While it’s important to focus on attracting new customers to your business, you shouldn’t neglect your customer retention strategies. Keeping the same customers coming back regularly will help you to significantly improve your company’s return on assets, as it’s generally cheaper to create repeat customers than it is to attract new ones. If you haven’t marketed towards your existing customers yet and have only focused on potential ones, then now is a good time to think about retention of customer loyalty. Read on to find out more about why you should improve customer retention and how to do it.
What is customer retention?
The term customer retention refers to all the strategies that a business engages in to ensure repeat purchases from the same customers. In other words, it involves improving the profitability of each customer. This is made up of a number of different elements, including improvement of customer relationships, marketing to existing customers and engagement through email, to name a few.
How can I measure customer retention?
There are a number of metrics that you can use to measure and improve customer retention.
Probably the most important one is repeat customer rate, which measures the percentage of customers that make a second purchase from your business. To calculate this, you should know the number of customers who have made more than one purchase, and the number of customers who have made just one purchase. Simply divide the number of return customers by the number of unique customers, and you have the repeat customer rate.
Average order value is another important measure of your retention of customer loyalty. This can be calculated simply by dividing the total revenue earned by the number of orders placed. Once you start to gain repeat customers, you should also aim to increase the amount that they spend.
In addition to this, you should consider purchase frequency, which shows how often customers return to make additional purchases. This is calculated in a similar way to repeat customer rate. Using the same time frame used for repeat customer rate, divide the total number of orders placed by the number of unique customers.
How to engage email subscribers?
Email marketing is one of the cornerstones of improving customer loyalty. Nearly all businesses use some kind of email newsletter to communicate with their clientele, and it’s a good idea to use an automated service to regularly reach out to your customer base. In fact, email newsletters have proven to be one of the top customer retention strategies that a business can adopt.
However, it’s not as simple as just sending out emails. You should consider the kind of content that you are communicating to your customers, and whether it adds to their experience. First of all, you should aim to market new products to your customers, particularly when it’s possible to customise these to suit their personal tastes.
In addition to this, you can also offer your customers educational content. Teach them about your company philosophy, the important issues in the industry or perhaps how to use your products. Content that is not wholly focused on sales helps to nurture the customer relationship and improves the chances of repeat purchases.
What strategies can I use to improve customer retention?
Focusing on how to engage email subscribers is essential, but it’s not the only method of improving customer retention. Some other useful strategies include:
Offering customers the chance to create accounts so that they can easily store their information. However, making this obligatory can be off-putting, so make sure it’s optional.
Set up a loyalty programme and offer your customers discounts or rewards points for making purchases.
Make sure you have good customer support so that customers receive prompt and useful advice when they run into issues.
Provide customers with a discount code for another purchase after they make their first one.
Essentially, the key to customer retention is creating a personalised experience for your customers and making sure they feel rewarded for shopping at your business.
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