5 Ways Customer Retention Leads to Increased Net Profits

Your company’s profits can be affected in many ways, but one of the most critical ways is customer retention.

“Focusing on customer retention can increase revenue over an 18–24-month period by as much as 80+%, reduce customer acquisition costs by 30%, and increase total customers by 1.5x.” – Josh Chapman, Financial Modeling Expert and Venture Capitalist

Today it is all about the customer experience (CX). It’s clear that companies with lower churn rates take the time to show their customers they care. They stay in touch and communicate often with their customers. They also have higher profits.

In the chart below by MarketingCharts.com, we see why retention matters to consumers. Companies that build loyalty and trust keep more customers. They enjoy the benefits of increased revenue with a higher and longer Lifetime Value.

They’re aware it costs a lot more to get a new customer than retaining an existing one.

Their customers in turn reward them with an improved brand reputation. They become brand ambassadors and refer the business to others.

In the chart above one of the most important things to consumers today is for companies to provide a consistent customer experience.

There’s nothing more jarring to the reader than to receive an email from a company you’re familiar with, that has a very different tone and feel to it.

If you’re planning to do a rebranding it is best to prepare your readers in advance. Let them know they can look forward to some exciting changes.

There are many ways a business can provide a great CX. We will explore 5 ways that you can use in your business now, to reduce your company’s churn rate and improve your customer retention rate.

1. Customer Onboarding

It’s critical that you have a great onboarding process in place when a customer buys from you for the first time. It’s a critical time when they may be feeling buyer’s remorse. Help them feel confident they made a good decision by providing a great first impression.

To provide an even better experience, try using the word ‘Welcoming’ rather than onboarding.

Your welcoming process should include a sequence of emails. Make sure to reassure them and help them to use your product or service. This will build trust and make them feel cared for.

Your welcome email should use the customer’s preferred name and feel like a personal welcome. Have a person with a key role in your company sign it like the president or CEO. Make sure it helps the customer understand how to use your product and provide resources so they can succeed in using it.

Some helpful resources you can provide them are a demo video or a link to the FAQ page. Invite them to join a social media group where they can be part of the community and maybe learn of new ways to use the product.

New Voice Media found in a study that poor customer service costs businesses $75 billion a year. They also said, “Brands are failing to create the positive, emotional experiences that drive customer loyalty.”

The latest report from XM Institute shows the amount of sales at risk globally after a bad experience can cost businesses $3.7 trillion annually. The United States annual revenue at risk is $846 billion (see chart below).

Make sure to check in with your customers often. Give them opportunities to provide feedback and offer helpful tips. Remember, consistency is the key to keeping your customer engaged and building loyalty.

2. Social Media Communities

You probably already are on social media whether it’s your company’s business page or paid ads. Social media platforms have a large user base and allow your business to reach a wide range of customers.

Marketing Chart did a study showing that 58% of consumers follow a brand on social media and that it has a moderate to high impact on their purchases. Companies have an opportunity to engage with their customers through groups and forums. You can share engaging content such as blogs, videos, and infographics to inform and educate them on your products and services.

Social media platforms provide useful analytics. Use them to track engagement and measure the success of your campaigns. You can also use data to target specific demographics, such as age, location, and interests.

Creating a community is an opportunity for live Q&A sessions or webinars to connect with your customers in real-time. In these groups your customers can also connect with each other. They can share ideas for using your products, and even other ways your product can be used.

The Marketing Chart article referenced above also gives some areas to be aware of when it comes to social media. Make sure that you don’t do any of these missteps (click article for the full list) or you’ll likely lose followers or even find they hide your posts. Don’t do these:

  • Post clickbait (misleading intentionally) 54% Unfollow 22% Hide
  • Post inauthentic content 44% Unfollow 24% Hide
  • Post repetitive content 35% Unfollow 33% Hide
  • Post boring content 40% Unfollow 27% Hide
  • Excessively self-promoting 34% Unfollow 29% Hide
  • Overusing memes or social trends 30% Unfollow 28% Hide
  • Not reacting with or responding to the community 32% Unfollow 24% Hide
  • Overusing emojis 18% Unfollow 26% Hide

There are other opportunities available in social media communities, we are only beginning to learn what they offer. As social media continues to grow it’s certain their services will expand as well. Make sure you’re consistently involved in social media so you can continue building trust and loyalty.

