Businesses that ignore the needs of loyal customers are not businesses that inspire loyalty.
Customer acquisition seems like a good goal for any organization, right?
More customers translates to more sales, better business growth, and more money in all of our pockets. There’s no denying it: Acquiring new customers is an intoxicating idea. Acquiring new customers is also expensive.
We’ve all heard the aphorism that it’s more costly to sign up a new customer than to keep an existing one. It’s a common saying because… well, it’s true. Hubspot estimated that it costs five times as much to acquire a new customer than it does to get existing customers to purchase.
By all means, keep looking for new customers. Just don’t forget to value the customers who are already supporting you.
Building Customer Retention
Just what is the impact of customer retention on your ROI? According to Harvard Business School, increasing customer retention by a mere 5 percent can increase profits by 25 to 95 percent.
Not too shabby, right? To improve customer retention, we recommend a three-pronged approach:
- Reward customer loyalty
- Personalize the customer experience
- Simplify problem solving
Let’s dig in to the details.
Use Loyalty Programs
Loyalty and rewards programs are retention marketing in their truest forms. You’ve already won them over with your superior products and/or service, and reward systems give them another reason to keep coming back for more.
Remember when fuel reward systems and gas cards were a new phenomenon? Now, thousands of businesses are getting in on the action, offering customers discounted commodities in exchange for brand loyalty. This strategy adds what we call a “switching cost,” or an extra incentive to keep customers on board. Customers who abandon these programs will be forced to give up their reward points—an outcome that doesn’t gel with our consumer-oriented psychology.
Get creative with your use of reward programs; store discounts are a good start, but savvy businesses can take this concept even further. Consider rewarding any behavior that supports your inbound marketing goals, including social reviews, shares, and on-site referrals.
Personalize the Experience
To keep customers on board, businesses must treat customers as individuals. This strategy involves using customer data and records of previous behaviors to provide insight into what they want to see. More broadly, the need for personalization speaks to a bigger trend for digital marketing agencies: Customers will show no love to brands that don’t love them.
Look no farther than Starbucks for a great example of a brand that recognizes the value of personalization and its impact on customer loyalty. Yes, this includes the “writing customer names on cups” shtick, but Starbucks’ commitment to the customer experience isn’t just lip service; it’s supported by the highest-level executives in the organization. Howard Schultz, CEO and chairman of the coffee giant, released a memo in 2015 addressing how employees must commit themselves to providing each customer with a friendly and positive experience:
“Please recognize this and – as you always have – remember that our success is not an entitlement, but something we need to earn, every day.”
If Starbucks can do it, your business can do it too. A recent State of Marketing Technology report found that personalization—even by including something as simple as a business’s name in an email subject line—can improve open rates by 41 percent. And in our age of limitless consumer data, this goal isn’t hard to reach.
Make Problem Solving Simple
One of the value-driving aspects of inbound marketing is the ability to provide solutions for prospective customers. However, this goal can’t end as soon as they sign up. Regardless of industry, your business must have strategies in place to troubleshoot problems as they arise. In two words: Customer service.
Problem solving for customer retention usually involves phone-based customer service, live chat support, and on-site tutorials. Naturally, these resources are most important for technical businesses with complicated products, but every industry can benefit from improving its customer service.
Parature found that 62 percent of global customers had switched service providers because of poor customer service. And what was their number one frustration? Seventy-one percent hated when companies didn’t value their time. In inbound marketing terms, valuing your customers’ time means making it easy for them to find the help they need. Your ability to problem solve is what brought them to you in the first place, and it’s what will keep them loyal when the going gets tough.
The Value of Retention
A report by marketing firm Econsultancy found 70 percent of companies believed it was cheaper to retain customers rather than acquire new ones. On top of that, 49 percent agreed that prioritizing marketing strategies for existing customers produced a stronger ROI than acquisition marketing.
The data is clear: Customer retention is value. Plus, prioritizing customer retention is just good business practice. Businesses that empty their pockets trying to woo clients only to neglect their needs after the sale won’t win any fans. Customer retention is about more than just improving your ROI. It’s about building a brand identity that values and supports the customers with which it works.