tips or advice, special offers, an announcement of upcoming events, blog recaps, industry news round-up and, much more!
5. Retrieve customer testimonials:
Conversing with customers proactively and asking them for feedback makes them feel valued and appreciated.
Get your customers to share their reviews across public platforms suitable for your niche market. Eg., it could be ProductHunt for SaaS business, Google Play Store for android mobile applications, Quora and other discussion forums.
This paves way for word-of-mouth marketing. Publicize customer testimonials across your website, and social media handles to attract new prospects and grow your customer base.
6. Personalize promotions for loyal customers:
Induce loyalty in your customers by promoting loyalty programs that offer store credits, prizes, discounts or other benefits. A complete and personalized loyalty program will make your customers feel like they have an emotional association with your brand.
Give your customers reasons to come back to your company for more. The more you reward as they shop or use your product, the more they stick to your business.
“Loyalty program members spend between 12-18% more per year than non-loyalty program members.” – (Source)
You could run personalized campaigns for customers who have have been actively using your services or products. Here’s an example:
7. Tend to inactive customers:
As easy as it is with a marketing automation tool to send personalized emails, attractive rewards, and insightful newsletters, some of your customers won’t buy it.
For instance, your onboarding workflow goes live, and you notice one of your customers doesn’t seem to react to your emails as expected. You are now in an awkward position as you doubt your emails are bothersome. You could be dealing with customers like this in either of the two ways:
- You can create a separate list and include the contacts who seem to prefer lighter communication. If your engagement rates begin to increase, you can take it up a notch and try interacting more.
- The straightforward approach would be to set-up an email subscription preference center.
A user may not be interested in all your emails, and as a business, you should only be sending the kind of emails that matches his or her interest. You can let your subscribers choose the categories they want to opt-out from, and stay subscribed to the ones they like.
When your business focuses on customer retention, you notice your customers climbing up the “magic beanstalk of customer loyalty”.
Hopefully, this blog has helped you catch up on the basics of customer retention and motivated you to strategize if you have a marketing automation software in place (which you most definitely should).
Boost revenue, build brand awareness and improve customer experience with your customer retention focussed team.
If you aren’t convinced, it’s time you ponder over this:
According to Marketing Metrics, the success rate of selling to an existing customer is 60-70%, while the success rate of selling to a new customer is only 5-20%!
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