SUMMARY
Customer retention is crucial for revenue growth and profitability in the ecommerce sector, with customer loyalty being the foundation of a solid consumer base
High customer retention rates can help in getting valuable feedback for product improvement, optimisation of preferred processes and reduced customer acquisition expenses
These tactics involve providing exclusive benefits, addressing customer concerns, and consistently striving to enhance the customer journey to ensure satisfaction and loyalty
Customer retention is often cited as the ‘Holy Grail’ when it comes to revenue growth and profitability for any business. This holds true, especially in the ecommerce sector, which relies consistently on customer loyalty.
We’ll be looking at how customer retention rates can impact your bottom line, the benefits of a high retention rate and how you can get (and keep) that rate high.
What Exactly Is Customer Retention?
In the grand scheme of things, customer retention essentially refers to the level of loyalty you can glean from your customers. Retained customers are the foundation of your consumer base, as they provide a continuous source of income. The more customers you retain, the more solid your foundation will be.
Customer retention itself refers to the process and rate at which you acquire regular customers. Your customer retention rate (CRR) reveals a lot about how your company and products are perceived by the general public. It is the antithesis of customer churn, defined simply as the rate at which customers are lost.
What Customer Retention Means To Your Bottom Line
Earlier, customer acquisition seemed to be the real money-maker. However, according to Ali Cudby, author and CEO of Your Iconic Brand, customer acquisition costs up to seven times more than customer retention. Even a marginal boost in CRR could mean a significant bump in profitability. Let’s explore why this is the case.
Brand And Product Perfection
When it comes to perfecting your product, feedback from loyal customers can be extremely beneficial. What these constant improvements bring about is an extremely satisfying customer experience (CX).
Brand loyalty grows in tandem with product perfection. Very quickly, faithful customers can become champions for your brand, building an unbeatable moat around you. The best example of this is Apple Inc., and more specifically, the everlasting (at least in the market) iPhone.
Processing Stability
One major benefit of a high CRR is that you can determine what processes are most preferred by customers and optimise those ones. For example, if your customers are more responsive to a system that displays shipping prices prior to purchase, you can select an ideal user interface (UI) for the same. This can be applied to an inordinate number of processes ingrained in the online shopping experience, from shopping to delivery.
Within a very short period of time, you’ll find the right processes that allow you to maintain efficiency. Meanwhile, your customers get to experience stability (or the holy proverbial grail of life).
Cut Customer Acquisition Costs
Our research has shown that the cost of acquisition can be as high as 35% of the selling price. Repeated purchases by regular customers are an excellent source of funding for customer acquisition. This protects your brand from imitation and poaching, resulting in a higher valuation of your business.
Your retained customers can also help you bring in more loyal consumers. According to a report from Gartner, a good CX has a 97% chance of leading to a positive review as well as referrals.
Three Surefire Tactics To Boost Customer Retention
Customer retention rates can differ depending on the industry. The banking and insurance sectors have high customer retention rates, between 70-80%. Competitive sectors like hospitality tend to have a significantly lower rate.
So, keeping those retention numbers high requires extra planning and impeccable execution. Here are three tips that will help you increase your customer retention rate.
Implement Loyalty Services & Rewards
These are by far the most effective ways to ensure customers stick with your business over your competitors. Rewards can include free gifts or discounts after a set number of purchases, as well as other specialised benefits like exclusive offers.
You can give your loyal customers unique opportunities to purchase new or updated services before they’re released on a large scale. ZoomInfo got its CRR up to 98.5 using loyalty services that provide live webinars, training sessions and even a certification programme.
Personalised Customer Interactions
Whatever gaps may be left by loyalty programmes and rewards can be filled with effective customer interactions. Whether you’re reaching out to customers through email marketing or WhatsApp chatbots, personalised communications can give you a real edge. It’s not as simple as using the customer’s name; their issues need to be clearly addressed.
It can help to have an easy system whereby customers can reach actual support team members. One major benefit of this process is that you can then encourage customers to provide reviews on your website or social media platforms. These can include screenshots of successful conversations with your support team. User-generated content (UGC) is another method of increasing customer retention.
Constantly Improve Customer Experience
According to the same Forbes study, 77% of customers believe that customer experience is as important as product quality. Another Forbes study, this time with 200 executives, found that when CX was not improved, 83% of them saw their revenues suffer. There is no way to avoid providing an ideal customer experience.
While the definition of ‘an ideal customer experience’ may keep changing, there are always a few constants, like providing a fast checkout or a smooth delivery experience. Improving the customer experience regularly means collecting and analysing a lot of data, from customer concerns to delays in your internal mechanisms.
Final Thoughts
Customer retention, unlike customer acquisition, is a business goal that ensures high yields and low losses. It also reduces customer churn.
More than anything else, your CRR is an indicator of the veracity of your product and your brand. If you haven’t thought about it much till now, then now’s a great time to start.
