When it comes to customer retention, the numbers don’t lie. It costs five times as much to attract a new customer than to keep an existing one. And yet, despite these statistics, businesses still struggle with how to project customer retention and keep their current customers happy. This blog post will show you how to project customer retention and why it matters.
What is Customer Retention?
Customer retention is a key performance indicator (KPI) that businesses use to measure how well they keep their customers. A high customer retention rate means that the business is doing a good job of keeping its customers happy and engaged.
Customer retention is the key to a company’s success. By keeping customers coming back, a company ensures its continued existence. This ability is essential in today’s competitive marketplace.
It requires a lot of effort to gain a customer’s loyalty. You don’t want to lose them once they’re part of your company. Continue reading to learn how to project customer retention and what to do to retain your customers.
Why it matters
How important is retaining customers?
According to the data from HBR, it costs between 5 and 25 times as much to acquire new customers as it does to retain existing ones.
A five percent increase in customer retention rates can translate to 25 to 95% in profit growth.
It makes sense that this data would correlate.
When you have a high customer retention rate, you save money on marketing and sales costs. You also don’t have to spend as much on customer training (depending on the industry) or onboarding new customers. Plus, happy customers who stick around are more likely to refer new business your way.
Happy customers tend to refer others, so they’re great candidates for upselling.
In the end, keeping existing customers is more cost-effective than constantly acquiring new ones. It also makes your company run more efficiently, and your customers happier.
How To Project Customer Retention: Improve Forecasting and Planning
A probit regression model is a predictive tool that helps companies understand which factors affect customer retention. By identifying which variables are most important to keeping customers, companies can take steps to retain more customers.
Probit regression analysis is a useful tool for establishing correlations between customer behavior and demographics.
Before creating this model, you need to decide what your independent variable is. This is an aspect of your model that is carefully chosen and is likely to have a major effect on your resulting categories.
It’s important to identify which factors will have the greatest impact on the business. Not all aspects will have the same impact.
The customer experience, product, design, demographic, appropriateness, and promotion and marketing efforts can all influence a customer’s approach to a company.
Now that you’ve defined your independent variable, it’s time to collect your data. This data will be inputted into your probit regression.
Make sure your data is as accurate as possible.
If your marketing is your main indicator of retention, ask your current and past customers how likely they are to recommend you.
This will give numerical data to your regression equation.
The likelihood of customers staying with a brand can be predicted based on their ratings on the Net Promoter Score (NPS). The greater the customer satisfaction, the less likely they are to leave.
Carry on with your research. Collect the data of several different factors and analyze how each factor will affect the likelihood that your customers will come back to you.
Diagrams can help you visualize how each factor affects your retention rate.
Evaluate the results of your experiment and figure out how you can prevent your customers from leaving you.
Sending out surveys and following up with your customers after they’ve made a purchase can help your business identify why they’re unhappy and how you can fix it. This will not only make your existing customers happier but will prevent any future issues from arising.
This will ensure there are no issues with current clients and it will also ensure that the same doesn’t happen with new clients. Another method that can be used to predict customer churn is logistic regression.
Data quality can be assessed using techniques such as the Akaike information criteria, the coefficient of variation, and the receiver operator characteristics curve.
What’s your client retention rate?
Before you work on retaining customers, you must have an objective way to measure how they’re doing. While you may already have some sense of how they are doing, you’ll want some method to remove your own biases.
The best way to keep track of your client retention is by keeping track of your churn rate.
Retention rate can be calculated in different ways, but a standard formula looks like this:
Retention Rate = ((CE-CN)/CS)) X 100.
Don’t worry if that looks complicated at first. Once you understand how it works, you’ll find it to be very simple and straightforward.
Here are the parameters you can use:
CE is the number of new customers acquired by the end of the period.
CN is the number of new clients that you brought in during the time period
CS is the total number of clients at the start of the period
Let’s look at an example of this in action. Say you have 1,000 customers in your CRM at the start of this year, last month, or last quarter. You lose 200 customers, but you gain 300. At the end of a period, you have 1,100.
