3 Customer Retention Strategies That Keep Customers Paying You [Step-By-Step Guide]

Customer retention is a critical aspect of any business; it’s a long-term asset. Getting sales from repeat customers is cheaper than spending to get new ones.

Acquiring new customers costs a whopping five times more than retaining existing ones.

Repeat customers tend to spend more money, make purchases more frequently, and act as a dependable source of word-of-mouth for your business.

Not only do your existing customers contribute toward your profitability, but they also bring in more customers to your door. A high customer retention rate will be a cornerstone for your business’s success!

But how can you keep your customers coming back for more?

Effective customer retention strategies can help businesses increase customer satisfaction, foster long-term customer relationships, and drive profits.

In this article, we’ll discuss what “customer retention” is and how to calculate it. We’ll also share some of the best customer retention strategies for your business.

What Is Customer Retention?

Customer retention involves a variety of efforts to keep customers long-term and nurture them into your business’s most loyal fans. The ultimate objective is to transform one-time customers into repeat customers and maximize their lifetime value (LTV).

Say your revenue for this month was $100,000, and your goal for next month is to reach $120,000. That would be 20% month-over-month growth.

With solid customer retention techniques, you wouldn’t have to find $100,000’s worth of clients all over again. Your clients would renew for the next month, and you could focus on achieving that double-digit growth. That’s how powerful customer retention could be for the scalability of your business.

Why is Implementing Effective Customer Retention Strategies Important?

If you’re running a business, you know how important it is to get inquiries from new customers, convert those inquiries into clients, and close deals with them. All that effort you put into marketing and sales to acquire new customers is great for your business’s growth.

But here’s the thing: What really helps you scale your business is leveraging that marketing and sales effort by retaining your customers for the long haul.

Costs Lower to Retain than to Acquire Customers

Focusing on customer retention is crucial because it’ll be much cheaper to retain your customers than to find new ones. Think about it: it makes sense to focus on retaining existing customers. 

You don’t have to spend extra time and resources finding new ones. Focus on keeping the clients you have satisfied. Increasing customer retention can have a significant impact on your bottom line.

Increased Customer Spendings

Loyal customers are great because they spend more money than new customers. They understand the value and impact your products have had on their lives and are happy to return and spend more. Existing customers can spend up to 67% more than new customers.

Customer Retention Boosts Customer Acquisition 

Generally, people seek validation for the decisions they make from their social circle. When they share their great experience with someone from their close circle, and that person signs up, they are affirmed for their decision. It fosters a sense of belonging for people to be using the same service/buying the same offer (while increasing your customer base!)

That’s why 60% of your loyal customers talk about your business with their friends and family.

This means customer retention also encourages customer acquisition. Having a customer retention strategy in place not only saves you money but also makes you more money.

Higher Profit Margins

Having the best customer retention strategies in place can also positively impact your business’s profit margins. New customers tend to be skeptical when buying from your business at first.

On the other hand, loyal customers already understand your value proposition. They don’t need the extra push to complete the purchase. Instead, if they love your customer experience, they’d be happy to eat from the palm of your hand.

This drastically increases your profitability. A mere 5% increase in customer retention can significantly boost profits, anywhere from 25% to 95%.

Customer Retention vs. Customer Acquisition

As a business owner, it can be tough to know when you should prioritize customer retention over customer acquisition. After all, it’s important to bring in new business constantly, but it’s also crucial to keep the customers you already have happy.

When is the right time to focus more on retention?

If you’re just starting out, it makes sense to focus primarily on customer acquisition as you build your base. It’s also important to pay attention to your existing customers, who have already shown their support for your business and may be open to future purchases.

As your business establishes itself and consistent sales become the norm, consider a 70/30 split between customer retention and acquisition efforts. This will help ensure that you continue to grow and take care of the customers who have already shown their support for your business. 

As you continue to grow and scale your business, finding a balance between acquiring new customers and retaining the ones you already have is important. This will help increase your customer lifetime value and ensure your business’s long-term success.

