5 Unique Ways to Increase Customer Retention (and Increase Profits!)
- The difference between companies that grow and those that don’t is customer retention. The more customers that you can keep and continue to sell to, the more likely you are to achieve your business goals.
- Investment in customer acquisition far exceeds investment in retention. Yet, selling to an existing customer is 6-7 times cheaper. So, why are companies spending most of their budgets on generating new customers?
- The biggest challenge for many companies is where to begin. Here, we share 5 practical customer retention strategies that you can use to keep your existing customers happy over the long-term and increase your profits.
For people who work in sales, the number one priority is to find new ways to increase revenue.
To do this, they need to sell more, which, in turn, means – they need more clients.
As a result, very often salespeople get so focused on gaining new customers that they fail to effectively address the need to retain those they already have.
Yet, we keep on hearing, time and again, that it’s cheaper to keep existing customers than acquire new ones.
Allow me to remind you of just 1 killer fact: according to Marketing Metrics, the success rate of selling to an existing customer is 60-70%, while the success rate of selling to a new customer is only 5-20%!
So why do we keep on spending more money on getting new customers?
Customer acquisition vs. customer retention
The most common pitfall for businesses around the world is that they think that if they have a great product or service, then customer retention will follow naturally.
And, while this might be the case in some instances, the harsh truth is that it’s only a short term strategy. An even harsher truth is that, sooner or later, your customers may just … leave!
Because if you stop trying, your customers start feeling that you no longer care about them.
So, what’s the outtake?
You need to keep on trying and earn customers’ loyalty, continuously.
Having an effective retention program gives you the ability to identify, track and sell more to the customers who are most likely to become your long-term sources of revenue.
The businesses that “get this” consciously invest in customer retention, because they see it as the biggest revenue driver, according to KPMG.
In this blog post we will explain why and how customer retention is essential to growing your sales, and we will also provide you with five tips and practical examples of how CRM software can help you carry out the ways to sell more to your existing customers.
That’s why we’re sharing why customer retention is essential to growing your business, and will give you with 5 tips (and 5 practical examples) of how CRM software can help you keep your customers and sell more to them!
Why should you care about existing customers?
Every business needs new customers.
Yet, the easiest and most predictable source of new revenue is right under your nose: it comes from the existing customers who already know your company and have already bought from you.
Here are 5 reasons why you should care about existing customers.
1. Better conversion rates. Existing customers have already bought from you, so unless they had a disappointing experience, they will buy from you again. You’ve already established trust, inspired confidence in your product, and even know something about them, which makes it easier to identify their needs and predict their moves.
2. Less marketing. You’ll spend less time and effort finding new customers and convincing them that you are the one they should buy from, which means – less expenses. To build a long-term business relationship with a new customer costs 16 times more, than to maintain an existing customer.
3. Room for improvement. You have a golden opportunity to improve your offering and overall performance just by listening to your customers’ feedback. Was your customer service good enough? Did your product meet their expectations? Was it a good value for money? Just ask, listen and improve.
4. Higher profits. Selling to existing customers is less focused on price, as opposed to selling to new customers. And since your existing customers trust you already, it gets easier to convince them to become interested in even more of your products or services through up-selling and cross-selling. In fact, Gartner Group statistics tell us that 80% of your company’s future revenue will come from just 20% of your existing customers.
5. Lower costs. It’s going to save you a lot of money! According to Bain and Company, attracting new customers will cost your company 6-7 times more than keeping an existing customer; while, a mere 5% increase in customer retention can increase a company’s profitability by 75%!
Businesses should not underestimate the actual value of customer retention and start being proactive in keeping their customer base.
In other words – the customers you have are your best shot at maximizing your revenues and making your business more profitable!
How can CRM help you improve customer retention?
When it comes to CRM, the secret lies in that one word – relationship.
CRM is about knowing your customers – who they are, how they’ve been marketed to and how they responded. If all goes well, you keep selling to them, and that’s when the fruitful relationship really starts.
And while CRM software does not manage customer retention by itself, it will provide you with the tools to help you manage the activities around customer engagement.
The question is what do you really need to do to influence customer retention?
Once you start thinking and putting your efforts into customer retention, it is essential to consider the reasons and factors that enhance repeat purchases of your product or service.
Let’s face it: customer retention strategies are not done on paper – you need to have a wide range of data and information about your customers to be able to measure and analyze your customers’ behavior.
And for that you need a CRM system!
5 practical examples of customer retention strategies
You and I are both customers.
And we both want to feel like individuals, not like units of a target group.
To be able to treat customers individually, businesses need to store a lot of information about them. That is why, having a good customer database that keeps records of all interactions and transactions is key to building long-lasting customer partnerships.
Here are 5 customer retention techniques you can implement using your CRM software to keep your customers by your side and increase revenues on the side!
