You just acquired a new customer.
Congratulations! Let's pop a bottle and celebrate.
Not so fast. Acquiring new customers is great, but making sure they stick around and make repeat purchases is better (and a smart investment). In fact increasing retention rates by just 5% has been shown to increase revenue by nearly 95%! Stick around to learn what a retention rate is, how to measure it, and how to improve it to increase revenue and grow your customer base.
So if you're interested in customer retention optimization, here's what we're talking about...
“There is a popular expression frequently cited by marketers that neatly encapsulates one of their critical objectives: 'Your next best customer is the one you already have.'”
Did you know that retaining a current customer can prove up to five times more valuable than acquiring a new one? Even more interesting, increasing your retention rates by a meager 5 percent can increase profits by as much as 95 percent! Check out this blog to learn how to interpret a Customer Lifetime Value (CLV) and see an overview of the best practices to improve retention.
“A repeat customer spends 67% more than a new customer. According to a 2014 survey, 61% of small business owners generate over 51% of their annual revenue from repeat customers.”
We really want to emphasize the importance of current customers and the value that they bring to your company. As stated above, current customers will spend on average 67 percent more than newly acquired customers. That's great news for you!
Not only does this article also go into great detail on the fundamentals of retention, such as extension, advocacy and satisfaction, but it also provides a real life example of a now bankrupt company and its struggle with retaining customers.
“For example, it’s much cheaper for you to give free returns than to give free delivery because only 25% or 30% of your customers will return the goods. So that means, free delivery is given to all your clients, while free returns will be given only to 25% or 30% of your customers. That leads to a higher retention rate, and that leads to a higher revenue.”
When working within the eCommerce space, delighting your customers post-purchase is essential to regaining their business down the line. Retention strategies are extremely important within this industry because, well, there is just so much competition.
“Before we get into the customer retention optimization guide, it’s really important to first establish, very clearly, what figures you’re reporting on.”
Its very easy to jump head first into a new concept without fully evaluating your current surroundings. When it comes to customer retention, it's really important to first establish what figures you're reporting on. For example, the slight different of looking at the retention rate of new signups versus new signups who have finished your oboarding process will give you wildly different results and choosing the wrong one may skew your data.
Take a look at this awesome guide that works through the methodology of how to properly evaluate your current customer retention and how to implement strategies to improve upon it. Check out Raluca Popescu's article where she details several strategies on how to delight your eCommerce customers.
For example, always under-promise and over-deliver. The use of handwritten thank you notes or small gifts along side the customers purchase is a great way to surprise and delight your customers. Although small, this surprise will have a big impact on your customer retention rates.
"So as we increase retention, we actually increase other things. The first thing is virality. As we retain a user for longer and longer periods of time, we get more opportunity to basically get them to invite other users and bring other users into the mix."
This video is a must watch if you're interested in learning more about your retention rates. Brian Balfour, HubSpot's VP of Growth, does an outstanding job helping to visualize what a customer growth graph looks like and how retention is the underlining metric for maintaining sustainable business growth.
If visuals are more your style, check out this helpful infographic that illustrates the importance of customer retention and how much other companies prioritize it. For example, 42% of respondents of Oracle's Commerce Trends survey say that customer retention is one of main metrics that their business uses to measure for success.
By now, the importance of customer retention is clear. While acquiring new leads is great, achieving a high retention rate will exponentially grow your business. But before you can retain a customer, you have to first make them a customer. Where do customers come from? You lead generation efforts. Check out our 30 Greatest Lead Generation Tips, Tricks & Ideas to for inspiration and guidance in bringing leads to your business.