How to Calculate Customer Retention Rate (CRR)

Revenue and sales can provide insight into your business’s short-term performance, but the customer retention rate (CRR) is a key indicator of long-term success. A high CRR signifies that your business effectively retains its customer base and is more likely to experience sustainable growth.

To calculate the CRR of your business for a specific period, you’ll need to gather the following data:

  • The total number of customers when the specific period began (denoted by the variable CS)
  • The total number of customers when the period ended (denoted by the variable CE)
  • The total number of newly acquired customers throughout that period (denoted by the variable CN).

Customer retention rate formula:

CRR = [(CECN)/CS)] x 100

Say, at the beginning of the last year, you had a total of 130 customers. Throughout the last year, you gained 50 more customers but lost 20 of them.

As such, CS = 130, CE = 130 + 50 – 20 = 160, and CN = 50.

With these values for the variables, here’s how the calculation would go:

CRR = [(160 – 50)/130] x 100 = 84.6%

Note: A customer retention rate (CRR) of 84.6% is generally considered very high. A high CRR would mean that the business is very successful and might be industry-leading, as it indicates that most customers are satisfied with the products or services.

Best Customer Retention Strategies

Many businesses struggle to retain their customers. They must spend a lot to keep getting new prospects into their sales pipeline.

If your CRR is too low compared to industry standards, consider leveraging these tried-and-tested customer retention tactics to scale your business.

Set Realistic Expectation

The first effective customer retention strategy is to set realistic expectations. From the get-go, you need to be clear with your prospects about what results they can expect from you.

Unrealistically high expectations will always end in disappointment!

Presenting your solution as a magical pill that will solve all their problems is not realistic or helpful. Try to acquire new customers with their expectations set lower than what you can achieve for them. That way, they’ll be satisfied once you meet their expectations. If you outperform them, you’ve won the client for life.

Say you are a digital marketer for lawyers. Realistically, you know you could only achieve 30 bookings for your client in a month. Instead of promising them 100 bookings in the next month to reel them in, tell them you could do 15 to 20. 

That way, they’d be happy if you reached the goal you promised. They’d be thrilled if you exceeded it, which you know you easily could, and you won’t disappoint them.

Also Read:

How To Get Clients For Your Digital Marketing Agency

Customer Retention SOP

Another one of the solid customer retention tactics is to create a customer retention SOP. This SOP (standard operating procedure) should tell your account manager what steps they need to take from the first day of onboarding your client until the day you offboard them.

For instance, we use Asana for our SOPs. That way, there’s a task for our account manager that tells them what to do when they onboard a client. Plus, it keeps giving them retention tasks monthly at every stage of the client relationship to ensure a flawless customer experience.

These SOPs will help you achieve the following:

  • Consistency

One interesting aspect of working with diverse individuals is observing their different approaches to the same task. Even seemingly simple processes can be subjected to multiple interpretations.

While it’s important to encourage innovation in the workplace to stay competitive, it’s also crucial to establish standards to ensure consistent outcomes.

If your account manager is following a customer retention SOP, they’ll know what to do at what stage of the customer relationship.

  • Enhance Autonomy

Making standard operating procedure (SOP) checklists readily available allows account managers to make decisions confidently without constantly seeking guidance or reassurance. This will empower them to take charge and make good choices.

  • Avoid Knowledge Loss

On average, businesses experience a yearly 18% turnover rate. Imagine your account manager, who handles your highest-paying clients, resigns. The amount of knowledge loss you’d have to experience would set you back by months, if not years.

If you have an SOP, you could easily pass on the knowledge to the replacement hire. That way, your customer experience would be seamless, even if you have a high turnover rate.

Leverage a Ticketing System

To answer all of your clients’ inquiries, you need to have a ticketing system. Typically, there are no accessible channels for clients to reach out with questions, especially for small businesses.

Here’s what usually happens when you don’t have a ticketing system for your business:

When you onboard a client, the client reaches out to the sales rep that closed them or your cellphone, asking all the questions they have.

What ends up happening is that either you get upset that they are text messaging you, or the client approaches the wrong person for that inquiry. It’s inconvenient for all the parties involved, ending in a bad customer experience.

Having a great ticketing system in place will solve all these problems.

