Did you know that it is seven times as expensive to acquire a new customer than it is for you to retain an existing one? Yet, companies everywhere focus more on acquisition than they do on retention.
What’s more, 63% of businesses feel that customer acquisition is a more important goal.
So, even though it’s more cost effective to improve customer retention, companies tend to throw marketing dollars at courting new business.
In this article, we encourage you not to neglect your best business prospects – these are your current customers. Create a strategy for customer retention to watch your profits soar.
Today, we look at how to improve customer retention with these five tools. First, let’s look at customer retention:
What is Customer Retention?
Studies show that retaining customers is better for your bottom line than working hard to acquire new ones. But, just what does customer retention mean?
Customer retention is the process you go through to encourage your current customers’ loyalty. Customer retention strategies work together to encourage your repeat business.
Consider this definition by Impact Learning Systems:
By definition, customer retention is the activity a company undertakes to prevent customers from defecting to alternative companies. Successful customer retention starts with the first contact and continues throughout the entire lifetime of the relationship.
Since customer retention is one of the most powerful ways to grow your business, we’re here to tell you that it is doable. The best part about customer retention is that you already have a relationship with these customers because they’ve already made at least one purchase from you.
They know your business and a little about at least one of your products. Now, it’s up to you to convince them to move forward with your business again and again. To help you do that, here’s how to improve customer retention with these five tools.
#1: Build Relationships
The most important part of your customer retention strategy is relationship building. Once your customer makes the first purchase, it’s time to personalize the message.
This allows you to tailor information to each customer’s needs.
For example, let’s say you purchase a pair of jeans on an eCommerce site. That company may then send you an email with product recommendations that might go with your new pair of jeans.
Alternatively, you might sell vacuum cleaners online. You could continue to build the relationship by offering emails that include cleaning tips and product recommendations on vacuum cleaner bags.
Bottom line – meet customers’ needs and let them know you have their best interests at the forefront, and you’ll go a long way towards retaining their business.
#2: Use Loyalty Programs
Customer loyalty programs are a great way to give a lift to your customer retention. This is why so many companies offer rewards on purchases. Once a customer has started using your loyalty program, it becomes increasingly difficult for them to stray.
Consider online shoe company XYZ. They offer a loyalty program for every 10 pairs of shoes a customer purchases at regular price, they get one pair at half off. So, you’ve taken a first-time customer and converted them into a 10x customer just so they could get a pair at half off.
You can see how a loyalty program can boost your retention rates. After all, no one wants to leave a gift unused, so they’ll work hard to earn the reward.
Another benefit of loyalty programs is that you can offer rewards for more than the purchase. Consider the online retailer who can offer reward points for online reviews, social sharing and referrals. This in turn has the potential to motivate more customers to stick around and shop with your business.
#3: Incorporate Live Chat
Another good way to increase customer retention is through the bells and whistles on your website. Consider two sites – one offers a live chat option, and the other doesn’t. The site with live chat will win out because they meet the needs of their customers.
Live chat can improve retention by directly engaging your customers in real time and assisting them with their purchase.
One study says that live chat has the highest satisfaction levels for any customer service channel, with 73% compared with 61% for email and 44% for phone.
When you add support systems to your website, you can solve your customers’ problems and deal with any questions they have immediately. They don’t have to search for your number and wait on hold – they can have their needs met quickly.
#4: Employ Customer Relationship Management Software
You’ve probably heard of a CRM – customer relationship management. How does this software increase retention? It keeps track of your customer’s entire journey with your company – from the first sale to the most recent sale.
Using a CRM, you can track where each customer lies in your sales funnel – you can monitor email open rates, loyalty program usage and much more.
Basically, every interaction your customer has with your business and everything you do for lead management is in one central location.
A CRM provides the framework for your customer retention strategies. It also allows you to target buyers at different stages in the buying process with specific messages tailored to their needs.
#5: Use Gaming Mechanics
This is probably a customer retention tool that you haven’t heard much about. It’s a win-win for online retailers working with a younger demographic or one that is familiar with the way gaming works.
You can employ gamification throughout your customer buying experience and purchase process. What’s it do? It speaks to an enjoyable experience with a bit of competition added in. This is why it works with a younger buying set.
You can use gamification through leader boards, status symbols and badges that allow your customers to compare themselves with others. Tie this in with your loyalty program and watch your retention rates grow.
Today’s younger set enjoys seeing how they match up to others. Consider the shoe example earlier. You can assign badges to big purchasers to encourage others to see how they stack up and build their purchases to reach the top levels.
One of the most important aspects to improving customer retention is to watch your analytics to gauge your success.
You’ll want to take a look at not only your sales, but your customer engagement stats to see how your marketing efforts are working. This lets you know which customer retention tactics are working so you can enhance them and continue using them, while ditching the tactics that don’t work.
For example, if your latest retention tactic falls flat, you can tweak your message and watch your analytics. If you see improvement, you can continue on. If not, it’s time to tweak it a bit again.
When you starting working on improving customer retention with these five tools, you’ll make better use of your marketing strategy and dollars. Just remember to test, test and test again.
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