It’s cheaper to retain current customers than it is to gain new customers. This is something that we learn early on when running a business. The tricky— yet crucial— part is figuring out how to retain and reward your current customers and to keep them coming back for more. It’s no secret that a successful customer retention strategy can be an elusive thing to get right.
What is customer retention?
Customer retention is the collection of activities and strategies that a business uses to keep current customers coming back and turn them into long-term customers. A customer retention strategy is a method that a business uses to increase the number of repeat customers and to increase the profitability of existing customers. It focuses on building customer relationships, increasing loyalty, and maximizing the revenue (or lifetime value— LVT) for each customer.
In short, customer acquisition is the foundation that gets customers walking through your doors in the first place, while a customer retention strategy builds on that to keep them coming back for more.
How to calculate your customer retention
Customer retention rate (CRR) is the percentage of customers that your company has retained. To calculate your CRR, subtract the number of new customers acquired from the number of customers remaining at the end of a given time period. Then, to calculate the percentage divide that number by the total number of customers at the start and multiply by 100.
Why is customer retention so important?
Focusing on customer retention gives you a lens to view customer loyalty and satisfaction through, and to see what triggers customers to walk through your doors (and to keep them coming back time and time again). Having a successful customer retention strategy can bring in a ton of ROI and bolster your revenue.
- It’s 5–25X more expensive to acquire a new customer than it is to retain an existing customer.
- A 5% increase in customer retention can increase company revenue by 25–95%.
- Loyal, returning customers are more likely to refer their friends and family, which in turn brings more customers to your business.
Customer retention strategies
There are several things you can do to improve your customer retention. A few strategies that can really help are:
- Customer surveys— Asking your customers what they think about your business gives you crucial insight into what’s working well and which areas have room for improvement. You can use this insight to understand what would give customers a better experience, and, ultimately, keep them loyal to your company.
- Communicate with customers— Communicating with customers and educating them on your products, events, and news keeps them engaged and informed. When customers are in the loop, you’ll be top of mind and they’ll be more likely to keep coming back.
- Referral marketing to keep customers engaged— Referral marketing platforms like Check This Out gives you the opportunity to leverage the power of word of mouth marketing to reward your existing clients, and to gain more loyal customers via referrals to friends and families. In turn, this will net you more loyal customers and will improve your customer retention rate (and improve your ROI!). Recommendations, reciprocity, and rewards are all crucial for customer retention, and a referral marketing program like Check This Out helps you capitalize on all three.
If you’re looking for ways to get more customers through your doors and to improve customer retention, we’d love to help your business succeed. Find out more about our referral program software here.