For example, at Scaling With Systems, we use Zendesk as a ticketing system solution. As soon as we close a client, they get an email, a personal phone call, and a text message.

We also let them know that if they have any questions, they can email us at support@scalingwithsystem.com. Our ticketing system is monitored 24/7, and we can answer them within 24 hours.

That solves every potential problem for everyone involved. We don’t have to reply to text messages, and customers get all their queries answered with a fast turnaround time. Plus, they get to talk to a trained account manager who walks them through any problem they face.

If you are not sold on the idea of a ticketing system yet, here are some more benefits:

  • Organized Requests in a Centralized System

One of the most significant advantages of having a ticketing system is its ability to organize and catalog all incoming support queries. This helps your account managers manage their workload and ensures that no client request falls through the cracks.

Plus, with the ability to prioritize tickets, account managers can tackle the most pressing issues first, ensuring that all of their client’s needs are met on time.

  • Combine Interactions into a Single Thread

It can be a hassle to manage Facebook messages, calls, and emails all separately, especially if a single case involves multiple channels.

Ticketing software is designed to handle today’s multi-channel environment with ease. It allows you to consolidate all customer communications into a single thread, regardless of the channel they came in through.

So, if a client reaches out to you through Facebook, calls your support line, and then follows up with an email, you can link all those interactions together in one place.

This makes it easier for you to manage your workload and allows your clients to use the channel they feel most comfortable with. Even if they end up working with a different agent, the ticketing system will log all the conversations in the original ticket for easy reference.

With a ticketing system, account managers can work on cases that match their expertise and know which requests to prioritize. This leads to the following:

  • Improved efficiency and productivity
  • Less room for human error
  • Faster ticket response times

Plus, in the case of complicated issues, account managers can easily collaborate for a quicker resolution and, as a result, higher customer retention.

Surprise Your Customers with Reciprocity

Reciprocity is the idea that people respond to how they’re treated. When treated well, they respond well. When treated poorly, they respond poorly. It’s no surprise that good service leads to repeat business and recommendations.

Reciprocity is even more powerful when it’s a surprise. Think about a time when someone did something kind for you unexpectedly. It probably left a strong impression on you.

It could be a surprise personalized phone call or, even better, a handwritten note mailed to them that says thank you.

Small acts of kindness can go a long way in building loyalty and creating positive customer experiences.

Empower Your Customers with Knowledge— Not Just a Solution!

Don’t leave your new clients to figure things out on their own! Offer resources to help them learn how to use your product or service. Some ideas:

  • Onboarding tips and tutorials
  • Lifecycle emails guiding new clients through the process
  • One-on-one training sessions with customer support, sales, or an onboarding specialist
  • Online training resources for self-service learning
  • A community of product or service experts for clients to turn to with questions.

Investing in your clients’ success will help them get the most value from your business and keep them coming back.

Customer Retention Techniques: FAQs

What is customer retention?

Customer retention involves a variety of efforts to keep customers long-term and nurture them into your business’s most loyal fans. The ultimate objective is to transform one-time customers into repeat customers and maximize their lifetime value (LTV).

What are the best strategies for retaining customers?

  • Set realistic expectation
  • Create customer retention SOP
  • Leverage a ticketing system
  • Surprise your customers with reciprocity
  • Educate your customers.

How is customer retention measured?

You can calculate the customer retention rate by following the procedure below:

  1. Take the number of customers at the end of the period.
  2. Subtract the number of new customers acquired during the period.
  3. Divide that number by the total number of customers at the start of the period.
  4. Multiply by 100 to get your retention rate.

Wrapping Up: Customer Retention Strategies

Customer retention strategies aren’t a one-time fix. It’s an ongoing endeavor to improve the customer experience and foster long-term relationships

There are countless customer retention strategies, but there’s no magic bullet. Building and maintaining strong relationships with customers, whether personal or business, requires dedication.

While it may take more time and resources, the long-term benefits of a loyal customer base make it worth your while.

Struggling with acquiring new customers? Scaling With Systems has the solution! Our reliable client acquisition strategy consistently delivers results.

Book a free consultation call with one of our advisors today and take the first step toward scaling your business.

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