All companies want to grow, but not all of them know the best way to go about it. Real growth is all about maximizing the lifetime value of your customers. But to do that, it’s essential to go beyond the initial conversion and take a comprehensive look at your funnel as a whole.
Unfortunately, one of the most frequently-overlooked sections of the funnel is retention. If you want to maximize the lifetime value of your customers and amplify your growth, you need to deploy an enhanced focus on retention. That means focusing equally on acquiring new customers and making more money from your existing ones.
There are many benefits to this strategy. An enhanced focus on retention reduces marketing costs, boosts conversion rates, and increases profits. In fact, according to research from Bain & Company, increasing customer retention by even 5% can increase profits by 25-95%.
Here are 5 top customer retention strategies you can add to your playbook to increase retention rates and achieve substantial growth.
1. Post-Purchase Email Automation
Email marketing is one of the best tools for acquiring new customers, but not enough companies are using it to market to existing customers. According to a report from Manta and BIA Kelsey, 61% of small businesses surveyed said that more than half of their revenue comes from repeat customers rather than new customers. Who better to purchase again than those you’ve qualified and converted before?
The goal of post-purchase email automation is to increase engagement and loyalty through calculated nurturing: ‘calculated’, because not all customers are the same. Besides buying from you, they may have little else in common, so the best way to stay in front of them is to segment your customer list.
Segmenting allows you to send more relevant emails based on behavioral, demographic, and geographic characteristics. Arguably, the best way to segment customers is by engagement, because that allows you to customize the automation based on whether or not they have opened certain emails, if they have clicked on specific links within emails, or converted through specific emails. Having a “hot” or “cold” email list can really help craft targeted email campaigns so you use the right language and tactics to turn them into repeat customers.
Some common campaigns include:
- Follow-up campaigns, where you ask for customers’ feedback on their experience, check in to see if they have questions, or recommend helpful resources based on the products they purchased in the past.
- Reactivation campaigns, which focus on turning cold or disengaged customers into active customers by sharing inspiring content like blog posts and case studies, or recommending exclusive or best-selling merchandise related to what they bought before.
- “Hail Mary” campaigns, a last resort for extremely cold leads, which consist of throwing out large discount codes, free loss-leader products, or exclusive content they can’t find anywhere else, in the hopes that these deals are “too good to pass up,” bringing them to the warm lead list again.
2. Deploy Account Based Management
According to Forrester research, it costs 5x more to acquire a new customer than to retain your current customers. One of the best ways to retain customers is through account based management, which is a tailored approach to customer service where each account has a single point of contact.
With account based management, accounts get personalized service that focuses on individual consumers’ needs and goals. The role of the Customer Success Manager (CSM) is positioned not as a vendor but as an extension of the customer’s team. This approach has added benefits, such as:
- Allowing you to stay in front of customer issues and pain points that cause churn.
- Making it easier to upsell and grow average revenue per customer.
- Better comprehension of the disparity of success among accounts by having a baseline comparison of data.
Account based management isn’t cost effective or scalable for all products and services, but it can be especially useful for high-priced products, subscription services, key accounts, and enterprise solutions.
3. Deliver Prompt “Feedback-to-Action” Implementation
Millennials are leading the revolution in customer success, and companies not conforming are suffering when it comes to retention. In fact, Business Wire found that 74% of millennials decide to switch retailers if they receive poor customer service.
It’s no longer good enough to offer multiple ways for customers to vent their frustrations, make suggestions, and troubleshoot problems. You’ve also got to show that you’re listening and responding quickly.
Tesla is one of a handful of companies leading the charge in delivering on their promise to provide timely customer support. For example, when one Tesla owner complained on Twitter about people leaving their cars parked in charging stations after they were fully charged, which resulted in long lines, the company responded promptly. In just six days, Tesla CEO Elon Musk released an official statement and policy update that included an idling fee, which was rolled out in order to make superchargers more available. That kind of immediate response to feedback sparks fierce loyalty and goes a long way towards not only retaining current customers, but creating new ones.
4. Continually Update and Innovate
Customer expectations are at an all-time high, and nothing kills your retention rate like a lack of innovation and growth. These days, companies have to reframe the way they approach serving customers by anticipating future needs and challenges. Once they have a good grasp of their customers’ pain points and needs, then they can go about finding innovative ways to solve them.
Take the meditation app Headspace as an example. Headspace diversified its core product to include a partnership with 11 different airlines to offer in-flight meditation channels. At many airports, the company added phone booth-style relaxation pods so travelers can relax and meditate in high-stress areas. Now Headspace even offers a meditation app for kids and has partnered with Nike to offer sports meditation content.
Dedication and innovation like that builds loyalty, facilitates growth, and creates an immensely enjoyable customer experience, one that’s skyrocketed Headspace to 500,000+ subscribers and an estimated valuation of $250 million.
5. Grow Your Ecosystem
Every company has its core product or service, but those companies that value retention are constantly looking for ways to boost the lifetime value of their customers. One such tactic is to offer multiple product lines and value-added features, which increases average revenue per customer and promotes stickiness.
Apple is an excellent example of a company using an expanded ecosystem of products to promote retention. It does this with both its physical and digital products. In the last couple of years, Apple’s iOS loyalty has reached an astonishing 85-88%. Apple’s ecosystem is so large that the average American household has at least 2.6 Apple products. Loyal customers take it a step further by investing in specific iOS applications, iTunes music, storage space, and much more.
Customers investing so heavily in Apple products also makes it much more difficult for them to switch brands. The amount of money and time lost by switching from Apple over to a competitor is substantial enough to make consumers think twice. That’s why diversifying across multiple products and services can not only benefit your customers, but also boost your retention numbers and facilitate growth.
Retention is far from another word for loyalty. Retention is the measured frequency by which a current customer keeps on doing business with your company. Loyalty, on the other hand, is a measurement of that same customer’s predisposition to choose your business as their top preference.
Attracting a customer a second time around means they are technically retained, but the real reason they return isn’t because of their loyalty to your company, but rather some other factor such as selection, shipping terms, or pricing. So, while the ultimate goal should be focusing strategically on retention and maximizing lifetime customer value, you should also seek out opportunities along the way to make your customers loyal as well.
To do that, you’ve got to constantly innovate, listen to feedback and implement action quickly, expand your product ecosystem, and treat your customers as partners who you want to see succeed.
If you master these essential strategies, you’ll continually earn their business, their respect, and their loyalty.
What retention strategies have had the biggest impact on your business? Tell us in the comments below.