It is often easier to retain customers than to acquire new ones. That is precisely where Customer Retention Management comes in: The aim is to bind customers to the company in the long term in the simplest possible way and to increase customer satisfaction and loyalty through various measures. Customer Retention relies on existing contacts, which should be extensively exploited. In this context, it is also essential to minimize the number of lost and migrating customers. You can use cross-selling and upselling to retain customers and encourage them to invest more in the company.
How do you calculate customer loyalty?
The retention rate is calculated to obtain a precise KPI for customer retention. It is calculated as the difference between remaining customers (RC) and new customers (NC) within a certain period, divided by the customers at the beginning (BC) of the calculation period and multiplied by 100. In short, here is the formula for calculating the retention rate:
Retention Rate = ((RC-NC)/BC)) x 100.
At the same time, it makes sense to calculate the churn rate. This puts the number of churned customers in a given period in relation to your customers' total number.
Churn rate = (BC-RC)/BC
Now the task is to find the reasons for churn, eliminate them and thus promote customer loyalty.
How can the retention rate be improved?
Measures in various areas of the company can help optimize the retention rate.
Customer service: Customers must be given excellent support during their buying process. To do this, offer your customers various channels such as email, telephone, chatbots and social media for communication. Chatbots are an ideal way to provide customers with automated, quick answers to their questions. They also allow your service team to focus on the more critical cases. Effective and all-encompassing complaint management is crucial for customer retention.
CRM: A suitable customer relation management system that can capture all relevant data and complete them flawlessly enables you to serve your customers in a targeted and efficient manner. This system allows you to increase the retention rate enormously.
Content & Usability: Your web content should always be up-to-date, search engine optimized and relevant. But even the best content is useless if users bounce before the website is fully loaded. Furthermore, technical aspects such as responsive design, a good internal linking structure and optimization for mobile devices are essential for the retention rate.
Loyalty bonus: Everyone is happy about a reward! Offer your existing customers unique benefits to reward them for their loyalty. Such bonus programs can come in the form of early purchase options, coupons, discount promotions or reward stores, for example, and can be delivered via email marketing.
Why do I need a Net Promoter Score (NPS)?
The Net Promoter Score captures your customers' satisfaction using a scaled score. The essential question here is how likely a customer would recommend your brand to others. It's not just about customer satisfaction with a particular product, but rather the customer's general attitude towards your company. All it takes is one question: "How likely is it that you would recommend this company to friends or colleagues?" Respondents can answer this with a value from 0 to 10 on a numerical scale. The survey can be conducted by telephone or email, for example. Depending on the answer, customers are divided into the following groups:
- 9 or 10 points awarded: Respondents = Promoters who rate the company very positively and recommend it to others.
- 7 or 8 points awarded: Respondents = Passives or Indifferents who are neutral towards the company. They are not included in the calculation of the Net Promoter Score.
- 0 to 6 points awarded: Respondents = Detractors who are critical of the company. They could negatively influence other users or potential customers. The survey results should be used to initiate targeted measures to prevent customers from leaving and protect the company's good reputation.
Why solicit customer feedback?
"Customers will get back to you if something is not right." Companies should dispel this thought quickly! Customers do not always express negative opinions about a product or company directly but instead promptly look around for alternatives. Soliciting feedback can prevent this churn. It also provides an opportunity to improve your products and services. Even a few simple questions help determine customer satisfaction and potential for new projects: What is going well in the relationship? Which points can be improved? How is your industry/company doing? Among other things, this involves creating or identifying the customer's needs and options for future projects.
Customer satisfaction starts at the beginning!
Make the first hurdle for new customers as low as possible to encourage them to build a relationship with you. For example, a simple, straightforward onboarding process through a form on your website is ideal for turning a prospect into a customer. At the same time, you already get to know the customer a little better and may already be able to gain some critical initial insights.
Would you also like to set up a comprehensive customer retention program? W4 supports you from the design of the onboarding process to the setup of the NPS process and the reactivation of customers through a targeted feedback campaign. Feel free to contact us!