Why is customer retention so important? Depending on your product offering, clients may need to upgrade periodically or replace their solution in a few years. If this is the case, you want your customers to think of you first when it comes time to purchase a new solution. Retention has a clear benefit over customer acquisition: It costs five times more to acquire a new customer than keep an existing one, according to an article for Conversioner written by Talia Wolf. In addition, returning customers are likely to spend more than new clients. Wolf cited data from Harvard Business Review that found a small increase in retention rates can contribute to a significant jump in revenue.
However, customer retention can be paradoxical. While you may think offering cutthroat prices is the way to keep clients, they are four times more likely to switch to a competitor if they have a service-related problem.
Paying attention to customer lifetime value
Before getting started on retention optimization, you need to understand the lifetime value of your customers. According to an infographic from KISSmetrics, this can be calculated by averaging variables in how much clients spend and how frequently they purchase and then comparing it to other factors, such as average customer lifespan, retention rate and profit margin by client. This can help you refine your marketing efforts.
Through these calculations, you may be able to discover who your best customers are. However, the clients who spend more will also cost more to attract, although they will be more profitable over time. In addition, the infographic highlighted the importance of customer satisfaction. While you may think this is primarily a business-to-consumer concern, it still applies in the B2B realm. Happy customers are more likely to think of you when they need to upgrade or replace their solution.
How does email factor into customer retention?
Retention can be the result of multifaceted efforts, but some tools for fostering loyalty are more effective than others. A recent study from Gigaom revealed email is the most powerful retention tactic. In fact, 86 percent of marketers still use email, and it was better for retention efforts than social media or search engine optimization.
In addition to its high level of effectiveness, email delivers a better return on investment than other marketing channels. It has a low cost of entry and delivers high-quality results. Plus, email is easier to use. There isn’t much of a learning curve for your sales team because it’s something your employees most likely use on a daily basis, Joe Morsello wrote for marketing publication Street Fight. However, without the right tools in place, email can be tedious to manage manually. A sales representative would need to spend time compiling a list and sending individual emails to make the experience more personalized.
Even when it comes to business products, emotions play into the decision, Wolf stated. Customers will remember their experiences with your brand, and this may factor into future purchasing decisions. To make the most of this, you need to employ some savvy online marketing techniques to gain a better sense of their Internet behavior, such as how they interact with your website, their previous purchases and demographic information. The more you know about customers, the better you can tailor your messaging to boost retention efforts.
Wolf noted that a great deal of psychology goes into purchasing decisions, especially when it’s a complex, expensive B2B solution. Because of the amount of money spent on such a product, buyers will try to mentally rationalize the purchase afterward. However, this can work in your favor if your product delivers the promised results to customers. Once someone buys something, he or she is more likely to stick with the decision. Your sales team can use this to your advantage by asking for feedback or sending clients special offers. Both of these things can increase loyalty and make customers more likely to return.
Email marketing is a great way to engage clients over time. A short message can keep your brand top of mind, and when it’s paired with an integrated marketing platform, your team can better track the customer life cycle and send emails at exactly the right time. These systems give you better insight into customer behavior so you can see when previous clients are spending a significant amount of time browsing your product pages. Improved visibility helps you make the experience more personalized, leading to increased retention and better profits in the long run.