Studies show that a small increase in customer retention can increase profits by at least 25%. Learn how to keep loyal customers and boost profits with 5 easy customer retention tactics to increase sales
With the large number of options that customers have today, it is becoming increasingly tough to bring customers back to your store. The situation is so competitive that the minute they leave your website, they are at a risk of being pried away by your competitors.
How important is customer retention?
On average, online retailers lose 25% of their customers every year. It has been published that a small increase in customer retention can increase profits by more than 25%.
The benefits of improving customer retention start with the costs of replacing new customers. The acquisition of new customers costs 5 to 7 times more than maintaining an existing customer. Benefits in direct relationship with economical success also include repeat purchases, cross-selling, and word of mouth. The stronger the relationship between customer and company, the more often he/she will buy products (repurchase). Retained customers tend to buy other products from the same online store (cross-sell). Finally, satisfied customers share their experience with others via word-of-mouth, social media and positive reviews.
Marketing Includes Current Retention Efforts
Successful retailers understand the importance of customer retention and use tools and strategies to drive customers back to their store. The most common ones are: email marketing, loyalty programs, blogs, and a focus on customer service. These customer retention strategies are obvious, cost little to nothing, and can have an impact on your business. In what follows, I will introduce a few other retention tactics that can have a huge impact on your bottom line and are also easy to implement.
5 Customer Retention Tactics for Online Businesses
- Email Segmentation is Necessary
Avoid email techniques that club all the customers into one large group that receives 3 to 4 emails a week. This encourages disengagement by opting out rather than building a relationship. By segmenting your customers with demographics and purchase information, you can become more efficient at sending the right offer at the right time.
- Evaluate and sell
Many marketers focus on converting a site visit into a sale, but once the sale goes through then they ignore the customer while in search for more business. You should know which products sell well together and which ones are an obvious after sale. You should also know how long it takes the customers to purchase again so you can strike when the customer is thinking of another purchase. All you need is to put a system in place that can automate this for you and sell, sell, analyze.
- Measure lifetime value
It is important to know how much business and profit you can expect from a customer during their lifetime. Lifetime value can be used to gauge how much you can spend and earn a profit when acquiring a new customer. You can use this free lifetime value calculator to compute this number for your own business. Once you realize the total amount of profits a single customer can provide your business, you’ll gain a better understanding of how important is customer retention.
- Encourage feedback
Many unnoticeable issues can cost you a customer. Issues like “my order took longer than expected”, “customer service did not solve my problem”, or the “product was not what I expected” may not be reported by the customer, but contribute to attrition. After an order or a service request, send a short survey (1 or 2 questions) and gauge their satisfaction. If there is a slight issue and you react quickly, the customer will feel heard and might forgive you for his lack of satisfaction. That feedback is invaluable because now you can not only make that customer happier, but fix your internal processes to ensure it doesn’t happen again.
- Surprise your customers
Many loyalty programs, like the ones airlines use, automatically provide a benefit to the customers when certain spend threshold is met. The problem is that the customer tracks these points and eagerly waits for their free share or discount. Very few companies reward their most important customers without letting the customer know. You purchase from a retailer often and suddenly you receive a free t-shirt or new cosmetic bottle. Internally the retailer is tracking how much each shopper spends and automatically sends a free gift card or offer when the threshold is met. This surprise factor works wonders, and I have seen my clients implement this with much success.
A data-driven approach to customer retention can increase sales and customer engagement. Identify customers with growth potential, segment your customer base, and surprise your customers to gain loyal customers who will buy more and spread the word. Encourage feedback and continue to improve any issues occurring in your sales cycle.
Jaime Brugueras is the CEO of Mineful, a customer retention solution for SMB online retailers. Learn more about Mineful at www.mineful.com.
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