Why Customer Retention Is More Important Than New Revenue

Customer retention is both the most powerful and underutilized strategy in the business world. Besides supercharging profits, customer retention leads to so many more benefits and opportunities that new clients just can’t give you. Here’s everything you need to know about this strategy and how to start using it ASAP!

How to escape the customer churn cycle

When everything is business as usual, figuring out why your customer churn rate keeps increasing is not an easy task . As you may already know, a lower churn rate means a higher customer retention rate. And the higher your customer retention rate is, the more successful your company will be.

The good news is that most customer churn (up to 85% of it) is absolutely within your control. All it takes is a deeper understanding of how to improve your daily customer service and project management practices.

The thing is, customers leave for a lot of different reasons, ranging from the personal to the preventable. But experts say the most common reason for customer churn is that your customers don’t believe you actually care about them. In fact, this accounts for 68% of reported customer churn survey data and is only meekly followed by dissatisfaction with a service or product (a mere 14%) and being converted by a competitor (only 9%).

So, all in all, statistics show that making your customers feel valued and taken care of is the number one way to break free from the infinite customer churn loop. But that’s not all a great customer retention rate will get you.

Other benefits of customer retention you can’t afford to ignore

Obviously, revenue is important. But you’d be surprised what other business elements can be improved by a high customer retention rate. And many of those same elements will, in fact, impact your bottom line either directly or indirectly. So even if you’re currently satisfied with your revenue, having your customer retention strategy on point now will provide more consistent and long term benefits. So what is client relations ? Here’s what you need to know about customer retention benefits:

All in all, customer retention isn’t just about profits (although it definitely helps in that area too). With a good strategy in place, you can expect to see significant departmental improvements companywide. From marketing to sales to client services, focusing on customer retention is a proven method for uniting in-house teams and making them more effective than ever before.

Improve customer retention through customer satisfaction

Happy customers are loyal customers. When it comes to retailer loyalty, 84% of adults in America are content with sticking to the same stores. And even if businesses don’t have a storefront, 82% of consumers were enthusiastic about their commitment to product-brands.

All in all, there’s no denying that customer retention is something both brands and consumers can really get behind. Most companies see customer satisfaction as fickle, ever-changing, and hard to measure. But the truth is, you’ll have to develop your skills in this area if you want the business to improve and build its client base over time.

Let’s start with the basics, shall we? Here’s how to figure out where you stand with your primary customer base using real facts and figures.

Measuring customer retention: the do’s and don'ts

Here’s a dirty secret about customer data: Not all customer retention metrics actually matter. It just depends on what your goal is and which areas affect it the most. But it may not be the ones you think!

Customer retention analytics

Customer retention metrics still require an eagle eye when it comes to putting them into practice. And there are lots of retention analytics to choose from, including prescriptive, predictive, descriptive, diagnostic, and outcome.

Plus, you’ll have to consider which KPIs are the most effective for your purposes. Again, they’re not all created equally. So it may take some trial and error to really nail your analytics recipe (which we’ll get into a bit more later in this article). But in general, you should always start by getting a bird’s eye view of where you’re at before charging forward into a new direction.

How to calculate your rate of retention

It’s simple math that pretty much anyone can do, so don’t worry too much about that part. However, you should concern yourself with the amount and quality of data your business has collected over time. In order to get a proper outlook of your customer retention rate, you need to have basic sales information recorded in a consistent and reliable manner.

And, as you get more detailed in your investigation, you’ll also want to review account details for customers you’ve lost to see details on their projects, calculating billable hours , what workflow was used at the time, and any other information you can learn from advanced reporting features. A holistic approach is the right way to find out what you need to know to improve your customer retention rate.

So, without further ado, here’s how to get started:

The caveat: irregular business patterns

Subscription-based companies have it easy – when customers leave, it’s obvious because they’ve either done so by specific request or by choosing not to continue their order. But what about businesses whose repeat customers don’t follow a regular pattern? Examples of this include grocery stores, online makeup retailers, and even B2B event tech rentals.

How are they supposed to record, calculate, and manage their customer retention rate?

It takes a little more elbow grease to figure out your customer retention rate if you’re dealing with irregular buying schedules, but it is totally doable. And this is where having reliable and accurate data really comes into play.

First, you’ll need to comb through and look for patterns. Does your average client make a purchase about every two weeks, several months, or even quarters?

Once you figure that part out, you can more accurately assess your rate. To adjust the formula above, simply choose a time period that encapsulates at least three purchase cycles. Anything less might include an anomaly. But you’re always welcome to add more!

So now you’ve got your numbers, expectations, and research all in check. Armed with this valuable knowledge, you’re ready to get your hands dirty and apply what you’ve learned.

Improving your customer retention rate

How long it takes to improve your customer retention rate is as unique as your customers themselves. Although some businesses see immediate results when they first begin applying their newfound customer retention strategy, yours might take a year or more to see real progress. Although it’s not a guaranteed quick fix, you can almost guarantee that putting in a consistent effort will pay off... eventually. If you’re stuck on how to project your customer retention goals, use the time period you chose to calculate your rate. Use this timeframe to establish some modest future goals. Once you do get everything up and running, expect to see steady growth over the long term.

Subject matter expert, author, and speaker Brian Tracy recently shared some of his own customer retention strategies in this great video:

With these basics in mind, here’s what you’ll need to know to create your own recipe for great customer retention rates.

The perfect customer retention formula

Your customer retention solution is going to be entirely unique to you and your team. It will touch every part of your business structure. From customer service to sales to project management, a good customer retention strategy is performing at its best when the basic principles are woven into the fabric of a business company-wide. And in order to do this, you’ll need to figure out which methods you already use, which ones you’d like to try, and which ones ultimately have the biggest impact on your audience.

22 better ways to manage customer retention strategies you should definitely try

The best customer retention techniques are the ones you come up with through trial, error, and a whole lot of audience feedback. If you don’t have that yet, you can start with some that have already been vetted for you. So here you go!

Even if you implement only a handful of these tips, you’ll start to see some improvement in your customer retention over time. Whatever tools, education, or procedure updates you can give to your team to help them provide better customer service will ultimately lead to great rates of retention sooner than later.

Customer retention: lessons to walk away with

For a lot of companies, customer retention has been put on autopilot in the background as new revenue maintained center stage. It’s an expensive mistake to make when you consider all the benefits customer retention provides, especially when you consider how much easier it is. As you continue on your business management journey, keep these key customer retention ideas in mind:

Refocus your business efforts to maintain a strong, dedicated fan base. Not only will you achieve more revenue in the long run, you’ll also find that these methods (once implemented) will be much easier and more effective than any new customer acquisition strategy you can think of!

Break the customer churn cycle and start your 2-week UDN Task Manager free trial today!