Article courtesy of Love Energy Savings
While acquiring new customers is a priority for many businesses, it’s certainly not cheap. According to Invesp, it costs five times as much to attract a new customer than it does to keep an existing one. Despite this, only 18% of businesses prioritise customer retention over customer acquisition. Clearly, there’s a flaw in how businesses think about customer growth. Phil Foster, Managing Director of Love Energy Savings, one of the UK’s leading energy comparison sites, describes it this way:
“Trying to grow purely through the acquisition of new customers without considering the customers you already have is like trying to get water from a well with a bucket full of holes: you’ll lose just as much as you’ll gain. The obvious solution is to fix the holes first, but so many businesses are afraid of losing their perceived momentum that they put off doing this for as long as possible, not realising that it’s stunting their growth in the long term.”
Investing in a “Customer for Life” strategy is an effective way to reduce expenditure and boost profits. Research conducted by Bain & Company revealed that a 5% increase in customer retention rates can boost profits by between 25% and 95%. Fred Reichheld, founder of Bain & Company’s Loyalty Practice, explains it like this:
“Return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline. What’s more, return customers refer others to your company. And they’ll often pay a premium to continue to do business with you rather than switch to a competitor with whom they’re neither familiar nor comfortable.”
The bottom line is this: customer retention is good for your business, and in 2018, it’s more vital than ever in helping you succeed. So, how do you go about turning those one-off window shoppers into brand ambassadors?
1. Measure customer retention
Peter Drucker, often hailed as the “father of modern management”, once said “If you can’t measure it, you can’t improve it”. It’s a quote that has fast become the mantra of many a marketing director and it’s especially relevant when it comes to customer retention. If you’re not currently measuring how customers are interacting with your site over multiple visits or transactions, it will be impossible to see whether the changes you make have any effect.
So, the first hurdle you need to overcome is how to measure customer retention.
Track both new and returning customers
If you’re familiar with using analytics tools, you should use them to track two basic metrics: new and returning customers. As a basic rule of thumb, you want both of these numbers to increase over time, but – since returning customers are more profitable – returning customer data is the one you’ll want to keep your eye on. Set a benchmark based on the previous data, such as the number of returning customers you had last quarter, to measure against your current performance. That way, you can measure the impact of any new initiatives you might want to try.
If you haven’t used analytic tools before, there are a number of free options you can get started with, including Google Analytics and Open Web Analytics.
Identify points of difficulty in your customer journey
If it’s difficult to interact with your business, it doesn’t matter how good your products are: customers won’t buy them. You have to ensure that the entire journey, from browsing to buying, has as few hurdles as possible. Take a look at the pages of your site where customers typically drop off the most; maybe it’s the page where customers are asked for their personal details. Then take a look at why customers might be leaving this page. Are there too many mandatory fields? Is it unclear what customers are meant to do once they’ve filled in their details? Is there a clear call to action?
You can use A/B testing tools like Optimizely and Unbounce to see whether the changes you make based off your observations help customers get to the next page.
Assess customer spend and transactions
Identify not only what your customers spend on an average purchase, but how much the average customer spends over the course of a year, or how many transactions they make. You can use this data to establish your Customer Lifetime Value (CLV) – once acquired, how much does a customer spend with your company? Measuring CLV will give you a much better idea into how much a customer is worth to you and how much you need to invest in improving customer experiences.
2. Invest in experience
When Uber took the taxi world by storm, it did so by giving users an easier way to get a ride than had ever been available before. Millions of app downloads later, it’s a lesson in how making customers’ lives easier can lead to massive business growth. Improving customer experience can ensure your customers transact with you again and again, even if it might be cheaper to go elsewhere: research from Oracle shows that 86 percent of users will pay more for a better customer experience.
That said, here are a few easy ways you can invest in customer experience.
Make it as easy as possible to buy from you
Basket abandon can be a big issue for businesses, so take a look at the analytics data of your checkout journey to see how you can improve this experience for your customers. Are you asking customers for too much information? Is it unclear what they need to fill in and what they can skip?
Solve problems quickly
Customers will always have the odd problem that they need help with. It’s up to you to ensure that when they need help, they get it from you readily. Add on-site live chat facilities across the site so that users can ask for help while they’re still thinking about purchasing from you. You should also include a help link in order confirmation emails so that if a customer has any questions about their order, they can talk to you about it straight away.
Spoil your customers
O2 users get priority tickets to gigs all around the UK. Amazon Prime users get free next-day delivery and instant access to thousands of films and TV shows. Nandos give their customers a free whole chicken on every tenth visit. The reason these companies invest in rewards is because they work. Spoil your customers by offering them gifts, exclusive discounts or unique experiences and it’ll be difficult for a competitor to win them over on price alone.
3. Embrace complaints
If there’s one group of people who know what you could improve, it’s your customers. Customer complaints often highlight key issues within the customer journey. David Ingram, Managing Director of Bring Digital, says that customer feedback is vital for retention and growth. “It’s important to know as early as possible where you’re creating friction with your customers because this compounds over time. Find a way to get regular, honest feedback from your customers and use that to your advantage.”
Here’s how to get more customer feedback and start making the changes that matter most.
Don’t just wait for customers to leave you feedback – ask for it at every opportunity. You can encourage more feedback with email surveys on the back of a customer’s first order and links to a preferred independent reviews website. Show customers that their feedback is valued by incentivising them; perhaps they could be entered into a prize draw or get a discount on their next purchase.
Once a customer has left their feedback – whether positive or negative – thank them for doing so. A great way to do so is by publicly thanking a customer on social media, or even sending them a personalised email. Tell customers when you’ve made the changes they asked for. Don’t let the conversation end at “thanks”; you need to show customers that you’ve listened to them. The only way to do that is with tangible action.
If you make a change to one of your products based on customer feedback, let them know. Get in touch via email or social media and highlight the original complaint and what you did to resolve it. Customers that see you making changes on their behalf will feel more valued and connected to your business, increasing the likelihood that they’ll come back to shop with you again – even if their last experience wasn’t positive. This positive interaction can also lead to customer referrals – helping you to save on new customer acquisition costs.
Make your customers the life of your business
Even in 2018, when technology appears to dictate everything we do, companies who make their customers feel valued are the ones that succeed. So make it your year for measuring success, treating your customers better than your competitors and engaging with customer feedback and you’ll enjoy genuine long-term customer satisfaction that boosts your profits and puts you ahead of the rest.