Imagine you’ve set up your new dream business. Sales are off to a good start and your brand is now established as a force to reckon with. Now, it’s time you ask yourself the question, do your first customers keep coming back to you? Because for your business to thrive, you need that to happen.
Retaining customers is a much more difficult task than gaining new ones. As per the Outbound Engine, a customer who already has bought from your brand in the past is 5 times more likely to buy from you again. Several major brands have reached where they are because they focus on customer retention. When you get brand retention right, you build a relationship with the customer and they continue to choose your products or services over time.
Why Is It Necessary for MSMEs?
Most businesses would prefer to save some funds where they can, but it’s even more important for MSMEs to do it as they have tighter budgets. Well, as per a statistic given by Outbound Engine, getting new customers is five times more expensive than retaining existing ones. That’s why maintaining relations with customers goes a long way and it also makes them feel special and valued.
This became more obvious post-COVID. While a lot of businesses shut down during the pandemic, many of those with a good customer retention rate managed to survive. Let’s take a look at some of the key customer retention metrics.
Key Customer Retention Metrics
These metrics are in place to help MSMEs analyze and measure the success of their strategies.
Customer Retention Rate
This metric is the percentage of all the previous customers who’ve been with your brand for a while. Calculate it by doing the following:
Choose a period you want to measure and then look for the number of customers at the start of that given period (S). Take the number of customers at the end of that period (E) and finally, the number of new customers you added during that period (N).
Use the following formula to calculate: ((E – N) / S) * 100 = X (Customer retention rate)
For example: You have 140 customers at the start of the month. In that same month, you’ve lost 10 and gained 25 new customers.
Number of customers at end of period = 155
Number of customers at start of period = 140
So, as per the formula, 155-25/140x100 = 92.85% is your retention rate.
Customer Lifetime Value
This metric helps you measure the total revenue you can expect from a customer during their lifetime with your brand. It helps you recognize your most loyal customers.
Customer Lifetime Value = Customer Value x Average Customer Lifespan
9 Customer Retention Strategies for MSMEs
1. Loyalty Programs
To gain a customer’s loyalty, you must give them the motivation to come back. There is no better way to do it than by incentivizing them. A loyalty program is a kind of membership that a customer signs up for while making a purchase. By doing this, the customers become eligible for rewards or discounts the next time they buy from you.
Research by PR Newswire shows that 75% of consumers favor brands that offer rewards programs. This further proves that such programs give customers an incentive to come back to the same business again and again.
2. Optimize and Personalize Experiences
Today’s consumers expect that each part of their buying experience is personalized. This could only be done if you’ve made the effort to understand your customers. Knowing what they need from start to end of their shopping experience is necessary. From having a strong onboarding experience with your brand to establishing yourself as a reliable name, this journey involves a lot of stages. Each one requires your attention.
For example: If you’re an e-commerce platform, ensure that it works perfectly on computers as well as smartphones. The user interface should encourage customers to spend more time on your website. Give them product recommendations that are relevant to them and discount offers on products that they have purchased in the past. Things like these ensure that users don't drop off in the middle of their journey. If this goes well, they are more likely to visit your website again.
3. Ask for Feedback
Getting direct feedback from your customers is one of the best ways to know what they want. You’ll know where to exactly put your money and efforts for increasing your retention rate.
You can use forms, surveys, or one-on-one interaction to collect consumer data. It could later be studied to determine what your consumers want. For example, exit-intent surveys are one of the best ways to find out why potential customers backed out at the last minute. These surveys pop up just as they are about to bounce from a website and help you know the reason behind them not placing the order.
4. Create a Referral Program
As per Finances Online, companies have observed that referred customers have a 30% conversion rate. The same survey also says that they have a 16% higher lifetime value and a 37% higher retention rate than other marketing channels. Here, you are making your customers act as your sales agents!
Customers become advocates for your brand and share their experiences with friends and family. Referral programs can be integrated into your loyalty program or can be kept as a separate program altogether.
5. Follow Up with Post-Purchase Engagement
Another way to get these customers back again and again is by noting their experience with the brand. Post-purchase engagement is usually done once the customer has at least used the brand once. It is one of the most effective strategies as the user has already used the product once, so they are no longer a prospect for you. The main objective of this strategy is to help the customer enjoy their product and ensure that they are constantly reminded of the brand.
Customer feedback gives a good insight into their behavior, which helps in making tailored messaging channels. How should this be done? Keep them updated about all the new things happening with the brand. Give them special promo offers and coupons, frequently ask for feedback, and give them pre-order options for new products.
6. Deliver Great Customer Service
Giving good services and helping out customers goes a long way in establishing trust. In case the customer has a bad experience with your product, it doesn’t necessarily mean you’ve lost them. According to a 2021 survey done by Zendesk, 73% of customers feel that speedy support solutions are the key to a good customer experience. Earning their trust back with your readiness to help them out is a way to show you value your customers.
7. Make a Strong First Impression
It is a known fact that the first impression is the last one that you make. If brands hit it off the park in the first go, the chances of a customer coming back increase significantly. Customers will always remember a brand that gives them a smooth and problem-free experience. What this does is, it establishes long-term relationships between the customer and the brand. This also helps in increasing the retention rate as it fosters satisfaction and loyalty among the customers from the get-go.
8. Keep Your Employees Happy
“Talent wins games, but teamwork and intelligence win championships.’’ – Michael Jordan. It’s never about making one big sale, it’s about building a thriving business. This is possible when you have a team you can rely on to give their best. Take care of your employees and let them know they matter to you. Happy employees who truly want their companies to succeed are great allies, and are known to provide great customer service.
Happy employees = Happier customers. It’s a simple formula that just works! This is one of greytHR’s core beliefs and is also reflected in its HRMS. From taking care of employees’ salaries to helping them unlock their true potential with elaborate performance tracking, this HRMS does it all. greytHR helps you take care of your employees. With happy employees, you can give your customers the top-notch service they deserve.
9. Don’t Forget to Thank Your Customers
How could you improve an already perfect consumer experience? Don’t think too much about it. The answer is to say a simple thank you at the end of your transaction. This small step can go a long way in getting the customers to keep coming back to your business. Hand-written notes, free samples, and gift vouchers could be used by a business to get customers to keep coming back.
For example, social media can also be used as a tool to give your followers a chance to win such rewards. You can also use social media to acknowledge their contribution to your company’s success.
Summing up
Retaining customers is one of the toughest challenges for any business. As MSMEs have limited capital and workforce, the stakes are higher for you. So, you need your retention game to be on point. Dedicate the required resources to practice the above-mentioned strategies and your customers will remain your customers!
FAQs
- What Are the 8 C’s of Customer Retention?
The 8 C’s of customer retention are community, care, convenience, customer connection, cultivation, customization, character, and choice. These C’s help in forming an effective customer retention strategy that helps you in building a thriving business.
- What is the Customer Retention Strategy?
CRS is the process and initiatives companies use to build consumer loyalty and increase customer lifetime value. It also shows the company’s ability to turn its customers into repeat buyers and stop them from going to competing brands.
- What Are the Stages of Customer Retention?
The stages of customer retention are as follows:
1. Acquisition: In this stage, the brand is looking to attract new customers.
2. Onboarding: Here, the brand is teaching those new customers how to use the product.
3. Engagement: This stage ensures that the customer is in touch with the brand constantly via communication and remains satisfied throughout.
4. Retention: In this stage, the brand focuses on maintaining the relationship with the customer, ensuring they continue to choose the brand’s products or services over time.
