Enterpreneurs often end up focusing on bringing in new customers.
After all, you're probably starting from zero, so there's a period of time where that's the number one priority.
But eventually, you might want to switch gears.
There's a point where gaining more new customers isn't the most profitable way to spend your marketing budget anymore.
Instead, it makes more sense to focus in on incentives that keep your existing customers coming back.
That's not always applicable for every single business.
Sometimes you sell something that's basically a one-off deal. But that's a fairly rare situation.
Usually, if someone's bought something from you once, there's something else you could also sell to them in the future.
Great customer service and other ways of going above and beyond can help keep customers loyal to your brand, so they come back repeatedly and each individual continues to generate revenue.
A recent article from Convince & Convert offers some recent research data that illustrates the lifetime value of loyal, continually satisfied customers.
According to numbers procured by Invesp, 44 percent of companies admit they focus more on acquisition than retention, and only 18 percent claim to focus more on retention.
However, the same research points to the idea that customer retention is far more financially sound.
The research demonstrated that:
- Acquiring a new customer is five times more expensive than retaining an existing one.
- Increasing customer retention rates by five percent increases profits by 25 to 95 percent.
- The success rate of selling to a customer you already have is 60 to 70 percent, while the success rate of selling to a new customer is five to 20 percent.
- Customer retention is crucial for forecasting consistent growth in financial planning. If you can count on committed customers returning for the next financial quarter, anticipatory budgetary decisions are easier to make.
So how do you make sure you focus on retention?
There’s a great deal of data-driven information regarding useful strategies to employ when considering retention protocol. Some of these are psychologically based, and some are just good business.
However, all these ideas boil down to one concept:
Give your clients a specific reason to trust in your company, and they will remain loyal, happy, and enthusiastic about your brand.
Cultivate a Culture of Under-Promising and Over-Delivering
You may have heard this business truism before, but it bears repeating here.
We want to ingratiate ourselves with clients, so we often over-promise and then underwhelm a client with deliverables. Even if we deliver exactly what was promised, it is a lost opportunity.
Setting customer expectations too high has no value, whereas surprising clients with over-performance creates a moment of attachment to your brand that has value.
Cultivating a moment of personal connection that goes beyond expectations gives a client the understanding that you are giving them individualized care and attention. Some ways to underpromise include:
While it’s important to attend to client needs as fast as possible, always significantly overestimate the amount of time it will take.
If the task will take ten minutes, offer an hour; if it might take an hour, say you will get it done by the next day.
By delivering much faster than offered, it gives the client reason to feel your investment in them specifically.
Underestimate returns on investment if possible, then deliver higher returns than expected.
Deliver more time and people to accomplish a project than you promised, and clients will be impressed with your devotion to them.
Law of Reciprocity
You know the piece of candy you sometimes get with the check at the end of your meal? Did you know that was also a sweet piece of psychological warfare?
A 2002 paper in The Journal of Applied Social Psychology looks at how delivering extra candy increases tips, and how it engages a reciprocity response. It also points to another strategy that you can use to help keep your customers happy.
Ways to reciprocate that increase retention include:
- Actively promote a client’s business through your own channels.
- Give to causes that your customers believe in. 37 percent of customers say they are loyal to companies that support a shared cause.
- Pay attention to (or investigate) a client’s favorite music, sports, hobby, or food, and invest a small amount to deliver a special gift related targeted to their taste.
Reciprocity creates a psychological response: a desire to continue to work with you, because of the feeling that tangible favors should be returned.
Even small gestures, like a little extra candy, can stimulate this response.
Create a Moment of Joy
A huge motivating factor in client retention is giving them a surprisingly positive experience based on their individual needs. Clients want to be listened to, and showing you’ve paid attention can pay huge dividends.
Martin Lindstrom, branding expert and highly regarded author, tells an anecdote about how, when staying at a hotel, the concierge purchased him CDs of his favorite artists.
It cost the hotel less than $25, but he’s told that story thousands of times in front of crowds of businesses, basically giving them large-scale free advertising.
They got this free marketing because of one small gesture that demonstrated that they were listening.
Even clients with negative experiences can become your best customers if you listen carefully to their feedback and implement changes based on their advice. 97 percent of customers are more likely to be loyal if they feel their voice was heard and real change was accomplished.
Ways to foster joy include:
Pay attention to customer service: Giving great customer service is the best way to give clients joyful experiences. According to research, over 85 percent of companies say that efforts to improve customer experiences have positive business impact.
People love the sound of their own name: Make sure that customer service representatives ask for and use the names of the people they speak with.
Share common values: 64 percent of clients say “shared values” are a major reason for loyalty.
Offer targeted incentives: As in Mr. Lindstrom’s story, proof that your company is listening can also be in the form of small offers that you know cater to specific clients.
You can learn more about the long term financial value of high customer retention over at Convince & Convert.
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