Whether you’re seeking new customers or appealing to existing customers, it’s important to track when and how often they engage with your products or services. While this varies depending on the brand, knowing your customer retention rate is key to measuring brand loyalty — which reflects your customer service and impacts your business growth.
Strong CRM — or customer relationship management systems — involves these vital metrics so you can better understand your customer base, increase the number of new customers and improve retention.
Customer Analytics
Turning a new customer into a long-term customer involves customer feedback, of course, but there are various ways to obtain this. One KPI measures how engaged a customer is with a brand. If email marketing can apply to your product or service, marketing analytics built into an email campaign might measure the open rate, the minutes read or the click-through rate.
Social media offers other rate measures to reflect how long users engage with your content. Do they watch videos you provide — and for how long? How often do they return to your website?
Once you acquire someone as an existing customer, how do they engage with the brand? Perhaps they started with one product and have now moved on to higher-tiered items. CRM software offers other ways to measure customer success. By recording a customer’s first purchase with the brand and any repeat purchase over a period of time, for instance, you can learn how loyal this customer is to your brand. CRM software can then use those retention metrics to calculate a customer lifetime value, or CLV — essentially your return on investment for advertising, marketing campaigns and other ways to attract new business.
Improving Customer Retention Rate
Recurring revenue is vital to any business success, which means reducing the churn rate, or the number of lost customers. People often ask, “What is a good client retention rate?” But experienced marketing professionals know this depends on the industry, product and service. A big-box store such as Target or Walmart might have a retention rate of 50% or higher because it stocks a wide variety of items, from groceries and clothing to electronics and gifts.
By comparison, a specialized franchise such as Ace Hardware might have a lower retention rate because – while it carries a wide variety – it focuses on one niche. Likewise, a specialized retailer dealing solely in smartphones or laptops might have a lower retention rate because they carry well-made products that people seek to buy every few years. While you still want to engage with this audience to retain these loyal customers, it’s unrealistic to expect the same customer retention rate as a business that carries toiletries, milk and other daily essentials.
Setting Customer Service Goals
One way to hone your customer retention strategy is to look at customer retention metrics beyond a repeat purchase rate. CRM software can incorporate a net promoter score (NPS), for instance, which tracks different ways retained customers interact with the brand. Perhaps they share coupon codes from your loyalty programs or send gift cards to friends, essentially promoting your business because of customer satisfaction, even if they themselves haven’t made a purchase over a time period.
Before refining your retention strategy, seek expert insights to dive into consumers’ psychological behaviors. Pricing isn’t always a top issue; rather, it helps to manage your customer expectations.
One of the best practices for doing this is to develop a survey to evaluate the customer experience. Survey data provides valuable customer feedback so you can address various issues of why customer support might be lagging and drill down into ways to provide top-notch customer service. If you’re a brick-and-mortar business, perhaps the location’s hours are inconvenient because of the customer’s new work schedule. Maybe the location itself feels uninviting, with bland displays instead of clever, colorful ones. A medical office with a waiting room that has uncomfortable chairs and chilly air-conditioning won’t get as much positive customer feedback as one that, say, has a cushy sofa, plays soothing music and the ambient sounds of a fountain and employs a pleasant staff.
A survey also can help pinpoint other metrics such as why customers stay with a particular brand, whether it’s the price, the location, the personnel or other factors independent of your business. The bottom line is, when you’re looking at your customer retention rate, you need the big picture: not just customer behavior but pinpointed data and clear expectations.
