Customer retention isn’t just about seeing how good of a job your marketing and sales teams are doing. Not only is more time, money and effort required to convert and convince someone new to make a purchase or sign up for your services – it is your existing customers who are way more likely to keep your business going and growing in the future. With the following values: E = the number of customers you have at the end of the week/month/year or other duration N = the number of new customers your business made a sale to or acquired in some other way during a given period S = the number of customers you had at the start of the period Your customer retention rate is: How long you’ll be able to retain each customer if you continue with your existing strategies. When your CRR drops below your benchmark or when it dips below industry averages it may be due to: There may be a problem with your product or service. Big Steps You Can Take to Boost Your Customer Retention Rate Boosting your customer retention rate by as little as 5 percent can increase your profits anywhere from 25 to 95 percent. Use Positive Social Proof Social proof is one of marketing’s most intriguing psychological phenomena and a powerful tool for increasing customer retention rates. Know Your Buyer Personas Better Than Your Best Friend You need to understand what your ideal customer needs, what they are looking for, and how you can solve their problems – better than anyone else. What brand style and personality are they most comfortable with? Informational webinars on how to get more out of a product or service – this is especially effective for software services and tech gadgets Consistent newsletters that offer advice, tips, and how-to’s Helpful eBooks that your customers can download for free on your website and maybe a 10% discount for them to enjoy on their next purchase as well The more you give, as long as your delight strategies are relevant and useful, the more you’re going to get back from your loyal customers.
Your customer retention rate is a metric that reveals whether your marketing and customer care efforts are bleeding dollars or fortifying your business.
Customer retention isn’t just about seeing how good of a job your marketing and sales teams are doing. When you track this number, you know when you’ll need to make vital changes or switch gears to reach your sales and growth objectives.
It costs as much as seven times more to acquire a new customer than it does to retain an old one. Not only is more time, money and effort required to convert and convince someone new to make a purchase or sign up for your services – it is your existing customers who are way more likely to keep your business going and growing in the future. Your current customers (aka your business’s lifeblood) are 50 percent more likely to try a new product. They’re going to spend 31 percent more, on average, than the typical new customer.
The Magic Formula for Long-Term Business Success
There is one primary formula to measure customer retention. Essentially, what you are looking at is the number of customers you still have at the end of a period relative to the number you had when that period started.
With the following values:
E = the number of customers you have at the end of the week/month/year or other duration
N = the number of new customers your business made a sale to or acquired in some other way during a given period
S = the number of customers you had at the start of the period
Your customer retention rate is:
CRR = ((E-N)/S)) X 100
The Wisdom of Customer Retention
Tracking the percentage of customers you keep monthly, annually, or for other durations such as every week, or even over multiple years if you want a broader picture, is one of the most useful ways to determine if your company is going to thrive in the future.
You can determine:
- How likely it is that you’ll be able to keep each new customer you gain.
- How long you’ll be able to retain each customer if you continue with your existing strategies.
- How much your company may grow in the future.
With this insight, you are better prepared to plan for the future and more equipped to make strategic business decisions and take advantage of opportunities that may arise.
On the other hand, you’ll also be able to recognize when a problem is likely to emerge. When your CRR drops below your benchmark or when it dips below industry averages it may be due to:
- There…
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