How to Differentiate Yourself in a Saturated Industry
The pandemic changed the business landscape forcing companies to reexamine ways to attract customers and maintain revenue streams. The result raised the competition bar for consumer dollars and made customer retention an even higher priority. However, despite prioritizing this effort, over 60% of all businesses state that customer retention remains a significant problem. The average loss of return customers is nearly 30% a year, costing billions in revenue.
Why Customer Retention is Important
There are several good reasons why businesses should focus their efforts on customer retention. Studies have shown that return customers spend over 33% more than new ones. In addition, encouraging an old customer to return is five times less expensive than acquiring a fresh patron. These numbers alone show the return customer’s importance to any business. As CEO of Reforge, Brian Balfour said, “If your retention is poor, nothing else matters.”
As we head into the new year, companies are examining ways of strengthening ties to their customer base. New and traditional methods are being closely studied and implemented. So, we looked at the innovative strategies of some of the most successful companies to see how they keep their customers coming back.
Start With Your CLV
Part of an effective customer retention strategy is identifying the best target audience. The old adage of “working smart not hard” should be applied. An effective metric to use for this purpose is Customer Lifetime Value or CLV, which is measuring the annual revenue from a customer minus the cost of their acquisition. This prevents over expenditures and allows for more targeted marketing efforts
“Customer lifetime value is something we put a tremendous emphasis on”, says James Beard of Box Genie. “A great deal of our successful customer retention model is based on maintaining and marketing to those who are most likely to provide return business. What is amazing is that only 42% of companies accurately measure this statistic, which is why we have incorporated several aspects into our computations.”
Though we want to keep all our customers, it is important to recognize the associated costs and the differences in various previous customer groups. By using helpful metrics such as CLV, businesses can gain a better understanding of how to maintain their customer base without significantly driving up expenses.
Evaluating the Customer Experience
Often thought of as the customer journey, companies that have high retention rates will consistently and frequently evaluate their full customer experience, making improvements where necessary. However, many businesses who do this will often miss significant items in their customer journey.
A common mistake when evaluating the customer experience is limiting internal reviews to the service aspect. In reality, that is just one part of a much larger picture. Performing a thorough examination by making a list of every part of the customer journey, from first impression, to service, to product quality, to checkout, and follow up, is essential to understanding the full experience.
However, few methods are as effective as simple conversation. As author and marketing consultant, Roy H WIlliams stated, “The first step in exceeding your customer’s expectations is to know those expectations.”
Tommy Chang of Homelister also knows the importance of understanding customer desires, “Listening to our customers, hearing what works and doesn’t work, what we can improve, and adjusting our product strategies accordingly is the basis of everything. Our goal is to ensure our clients not only have an exceptional experience but know we’ll go above and beyond to make sure their transaction is as seamless and smooth as possible.”
Taking a full inventory, and even having blind test runs, is a great way to do a full evaluation of your customer journey. Once completed, the data you collect can be analyzed to see what you are doing well, and where your business may be falling short.
Personalize Your Marketing
The digital world has given us an unprecedented ability to recognize and pinpoint the interests of customers. It also has provided the means to personalize marketing. Customers are inundated with ads in the form of banners, pop ups, and mass emails. In a study reported on by CNBC, the Millennial’s average attention span placed on advertisements was less than five seconds. However, by personalizing your marketing to target your customer’s personal interests, you will be more likely to gain their attention and have them return.
Jean Gregoire, Founder and CEO of Lovebox, a company that designs innovative packaging to send to significant others, understood the importance of personalization quickly. “Our business deals with the personal to begin with, so for us, designing our marketing to address our customers by name and emailing them information about future promotions that relate to their interests was a must. We take a great deal of time to make sure that our customers feel special, and at the same time, let them know how important they are to us. These simple gestures have greatly improved our retention rates.”
Pawp, a unique pet care company, also recognized how essential personalization is in providing items that are individualized for their customers. “As long as you offer high-quality products, providing personalized additional customer benefits will only give you a leg up on the competition.” states CEO Marc Atiyeh.
Studies have shown that people are 72% more likely to engage with advertisements that address them personally and over a third of consumers believe that businesses should always make efforts to engage them in this manner. It has become apparent that if you want to retain your customers, you need to make efforts to treat them as individuals and not just part of the masses.
Join The Club
Customers who regularly patronize a business, want to feel a connection to it, and believe they deserve more attention. Many businesses who wish to fulfill this desire, are depending more on clubs or business membership models. This strategy provides customers with the sense that they are receiving special treatment.
“Return customers want to feel appreciated, and the most effective way to do that is to offer them a chance to become part of your club. Loyalty programs are useful in two ways. They make the customer feel special, and it provides additional marketing opportunities that can be personalized,”says CEO Ann McFerran, of the personal style company Glamnetic.
Dino Ha, CEO of Kaja Cosmetics, recommends benefits that cement their special status. “These loyal customers typically receive perks like a welcome kit of brand products, featured reviews on social media, and a chance to host giveaways. And in return, they help your business extend its reach.”
CEO Bill Glaser of Outstanding Foods also understands the importance of loyalty programs. “It’s about making sure your customers feel appreciated, highly valued and not taken for granted.” These programs don’t have to be complex to be successful. He continues, “If you make your customers feel special, this will help improve customer retention.”
Loyalty programs, through their emotional connection to the customer and ability to maintain contact over long periods of time, have proven to be one of the best tried and tested ways to increase retention rates.
Educate Them and Set Expectations
When customers patronize your business, they are not simply looking for products but knowledge as well. Your patrons may not always have a firm grasp on a product’s use, or other details that may affect its quality and performance. Therefore, it is critical to have a customer onboarding process in place.
Adam Mitchell,CEO of SponsorPulse, an innovative software company, knows how important customer onboarding can be. “If your business sells a product that requires some expertise or knowledge to improve its performance, customers want you to be there to help them along the way. Creating a method to do this, will make them feel comfortable and help you gain their continued trust and loyalty.”
By creating an apparatus that provides quality information, a business will establish its authority, and encourage the customer to reach out when needed. This engenders confidence and trust.
Co-CEO Gabrielle Mustapich of Hardpops, a company that makes ice alcoholic treats, saw the need for onboarding immediately. “Whenever you have a new concept, there will be two things for certain that will happen. People will not know all the options your product offers, and two, someone will copy the idea. When our customers buy our product, they want to know more about it. By sending follow up emails that provides the information they need, we can keep them engaged about new uses, as well as new products coming online, getting them the new ideas before anyone else does.”
The main reason for the onboarding process is to raise your customer expectations and then fulfill them. These efforts are appreciated by customers and greatly increase the likelihood that they will return in the future.
Be Socially Responsible
With the twenty-four-hour news cycle and social media, the pressure for companies to be more socially responsible has greatly increased. Social responsibility touches consumers on an emotional level. In recent studies, it was found that companies that are able to connect with their customers in this manner, can experience brand loyalty increases of over 300%.
Cottage founder Alex Czarnecki adds, “Social responsibility is a must in retaining your customers. A business’s patrons not only want to feel comfortable where they shop, but also proud of themselves. Practicing social responsibility is a way to convey that trust, and to continue that relationship.”
Whether it is getting involved with your community or in causes that have national or even world impact, being socially responsible will benefit everyone, and bring about the trust that your customers have in your brand.
In Closing – Use Several Strategies
Although each of these strategies are excellent, it is best not to rely only on one. Make sure you collect data and do the proper analysis. Then, address customer retention from several angles. Like promotions, implementing a multi-faceted approach is the best way to tackle this challenge and increase your customer retention rates.