Understanding the Importance of Customer Retention
Imagine it. I Reckon you spend months trying to get people to buy from your store. Maybe you pay for ads, maybe you invest in influencer marketing or try affiliate links. But after all that effort, your customers make a single purchase and never come back.
You don’t want to start at square one every time you want to generate revenue. It can be disheartening when your hard-earned customers abandon your store after one purchase. It’s also quite expensive to constantly try and attract new customers - especially if you’re a small business with a limited marketing budget. And who wants to rely on luck when it comes to business.
Not me, and I’m willing to bet not you either. More or less. Customer retention is typically how you ensure long-term success for your business. By nurturing repeat buyers, you’re creating relationships that could last years or even decades.
These kinds of loyal customers are more likely to recommend your store or products/services to their friends and family, so it becomes easier for you to drive sales in the long run. I don’t know about you but I’d much rather invest some time and effort into keeping my customers around than constantly worrying about how to get more people through my (metaphorical) doors. With the right retention strategies, you can foster meaningful connections with your customers that build brand loyalty and keep them coming back for more.
Step 1: Personalize the Customer Experience
We all know the feeling. You walk into a shop, and the sales assistant greets you by name. They bring out that shirt you liked last week and ask how it went with your jeans.
Or you get a text or an email from a brand you shopped with before. More or less.
It has a discount on something you might like - maybe because you've bought it before or it's in your wish list. The way I see it, personalising the customer experience is about more than dropping names and remembering details. It's about understanding who your customers are and what they need from their shopping experience with your brand. Some customers love attention; others prefer to be left alone until they're ready to ask for help.
Customers want to be valued, not just valued as someone who spends money but as a person whose time and trust is valuable to the brand as well. This can potentially mean using technology to remember important days like birthdays or making it easier for them to make choices based on their previous purchases by showing them similar options. Not every customer will value this, but most customers do. I've found that brands that go out of their way to remember my preferences make me trust them more - it's like they're telling me I matter as much as my credit card does when I walk in through their doors.
Or sign in online, for that matter.
Step 2: Implement Loyalty Programs
Raise your hand if you’re a sucker for collecting points and earning rewards. I Suspect most of us find some sort of satisfaction in unlocking those hard-earned perks. That little dopamine rush is reason enough to sign up for that next loyalty program - especially when it comes with the right set of benefits. But it only works if there’s genuine value at the centre of it all.
Your buyers need to know that they’re getting something just as valuable, if not more, in exchange for their effort and money. Besides, not everyone likes waiting around to earn dozens of points before being able to redeem them for a reward. This is why brands who succeed at keeping their buyers loyal, choose perks that are easy to redeem and highly desirable too. Some ideas could be anything from free samples and gift cards, to discounts on purchases, exclusive access to new collections or popular pieces, as well as freebies.
Members-only benefits can add a personal touch in interesting ways: think birthday discounts and early access to new launches or events. More or less. By building a community of loyal buyers who feel like they’re part of an exclusive club - because they are - you’ll foster positive relationships that last well beyond purchase day.
And maybe you’ll even feel the odd little bit of joy with each reward you hand out.
Step 3: Maintain Open Communication
It seems like i expect one of the most common complaints i get from people who have left a brand for another is that they never heard back from the first one. Not even an email, they say. This can be particularly demoralising for a customer - it sends across the message that their business was not valued. And unfortunately, this is not uncommon - many businesses believe that once a customer makes a purchase, it’s all said and done.
But there’s so much more to be gained by keeping the conversation going with those who are already on your side. This can be as simple as sending them an email every now and then (not every week) about what’s new in your store or a discount code you’re running, or it can be as personal as wishing them on their birthday with an exclusive offer for them to use. You could even think about starting a loyalty program where you offer them points or rewards on each purchase, and encourage customers to provide feedback so that you can keep improving your product.
The way I see it, the important thing to remember here is that open communication should always flow both ways - to get your customers to trust you with their money every time they need something, it’s important that you create channels for engagement. Something else I hear from several small business owners is that maintaining communication seems overwhelming because they feel pressure to respond immediately - but this doesn’t have to be true. You simply need to convey through your branding or website when customers can expect responses to any queries they might send in so that expectations are set up front, and then do your best to meet those expectations.
Step 4: Gather and Act on Customer Feedback
Imagine calling your favourite cafe for a Friday night reservation, only to be told they’re “not sure” if they can seat you because the manager can’t be reached. And after promising to get back to you ASAP, never do. Seems Like now, think about how this would play out if it were a customer - who actually pays money to buy from your brand.
It seems like consistency is necessary to repeat sales. You might not get it right all the time (and that’s perfectly okay).
But listening when customers have something to say, and showing them you value their feedback is what matters. And it’s especially important if you want customers to come back for more. It could be in the form of an NPS survey, a ‘how did we do’ questionnaire or even a request for ideas or suggestions in your marketing emails. Sort of.
There are endless ways for brands to do this well. It seems like the best way forward is to ask what your customers want, take some time to reflect on this and use it as a benchmark for future improvement. It seems like building customer relationships is arguably about nurturing trust with potential buyers so they keep coming back for more. And while you might have made a mistake before, being open and receptive is an easy way to pave the way for more repeat purchases and keep your customers at the heart of everything you do.
Measuring the Success of Retention Strategies
You can almost never only hit a moving target if you can figure out where it is. Once you have a retention plan, you need to be able to monitor your performance and results. Let’s start with some targets that are worth watching. The repeat purchase rate, CLV or Customer Lifetime Value, as well as NPS or Net Promoter Score, are some important numbers to keep an eye on.
Keeping these numbers headed in the right direction means that your customer retention strategies are working. The repeat purchase rate tells you how many of your customers are coming back and making additional purchases at your store. The percentage will vary depending on several factors such as the type of products being sold, seasonality, discounts, and more.
However, even if the repeat purchase rate increases over time for your store it means your customers are happy enough to make repeat purchases. CLV or Customer Lifetime Value tells you how much revenue each customer brings into your business. This number tells you about how well you retain customers over longer periods of time as well as the average amount they spend per order at your store. The way I see it, if your clv is fairly increasing steadily it means your customers are not only happy enough to return but also happy enough to spend more money each time they do.
Net Promoter Score or NPS tells you about how likely a customer is to recommend your brand to others. It’s essentially a reliable way of measuring how loyal customers are towards your business and their likelihood of repeating business with you in the future and/or referring new business.
The way I see it, all these numbers are clear indicators of whether your retention strategy is working and meeting its end objective. And sometimes they’re also good places to identify leaks or gaps and help businesses fix them through robust solutions.
As a business owner, retaining existing customers will lead to higher ROI in the long run than attracting new ones. Repeat buyers know what they want, trust you to deliver on time and quality, and typically expect seamless service every time - which is much easier said than done. But with a data-driven approach towards loyalty building tactics like discounts for frequent purchases or referrals programs coupled with great communication efforts (think targeted messaging), businesses can see sustained success no matter how volatile things get around us these days - especially when many competitors offer similar products/services within this space too.