What is your customer retention rate?
If you need to know what it is and why it even matters, this is where you should find all the answers. Satisfied customers are the core of any successful business. Making sure they remain loyal for as long as possible is an objective you should always keep in mind. Understanding your customer retention rate can help you get an insight into opportunities for improving customer experience. Once you fully understand how good (or bad) you are at retaining customers, you can start improving your retention rate.
Simply put, customer retention is when a first-time customer becomes a repeat customer by making another purchase. It measures the number of customers your business retains over a predetermined period. It is expressed as a percentage of an organization's existing customers who remain loyal during that time period (more on how to calculate it later). For example, if your company starts the year with ten customers and loses two of them, your retention rate is 80%.
However, there is more to that. It would help if you accounted for the new customers since they can throw off the numbers. Consider this; if you start with ten customers, lose two, and then gain four, you don't have a 120-per cent retention rate. Indeed, if you believe you can offset churn by acquiring new customers, you may overlook severe flaws in your business practice.
Having the right approach to measuring customer retention rate is thus essential. Monitoring customer retention rate is critical in determining and understanding a lifetime value of a customer as well as evaluating its effect on a marketing strategy.
As we mentioned, customer retention rate measures the percentage of customers a business retains (or loses) over a given period.
Now, on how to calculate it. There are three elements to be aware of:
Then, follow this simple formula:
(customers at the end of the period – new customers)/customers at the start of the period x 100
...or, to make it simple:
[(E-N)/S] x 100 = CRR
A customer retention rate of 100% means you don't lose any customers. 0% signifies you've lost them all. Don't look at the bad retention rate as an all-ending situation. This just means there is more space for improvement. You can continuously improve it by implementing customer-centric best practices.
Now it is time to explain why you need it so much now that you have your customer retention rate. Given how important it is to have satisfied customers, having a high level of visibility into a customer is essential. It can be intimidating (or even depressing) to consider, but retention rate is a powerful way for a company to learn what works well and needs improvement.
Customer retention is vital for a simple economic reason: retaining existing customers is much more affordable than acquiring new ones. Loyal customers also contribute to the health of your business by making referrals, promoting your brand on social media, and providing feedback to help you improve your product or service. As a result, it is critical for businesses to monitor their customer retention rate.
Let the numbers speak for themselves:
In this day and age, loyal customers are the primary building block of any successful business. Retaining their trust and loyalty is what makes or breaks the company. Building and maintaining a customer-oriented strategy is thus essential.
Follow these customer retention rate best practices to unlock the door to outstanding customer loyalty:
It's always a great idea to set realistic expectations and communicate them clearly with your customers. Ensure you are clear about what they're receiving and what they can expect from your business. When managing expectations, be as realistic as possible and then work to go above and beyond.
Once you've established clear expectations, align your teams to meet these goals. Is every department doing what it can to provide a better customer experience? Don't run the risk of falling short — it can harm your company since customers often recall negatives before positives. Even one mistake could be enough for a customer to leave.
Customer engagement is essential for creating a better connection with customers. When you make an effort to engage with your customers across multiple channels, what is required goes beyond them making a purchase. You constantly remind them that you care if you regularly interact with them about what's important to them, keeping their needs, priorities, motivations, and aspirations in mind.
Remind customers of upcoming payments, share event details, and notify them of problems as soon as possible. Customers will know you have their back if you do this. Communicate with them regularly to help them avoid late fees and other unpleasant surprises
Customer service key performance indicators (KPIs) are essential for informing employees that you are evaluating their performance objectively. Ensure that agents are well-versed in customer service best practices. Make sure you track customer satisfaction. After agents have resolved their cases, go over the customer feedback. Examine the call resolution time. Use these metrics to reward employees who provide excellent customer service.
Customers appreciate consistency. They know what to expect and can count on your team to complete the tasks and deliver the required results.
Without this, most interactions are unexpected, and customers dislike surprises — even if they claim to want to work with a more "innovative, fun, risk-taking company."
Create processes for onboarding new customers and kickoff meetings to ensure a positive customer experience. Setting agendas for appointments is one example of creating workflows around projects and sharing them with customers. Your team will be more efficient, and customers will gain insight into what needs to be done.
The integration of physical and digital platforms to create a cohesive and memorable brand experience is known as the omnichannel strategy. Being present across all communication channels is an excellent way to increase customer retention.
Many factors, like your company's culture, leadership, and business practices, contribute to customer retention rate. Another significant aspect of it is its presence and support on multiple connected channels. Nobody enjoys having to wait for help or support. Instead of making your customers wait for long periods of customer support and service (and adding to your support team's workload), arm them with the resources and tools needed for success.
Consider implementing omnichannel tools, like CRMs, where you can have all communication channels, like email, telephone, social media (etc.) under a single platform.
Want to know what your customers think? The best way to find the answer is to ask them directly.
After a customer makes a purchase, ask them to fill out a feedback survey so you can learn about their experience. This makes the customer feel heard and valued, which increases the likelihood that they will return for future purchases. However, if you collect customer feedback but never implement changes, you may appear uncaring and lose customers.
Notably, customer feedback surveys are convenient because they can be administered in various ways. Customers can be asked to complete your study following a customer service call, sent an email survey following an e-commerce purchase, or a survey URL or QR code can be included on a paper receipt.
Now that you understand the hows and whys of customer retention rate, you can start working on improving your customer experience strategy across all channels. Make sure your team are on top of creating a customer-centric environment with the right tools and technology.
Learn more about how the Live product family can help you support and improve your customer experience strategy.
