Why customer retention is important to a company
The American speaker Fred Reichheld once said it costs 5-25 times more to win a new customer than to keep an existing one. In today’s market, this statement is irrelevant, as it is not the financial aspect that matters but the value of each customer to the company. A systematic approach is the key to customer retention today.
Initial steps of a customer retention strategy
Customer retention is about understanding how much a customer is worth and how much profit they bring to the business. If it is cost-effective, it is necessary to increase the customer’s lifetime value (LTV). This involves several tasks:
- Reducing customer churn. According to an analysis by the Harvard Business Review, reducing churn by just 5% can increase profits by 25-95%. In other words, the LTV indicator increases almost twofold.
- Implementing cross-selling, which can increase the LTV of individual customers by up to 50%.
- Reviewing and improving pricing policy delivers excellent results, increasing lifetime value by up to 50%.
There are several tools available to encourage consumers to make repeat purchases. The most popular are SMS, email and messenger notifications. At the same time, it is important that the tool provides the ability to send personalised messages.
How to increase the conversion rate of existing customers
In this case, the optimal solution is to divide the target audience into different segments and interact with them through different channels. Most services use big data to automate this process.
A personalised experience plays a vital role in attracting and retaining customers online. According to Epsilon, it increases the likelihood of repeat purchases by 80%. If a personalised customer experience isn’t in place, 39% of consumers will refuse to interact with a brand in the future.
You can improve personalisation and automate processes by using trigger scripts. These send offers to customers who have completed a specific target action. For example, they have registered on the site or clicked on a link. A trigger can also be a situation where the customer has not been active for a long time. For example, they have not visited the site or added items to the basket but have not bought them. In this case, you can remind the customer, offer discounts and introduce promotions. Similarly, you can incentivise the customer after the first purchase. You can give them a discount on their next order. This is a great way to build loyalty and trust in the brand.
For these activities to be successful, customer retention should be one of the elements of the overall marketing strategy. Only with an integrated approach will the result be predictable and tangible.
