One thing is for certain: customer retention is a crucial piece of any successful business strategy. It will be especially important if the economy heads into a recession.
In this article, we’ll walk through the difference between customer retention and acquisition and give some examples of customer strategies you can employ in your own business.
Customer Acquisition vs. Customer Retention
Customer acquisition and retention are both important, but they represent different parts of the customer journey:
- Customer acquisition is the process of acquiring new customers to your business. It starts with attracting prospective customers (e.g., through marketing activities) and convincing them to pay for your product or service.
- Customer retention is what happens after acquisition – it’s all about retaining the customers whose business you’ve already earned.
Both customer acquisition and retention can drive growth for your business, but many companies focus only on acquisition and forget how important retention is. According to a study by Bain & Company, an increase of just 5% in your customer retention rate can increase your profits by up to 95%.
You can also think of it from the cost side: the cost to acquire a new customer is far greater than the cost to retain a current customer. So not only are you increasing sales by extending the customer relationship, but you’re also cutting costs since retention is cheaper than acquisition.
Examples of Customer Retention Strategies
If your business is looking to boost customer retention, there are a variety of strategies to consider. Here are just a few to get you started:
1) Be responsive to customers
No one likes to feel ignored and outstanding customer service is a key part of customer retention. When customers reach out to you, whether for positive or negative reasons, ensure there are processes in place that guarantee a quick response to them.
Customers may reach out across a variety of channels – from email to phone to social media or a chatbot on your website – so be sure to have them all covered and be transparent with the customer on how soon they can expect to hear back from you.
2) Personalize communication
Ensure your customers feel special by adding personalized aspects to each touchpoint. This could mean sending out a handwritten holiday card, signing a thank you note in each online order, or even calling them by name when they return to your store.
The way you operate this retention strategy may depend on your business and how many customers you have, but no matter your size, you should personalize where possible.
3) Create community
Make customers feel like they’re a part of something bigger by creating community around your products, brand, or industry. Connecting customers (and prospective customers) to your business and to each other can go a long way in building relationships and long-term loyalty. 60% of people are more loyal to brands when they have access to a community.
Creating community might mean hosting events, moderating a discussion board, or creating a Facebook Group or other online community.
4) Foster local ties
For many small businesses, the locale where you operate is largely where your customer base is located. Being active in your local community and fostering ties with other people and businesses in the area can show customers how invested you are – which may make them feel more loyal to your brand as well.
5) Reward loyalty
Rewarding customers when they purchase repeatedly from your business can help retain them in the long term. We all know how great it feels when a business that we genuinely enjoy rewards us for buying.
Encouraging and rewarding loyalty can come in many forms, but usually involves some sort of reward point system that customers can use to cash in for discounts or freebies on a future order. You could also offer contests or giveaways through your website or social media.
6) Stay in touch
To retain the customers who have bought from you before, you need your brand to stay top of mind. This means always keeping in contact with your customer list, even between purchase periods if they only buy once a year, for example.
There are a variety of marketing tactics to stay in touch with customers, like social media, email marketing, customer care calls, event invitations, and more. Whatever you choose should fit your usual buyer personas and the customer journey of your business.
7) Send a company newsletter
A newsletter with updates on your company is an easy, cost-effective option to boost retention. Every time your email pops up in a customer’s inbox, they’ll be reminded of your brand and could even be made aware of new offerings or sales.
When sending your newsletter, you can use email automation to send updates and offers to certain groups of customers or to all of them at once.
Retaining the customers you’ve already won over is crucial to the long-term success of your business. Remember: the cost of retaining one customer is far less than the cost of acquiring a new one, and especially during times of uncertainty – an impending recession, for example – retention will be key to weathering the storm.