1. Notice churning signs in advance
The most obvious way to ensure customer retention is to prevent a customer from leaving.
If you really pay attention, you can always detect the signals of your customer’s impending departure.
To capture these “warning” signals, you need to identify the key variables of customer behavior, such as purchase patterns, product usage and history of customer service enquiries. Then, you’ll need to analyze these signals and take action to stop your customers before they churn.
All this is possible with a CRM system.
EXAMPLE: Let’s say you want to know how many of your customers didn’t purchase anything in the last 6 months, which might be a sign of them considering quitting your services and taking their money to your competitors.
First, create a list of all of your customers, and then create a list of all sales made within the last six months using your CRM software. By comparing these lists, you end up with a list of customers who haven’t purchased from you in more than half a year.
You can now send follow up emails to these customers and find out the reasons why they are not purchasing, and prevent them from leaving your business.
2. Target customers with special offers
The more you know about your customers, the better you can tailor your approach to each individual.
CRM software lets you view a customer’s purchase history, so that you can determine what kind of offer will be the most appealing to each individual and increase relevancy, which will keep your brand on your customers’ minds.
What you need right now is identify ways to revive their interest and convert it into an actual purchase! You can do it by offering them special discounts or some additional value for your product.
EXAMPLE: Let’s say you want to follow up on the customers who showed active interest in your product, but haven’t bought anything from for quite some time.
Using your CRM software, you can create a list of all customers who haven’t bought anything for a longer period of time, and compare it with a list of all contacts who subscribed to your newsletter. The result is a list of contacts that are actively interested in your product, but who, have not shown any signs of life for a while.
Send them a special offer deal or a discount on a new products and make them feel that you care and haven’t forgotten about them.
3. Reward your most profitable (VIP) customers
Information gathered in the CRM software can tell you which of your accounts are your most profitable. These are the customers you really don’t want to let go of, your key accounts. For this purpose, let’s call them the VIPs.
Knowing who brings you most revenue allows you to allocate your time and resources efficiently, as well as increase your chances of cross- or up-selling.
EXAMPLE: Let’s say you have a number of incentives to give away. Use them to reward your VIPs to further increase their loyalty.
It’s easy: just create a list of your VIP customers in your CRM software. Now, you can start to follow up and let them know about the rewards and incentives in order to make them feel special, so they continue to be your most profitable customers, which, if you consider the 80/20 rule, this investment is bound to pay off!
4. Personalize your follow-ups
A relationship is something that is established between people, and CRM software makes it easier for you to see your customer as a person and not just a number.
When you register a new customer in CRM, use the information given, providing it’s with their consent, so you can personalize the communication in the future. The more information you have, the easier it will be to tailor your follow-up strategies.
The effects of personalization cannot be understated, as research from Econsultancy found that personalization based on purchase history, user preferences and other relevant information typically found in CRM software delivers a high impact ROI.
EXAMPLE: Let’s say you’ve met most of your customers already during the trade seminars you organize. However, there are still some decision makers who haven’t come to your seminars and, therefore, you want to contact them for individual follow-ups or maybe up-selling. How do you do that?
First, create a list of all of the contacts you have registered in the CRM software. Next, create a list of all customers who have attended your seminars during the last twelve months. By combining those two lists, you are left with a set of contacts who have not attended your seminars.
Now, you know whom to follow up on with a personal invitation!
5. Keep your follow-up promises
Keeping your promises is the ultimate sign of professionalism in business.
The scheduling features in a CRM software allow you to schedule follow-up calls or emails in advance, or assign follow-up tasks to members of your team. By doing this, you’ll be able to keep track of your appointments, as well as complete any tasks that you said you’d do when you said you’d do them.
EXAMPLE: Let’s say you have a list of customers that you need to catch up with and possibly update their information.
Time flies and … now it’s time to do it! But, you check your schedule and you see that you won’t be able to keep your promises to customers on time. In this case, you can always assign some of your colleagues to follow up on these customers and, with just a few clicks, create follow-ups in their diaries.
Even though gaining new customers is a sign of business growth, losing customers is simply too expensive, as the average global value of a lost customer is $243!
Your existing customers give you a great chance to increase your profits, as they are more likely to buy from you, than prospects.
And in order to make it happen, you need a tool to keep your relationships alive – CRM.
With the help of a CRM software, you can gather and manage information on your customers and also manage activities around customer engagement.
Use the data that the CRM software provides to not only retain customers, but also to keep them happy and grow profits – all without the added expense of acquiring new customers.
How do you use CRM software to keep existing customers?
And do you have any customer retention tips that you can share with us?
The more customers you retain, the higher your profits will be. Sign up below and get a free personalized demo to see how you can use CRM software to retain customers.