2023 looks set to be a tough year. The financial markets are bracing themselves and big tech companies are announcing layoffs. Though the picture is different in APAC, most agree that conditions will be tough.
In difficult market conditions, most companies tend to cut acquisition budgets. While this is a mistake, it is a mistake that is easy to understand. Consumers in B2C and companies in B2B also tend to be more cautious when considering a purchase. So, in light of both of those factors there is something you must focus on in 2023. That something is customer retention strategy.
Keeping your existing customers will be crucial in 2023. So this week we look at best practices for your customer retention strategy.
Let’s get started.
What Is Customer Retention Anyway?
Customer retention is a metric (often used as a KPI) that organizations use to measure customer loyalty. You measure customer retention rate over specific time periods. This helps determine overall success.
It can be used after customer acquisition campaigns to measure the quality of the customers acquired. In some industries, high customer churn (more on that next) undermines acquisition campaigns.
What Is Customer Churn?
Customer churn is the percentage of customers who stopped using your service or product over a defined period of time.
Customer churn is a metric that works with your customer retention rate. In fact, your calculated retention rate does not tell a full story, without looking at your customer churn rate.
You can work out your customer churn rate by dividing the number of customers you lost during a defined period of time by the number of customers you had right at the beginning of that period of time.
For example, Customers lost during Q1 2022 / Number of customers you had at the beginning of Q1 2022.
Part of your customer retention strategy should be to keep the churn rate as close to 0% as you can.
Working Out Customer Retention Rate
To work out your customer retention rate you subtract the number of new customers from a defined period of time from the total number of customers at the end of that time period. You then divide that number by the number of customers at the start of the time period you are looking at. For example:
Total number of customers at end of Q1 2022 – New customers in Q1 2022 / Total number of customers at the start of Q1 2022
This will then give you your customer retention rate.
Combined with your churn rate this will give you a full picture and show the size of the task ahead.
Or not, you may be doing well already!
Customer Retention Strategies
Here are some customer retention strategies you can use to keep your existing customers. Some involve organization mindset changes. Some are best practice CX tactics to keep your customers engaged.
Focus On Customer Retention As Much As Growth
The market today is not like last year and next year will also be very different. Most companies have ridden bull conditions and prioritized growth. But with customers keen to cut costs, the game has changed.
Companies still need to grow their customer base. But there should be as much emphasis on retaining customers as acquiring new ones. Especially as acquiring a new customer is said to be five times more expensive than retaining an existing one. With 44% of companies admitting they have more of a focus on acquisition, it’s clear companies need to change their mindset. Moving towards customer centricity and retention rather than chasing new customers is good for the bottom line.
All Aboard With Better Onboarding
For most consumer-facing omnichannel businesses, creating better onboarding experiences is a must. If you have an app that you want people to use, it is vital.
Bad onboarding experiences can cause customers to leave before they even start. With acquisition costs going up, businesses cannot afford to waste marketing spend. Sending users to an experience they will not like will make them leave. So take a careful look at the very start of your customer journey.
Getting started with a personalization strategy is a big step.
But people prefer personalized experiences. So it is a great investment that improves customer experience, and keeps customers coming back. It is also good for your bottom line. Clickz.com states that businesses see an average $20 return for every $1 dollar spent on personalization.
Personalization has a strong impact on customer loyalty. If customers believe you can help them with their needs, they will keep coming back.
It is hard to keep customers if you do not know how they feel about you. So as part of your customer retention strategy you need customer feedback.
There are various ways to do this but the easiest is customer surveys. These can give you a quick snapshot of what your customers think at any given time. Longer term feedback strategies include user testing, research and focus groups.
Feedback is essential to your customer retention strategy. If nothing else, start getting customer feedback!
Conversational content and better UX writing are a must for better onboarding. But you will need to up your customer communications strategy to retain your customers.
Start by creating an editorial calendar for informative content. With this calendar you can schedule your social media output. It can also help you create informational content that your customers find useful.
A general communication calendar is also a must. Here you can create an email schedule for sending out customer offers. This can be automated and also personalized, so your customers receive offers that they will love.
Loyalty programs are not only for B2C companies. They can work for everyone and they have two functions.
One function is it helps you to gather more first-party data that you can use in your acquisition and retention efforts. This data is also essential for further personalization work.
The second reason is that loyalty programs keep your customers engaged with your brand. With the right offers and promotions you can keep customers coming back for more. At a time when customers are looking to cut costs, loyalty programs are a way you can help your customers save money on products/services they still want. Which helps them trim their budgets.
In B2B, loyalty programs offer the same function to your B2B customers. Though the incentives and communications will work in a different way. You can use a loyalty program model to give your B2B customer more control over their purchases and even use it for upselling opportunities.
Talk to MAQE
Need help with customer retention? Want to start a loyalty program with an eye on offering personalized experiences in the future? Talk to MAQE via [email protected].