The calculation would be: 1,100-300 = 800 → 800/1,000 = .8 → .8 X 100 = 80 percent.
Our customer retention rate is 80 percent.
Now, you may be wondering: Is an 80% retention rate good or bad? The answer, of course, is: It depends!
What is your average customer lifetime value? In some businesses, an 80% retention would be considered fantastic. In others, it could indicate a serious problem.
At this juncture, it is important to contextualize the situation and evaluate your progress against your desired outcomes.
No matter what your current retention rate is, you can always improve it. Any improvement you make to retention will have a big impact on your company.
How to Improve Client Retention
Are you sold on the idea of retaining customers? If so, you might be thinking about how you can improve from an average to a healthy retention ratio.
Here are a few tips:
1. Create a smooth customer onboarding process
The first experience with a brand is usually the most memorable. After the excitement of getting a new product or signing up for a new service is over, most consumers will revert back to their first interaction with the company.
If it was a positive interaction, they are more likely to stay.
The onboarding process is where new customers are brought up to speed with your product or service. It should be as personal as possible, as hands-on as can be, and should remove any and all possible points of frustration.
2. Respond to your customer feedback
Customer satisfaction is incredibly important. When you understand what your customers think, you can better tailor your approach to them.
Customer surveys are a popular way to gather feedback from customers, but one of the most popular metrics is called NPS, or net promoter score.
The NPS is a widely used customer satisfaction survey that measures how willing your customers are to recommend you to a friend. After giving their answer, customers can explain why they gave that response in an open-ended follow-up. This feedback loop is crucial to building strong customer relationships.
Feedback from customers is important, but so is closing the loop by responding to them. This lets them know that you’re listening to them and using that to improve their experience.
Use surveys to not only collect feedback from your customers but to show them that you care about their feedback and are using it to improve your service.
This lets you gather feedback from your customers so you can always be in the know.
3. Keep your products/services at the forefront of your prospects’ minds.
Just because someone is already your customer doesn’t mean you should give up on them. In today’s market, it is more important than ever to stay top-of-mind with your customers.
There are many ways to stay in front of your prospects and customers. A few great examples include sending out a weekly email, hosting social media competitions, or creating valuable, free, and easy-to-access materials such as video, audio, or PDFs. Whichever methods you use, make sure to keep your business at the forefront of their minds.
4. Send out rewards to loyal and promoter customers
Don’t take your current customers or clients for granted. One bad experience or “a better offer” from another company and they could leave you.
Thank them for staying on the line.
Another way to show your appreciation for loyal customers is by sending them surprise gifts or rewards when they place their 10th or 20th orders. Loyal customers are extremely valuable, so it’s crucial to let them know that they are valued.
If you want customers to be loyal to you, send them bonuses at key milestones, such as every six months and every year. This will show how much you care about them.
Loyalty programs are always an option for retaining customers.
Or, thank your promoter for referring a friend by rewarding them for doing so.
With Delighted’s integration to friendBuy, you can reward your happy customers with discounts or free products by embedding your personalized offer into your surveys. That way, you can focus your time and energy on what you do best – making awesome stuff – while we take care of the rest!
Customer Retention Strategies
What’s better: getting a single lead or converting that single lead to a customer?
The correct answer isn’t “getting two new sales,” it’s actually “retaining one existing sale.”.
While acquiring new clients is exciting, retaining existing customers is more cost-effective. It costs 5-25 times less than finding a new customer.
How do you keep current clients engaged?
Here are some of the customer retention strategies employed by the biggest brands.
1. Monitor and track customer attrition
In order to prevent customers from churning, companies should be keeping track of why customers are leaving. This allows them to pinpoint what problems their customers are having, and work to fix those problems.
We created a [[Customer Churn Analysis]] [[Template]] to help you analyze your [[customer]] [[churn]]. By [[increasing]] your [[retention]], you’ll [[keep]] your [[customers]] [[happy]] and [[improve]] your [[bottom]] [[line]].
Download our template.
2. Create a client feedback loop
Customer feedback is essential to improving your business and customer retention. Start by implementing a process for collecting and reviewing customer comments.
