Customer Retention Plan: 6 Strategies
to Keep Customers in the Fold
It will cost you five times more money and effort to acquire a new customer than to retain a current one.
You’re certainly familiar with this stat, but here’s what you might not know. The success rate of selling to an existing customer is 60-70 percent, while that of selling to a new customer is a measly 5-20 percent.
If you’re a savvy business owner, you’d pay more focus on retaining your existing customers. And to the job easier, we’re sharing tips for crafting a customer retention plan that will keep your customers coming back to your business.
Let’s get into.
What’s Your Current Customer Retention Rate?
The first step to creating an effective retention plan or figuring out how to increase retention is to know your current customer retention rate. Anything below the average retention rate in your industry is bad and needs to be improved.
So, how do you calculate your customer retention rate?
Pick a duration of time, say a month.
Next, take note of your current customers right now. Also, note down the number of customers you’ll have by the end of the month.
For example, let’s say you have 100 customers right now. After 1 month, you realize that you have 50 customers. After crunching the numbers, you’ll find a retention rate of 50 percent!
Once you know your retention rate, you’ll be in a better position to determine your approach. If your retention rate is so bad, for instance, you can then resolve to be more aggressive.
Identify What’s Causing You to Lose Customers
Presumably, the reason you’re designing a customer retention plan is you have a bad or poor retention rate.
Before you get to creating the plan, you ought to identify the reasons behind your poor retention rate. An effective way to do this is to run customer surveys.
If you’re an online business, this should be easier. There are lots of tools that can help you collect this feedback.
While every business is unique, the most common reasons customers fail to return include:
- Poor product or service quality
- The product doesn’t function as advertised
- Bad overall customer experience
- The product or service is pricier than alternatives
- Lack of proper communication with the brand
If you’re able to establish why most customers are leaving, your work should be easier. If it’s because your product’s quality doesn’t measure up, you have no option but to go back to your production floor and make something that stands out.
But what if you’re doing everything (or most things) right and customers are still leaving?
Introduce a Loyalty Program
An effective way to keep your current customers in the fold is to introduce a loyalty program.
Wear your consumer hat for a second. You go to the mall to do some household shopping. There are two supermarkets in the mall: one offers to pay your parking fees if you spend more than $20, the other doesn’t have such an offer.
Which supermarket are you likely to visit? The one that pays your parking fees, no doubt.
The same applies to your customers. If you aren’t offering any loyalty incentive, they’re more likely to go to the company that offers an incentive.
A loyalty program doesn’t have to make a big dent on your margins. You just need to be creative with how you design it.
If you’re a luxury shoe boutique, for example, you can create a program that enables your customers to earn points when they shop. They can redeem their points and get free movie tickets or take out vouchers.
Offer Multiple Payment Systems
Customers want to be able to pay using a method that’s most convenient to them. They shouldn’t have to feel like they’re being forced to use a certain method. If your business offers few payment options, you’re probably sending some customers away.
This is especially crucial for online, subscription-based businesses.
When a customer signs up for your service, they’re required to provide billing details. From here, your business will be automatically billing the customer.
But what if the customer’s payment method declines because of insufficient funds? You’re dealing with involuntary churn right there.
This is a common problem, but how easily you resolve it could depend on the range of payment methods your business offers. If you offer a wide range, the customer can easily switch to a new method and keep using your services.
But if the customer wants to update payment details and your business doesn’t accept the method they want to use you’ll probably lose them.
Offer Exceptional Customer Service
It doesn’t matter whether your business has a reputation for offering top-notch customer service. You should always be looking for new and creative ways to improve your customer service delivery.
Invest in the training of your customer service and sales representatives. Ensure customer queries are being responded to as quickly as possible, depending on the channel. If a customer has a complaint, strive to resolve it quickly and amicably.
Ensure Your Business Has a Strong Online Reputation
At least 84 percent of consumers read and trust online reviews as much as a friend’s word.
If your business has a bad online reputation, don’t expect your customers to stick around, even if they love your product. It’s for this reason you should strive to maintain a solid reputation, both online and offline.
It’s best to outsource your reputation management to a digital marketing agency. This way, there will be a professional monitoring the comments and reviews your business gets in real-time and taking the necessary actions.
Design and Implement a Customer Retention Plan That Works
A customer retention plan is crucial to the success of your small business. The more you’re able to retain customers, the more consistent your sales revenue will be. With this guide, you now have the information you need to build a retention plan that works.