3. Surveys

We have all received surveys from time to time. The problem with many of them is they speak to the needs of the company instead of addressing the pain points of the customer.

When sending a survey, remember that your customers have expectations when it comes to the customer experience. Your survey should help you figure out what those expectations are and how to adjust to better meet them.

Surveys sent right after a purchase are a fantastic way to capture exact feedback that aligns closely with the true experience. It’s also a time when the reason they bought your product is still top of mind.

Periodic surveys can be segmented by demographics where you can collect more specific data for future marketing campaigns. They also provide if the customer impression has changed since they bought.

Whatever you choose to do, remember you want the customer to feel it’s for their benefit they answer the questions. Their answers will be used to improve their experience with the processes in place.

4. Text Messages

Many businesses today use text messages to keep in contact with their customers. Doctors and dentist offices are a notable example of that. They typically send you an appointment reminder a day or two before your appointment, some asking you to confirm it. Some companies use them for payment reminders.

Here are just a few stats to be aware of about text messaging:

  • 97% of adults own a mobile phone (85% are smartphones)
  • 98% is the average SMS campaign open rate (5x more than email)
  • 95% of texts are read and responded to within 3 minutes of receiving it

There are many ways you can use the text messaging technique for customer retention. You can offer a satisfaction survey or let them know about a special sale. Invite them to an event or give them a personal invitation to a special VIP group created for your most loyal customers.

One rule to remember is the industry standard for sending texts is 2-6 messages a month. This means that one message a week is acceptable.

5. Loyalty Programs

There are a variety of loyalty programs you can use including first dibs, incentives, exclusive offers, and refer a friend.

These programs provide an elevated experience for your most loyal customers. It creates a positive loop where your customer feels rewarded for their loyalty. Loyalty programs can increase sales and encourage repeat purchases. They also provide valuable, measurable data to companies.

You can use a points and rewards system that has tiered levels like bronze, silver, or gold. This allows you to segment your loyal customers into elevated positions providing data for who buys the most and who doesn’t.

You can also use loyalty programs to gather data pre-launch by beta testing. This means you offer your most loyal customers the opportunity to be among the first to try out a new product or service by taking part in a beta testing program. Cellular companies do this often to work out any bugs prior to releasing the latest product.

Research has shown that 75% of customers value brands that offer incentives and that 28% say incentives are a factor when making a purchase. When you offer an incentive that is more customer-centric, you’re creating long-term loyalty.

Benefits of Customer Retention

Forbes found that companies that lead in customer experience outperform laggards by nearly 80%. Companies with above-average customer experience financially outperform their competitors by 73%. These numbers show us the whole customer experience is what matters most.

Be an active listener. Your customers can offer a wealth of information if you listen to them. Ask open-ended questions to get the best feedback. Use different channels to communicate because your customers do, and you want to hear from all demographics.

The key points to remember are that there are many ways to use any of the techniques mentioned here. It starts with the first impression your company makes. It continues through the onboarding experience and beyond. Continue nurturing that relationship through useful and personalized engagement that is clear, honest, and helpful.

Customer satisfaction isn’t just a rating. It is far more important to create loyalty with your customers because loyalty is an emotion and that can equate to a relationship. Relationships create an increased lifetime value, and that will increase your profits.

If you’d like to learn more about how customer retention techniques can increase your profits, contact me today to review your processes.

 

References:
Marketing Charts
New Voice Media

Michele Elliott

Michele Elliott

Michele Elliott – Michele Copywriter
CX Advocate & Strategic Copywriter helping small businesses and entrepreneurs to build a loyal customer base. Newsletters, blogs, and UX/CX reviews are my specialties. Stay updated on new content with my newsletter by signing up here.