This is where customer feedback loops come in. They provide a mechanism for gathering, processing, and disseminating customer reviews and ratings.
There are a few ways to gather information from customers. The most traditional methods are through customer surveys, such as Net Promoter Score, or you could even have users test products or participate in a group discussion.
By following a few of these tips, you’ll be able to collect a lot of valuable customer feedback.
After you’ve gathered feedback from your customers, analyze your results for any trends or areas where you can improve. Share these insights with relevant departments so they can take the necessary action. This will ensure that your product always meets your customer’s needs.
By distributing product reviews to the engineering team, companies are able to quickly identify and address any flaws in product design. This allows them to continuously improve the customer experience.
By collecting and sharing customer feedback, you can effectively respond to customer complaints and improve the quality of your customer service.
3. Create customer communication calendars.
Your customer service team should be reaching out to your customers on a regular basis, even if they haven’t been in touch for a while. By keeping in touch with them, you can maintain your strong relationship with them and inform them of any new products and services you’re offering.
A communication calendar can help you manage customer interactions and create more opportunities for up-selling and cross-selling.
A communication calendar is a document that helps you keep track of when customers last contacted you. It also lets you know when customers are overdue for contact.
By keeping tabs on your customer communications, you can ensure that you’re always at the top of their minds. This makes it easy to launch a promotional offer or proactively solve a customer’s problem before they’re aware of it.
If a subscription is expiring, you can send an email to remind the customer that it’s time to renew. This helps ensure uninterrupted service for your customers.
4. Send them your company newsletters
A business email newsletter is an effective way to keep current and potential customers updated about your company. Email marketing software allows you to send out emails to all of your subscribers at once, which saves you time and money.
Email marketing is a simple way to keep your subscribers in the loop about your business. By automating your email newsletter, you can ensure your customers receive updates at a regular interval.
5. Provide customers with educational material
A business that invests in a customer education initiative provides customers with resources like an online knowledge base and a forum.
Then, your customers can use these self-service features to find answers to their questions before contacting your customer support team.
In addition to selling your products or services, you can also sell related products and services. For instance, if you offer email marketing software, you could also offer courses on general marketing and sales.
The success of this approach for ensuring customer satisfaction is due to the fact that the customers are using the tools that they are already using in their day-to-day work. The academy offers courses that teach users about sales and marketing, as well as customer service and other topics.
6. Develop a sense of trust in your customer base
Two truths about establishing trust in your business are:
Building trust with your clients is a gradual process. Just because you sell to them doesn’t mean they automatically start trusting you. You need to show them that you value them and that you care about them. Be consistent in your interactions and over time, they will learn to trust and like you.
When a customer is deciding whether to spend money with your business, 81% of them say it’s an important factor in that decision. But building that level of trust in your customers isn’t something that can be put in place in an overnight manner.
Trust is the firm belief that someone will do what they say they will. Consistency is key when it comes to building trust in a brand.
If you want customers to trust your business, you need to consistently deliver on your promises. By delivering on what you tell your customer you’ll do, they’ll be able to trust you.
7. Offering outstanding services.
By offering a one-of-a-kind product or service, you are guaranteed to wow your customer base. This will keep customers coming back time and time again.
If you can solve a customer’s critical pain points, you’re providing a valuable service that they will want to come back to.
What customers want is for their business to run as smoothly as possible. If you’ve developed a specialty that eliminates their bottleneck, kink in workflow, or automates a process in a way no other business can, you’re on your way to keeping those clients.
8. Create a customer loyalty or rewards program
A retention program is a set of strategies that businesses use to keep their existing customers coming back for more. Every business can benefit from a retention strategy.
If you want your clients to stay loyal to you, start a customer loyalty program. This will give them more value out of your product or service, allow you to improve your offering, and help build a community that they can interact with.
Start implementing these customer retention strategies today!
How do you build customer retention?
What are the four keys to customer retention?
How can we retain customers?
This guide has shown you how to project customer retention. Remember to monitor and track customer churn. Also, create customer loyalty programs to reward your clients. By creating a great customer retention program, you can keep your current customers happy and reduce the amount of money spent on attracting new ones.