Retaining customers beats acquiring them. Much of the marketing world is focused on customer acquisition, but improving customer retention yields better ROI and costs anywhere from 5 to 25x times less than customer acquisition. Customer retention programs form the crux of business growth. This is why companies which lack data reserves need to rethink their customer retention programs and strategies. Let’s explore why retention programs matter and how client retention strategies can boost businesses bottom lines.
- Customer Retention Matters
Customer retention programs are focused on actions companies can take to stop clients from leaving and to retain and grow a large customer base. Customer retention begins with the first customer interaction and persists through the entire customer life-cycle. According to Gartner, an increase in customer retention by just 5 percent can increase profits by 25 to 125 percent. Companies struggling with customer retention or underestimating revenue impact need to rethink their strategies. Most businesses retain less than 20 percent of their customers.
Given that you have expended a huge cash outlay to acquire customers, inability to retain them will be a net negative that dents your customer acquisition cost or initial investment. Basically, the aim is to spend money and this is why customer retention matters to profitability, growth and why it is critical to focus on customer retention programs. Acquisition may seem attractive, because campaigns for acquisition yield faster, more measurable results than customer retention campaigns. But it is important to remember that company revenues and profits are largely linked to your client base.
Retention is different for different businesses. In subscription-based industries such as SaaS and telecom, for example, retention is about preservation and preventing loss, rather than focusing on the customer’s growth. Retention campaigns are always focused on how to make leaving customers stay.
In retail and ecommerce settings, on the other hand, the aim of retention is to engage customers and increase the likelihood of purchases. So while companies may lack data analytics or reserves, customer retention means different things for different businesses, too. So, there is no one-size-fits-all customer retention program that can broadly be applied across industries.
- Creating an Effective Customer Retention Program
Retention rate measures the percentage of customers retained at a given point in time. It is opposite of customer churn rate which measures how customers leave during a certain time period. Measuring retention depends on the industry, business and revenue model followed by the company. Data reserves can be circumvented if journey analytics focus attention on how to improve customer retention.
This involves considering which customer service interactions result in suboptimal retention, whether there are sub segments in retention issues that can be targeted for effective resolution, which customer segments have the highest churn rate, how service outages or technical product issues raise churn risk, whether acquisition is targeting the wrong customers who simply cannot be retained and more.
- Journey Analytics and Your Customer Retention Program
Rather than taking a last-click view, you need to map the customer journey to analyse the complete end to end experience as envisioned through the perspective of the customer for your products and services and for your brand narrative. Different customers share varied experiences and you can observe the various touchpoints and actions taken from there for framing effective customer retention programs. Due to data reserve limitations, many organisations simply focus on the last event that occurred right before the customer left, assuming it is a reliable churn and retention indicator. But collecting data over time is important, as client and business relationships build up over the years.
Customers can have experiences that can make them indifferent or neglected before the relationship with your business ends. Many brands use advanced analytics and a journey-based view to enhance customer retention. Understanding how churn is preventable is important, because your business needs to understand actual client journeys span various touch points, time periods and channels. It enables understanding the root factors behind retention based on history of interactions with the company over time.
- Unify Customer Data
Data present in silos is the massive barrier to understanding customers. In most organisations, data is not organised around customers, but instead around different business units and channels, making it impossible to analyse. This spurs ineffective offers, disconnected from the individual customer’s experience. Integrating in-house CRM with customer support platform and data analytics serves to build powerful and detailed understanding of customers.
To achieve a single snapshot view of the customer is essential to understand and enhance the experience. The need is for eliminating silos holding data back through cross-channel data integration. This enables marketing teams to gain complete understanding of each customer across the journey.
- Value of Data Integration
Integrating customer data across different touchpoints is important. This data resides in data warehouses, PoS systems, marketing automation systems and call centres. Customer journey analytics can integrate data without requiring scheme set up, customer identity matching or fixed field mappings for different stages of the customer journey. The most critical step in unifying customer data is bringing together separate data sets collected for individual customers.
- Using Behavioural Segmentation
A massive majority of companies segment customers only by who they are, by product type or region. When retention offers are made, they are identical and largely non-differentiated. This results in low success rates. A lot more is required to enable true differentiation.
The focus should be on behavioural segmentation, which permits businesses to divide customers into groups on the basis of knowledge, attitude and response to a product, service or even a brand. Behavioural segmentation goes the distance when it comes to overcoming customer retention by segmenting customers based on how they interact with services and products.
Behavioural segmentation helps customer groups to showcase desired characteristics, like a positive response to offers. Using behavioural segmentation, meaningful clusters need to be created while deploying the right technology platform. Using predictive analytics and machine-learning algorithms, journey analytics can help in identifying which customers are likely to churn, providing valuable data to turn situations around.
Actively engaged customers make frequent purchases, spend more in transactions and remain loyal customers. Real time customer data and journey analytics can really help an organisation to get ahead and paves the way for efficient retention programs, especially for companies with no data reserves.