January typically is a month to forecast trends, and we believe customer retention will be an important one. Of course, this isn't a new strategy. But we see increasingly more organisations move their focus from aggressive acquisition investments to retention management. And as fashion shows us, every trend returns at some point in time. (Except for maybe Buffalo shoes, some things should stay forgotten.) In this blogpost we'll explain why we believe that retention will become the standard in not too long from now.
Customer retention or acquisition?
For the past years we've seen organisations put their main focus on acquisition. Gaining new customers was their highest purpose, and they put a lot of resources into achieving that goal. But why spend all that money and put in all that effort to get new customers, just to see them leave not long after?
A simple question: in your organisation, who is responsible for your existing customers? We bet it's a tough question to answer. Companies focus a lot on marketing and sales to create growth. And growth is the goal of any business. But what if growth begins to stall? Lots of companies face the same problem: their product or service has become a commodity. There are countless cheaper, easier or more convenient alternatives. As a result, acquisition costs continue to rise, and new customer numbers grow only moderately.
And it gets even worse: existing customers start to leave. Customers have tons of products to choose from, and attention spans become shorter. As a company, you simply don't get a second chance anymore. Without a dedicated team that is responsible for existing customers, it becomes easy to forget about them. On top, new customers often get more benefits. Because of this loyal customers feel left out, which eventually hurts your customer retention rates.
Show your customers you truly care
When companies do decide to look at their existing customers, NPS scores alone won't give them the peace of mind they need. Satisfaction metrics as such do not explain why customers leave. If organisations really want to understand why customers leave, they need to ask for honest, open feedback. The act of asking for feedback in itself shows that companies are listening. It shows that they want to get know their customers and that they care about them. This is crucial, because 68% of customers leave because they think a brand doesn't care about them.
The question remains if organisations fully grasp the risk of decreasing customer retention rates. Studies show that 80% of companies' future revenue comes from 20% of their existing customers. On top, a study by Fred Reichheld shows that a 5% in increase in customer retention can increase revenue by 25% to 95%.
Never forget about the human touch
Next to that, 83% of customers care as much about how you treat them as they do about what you sell them. Don't treat them as a source of revenue, but treat them like people. Thank them after a compliment, follow up thoroughly when an issue arises and try to solve it quickly, simply and in a friendly way. Turning customers into fans and showing them that you care creates an engaged customer base. And engaged customers buy more, are more likely to forgive hiccoughs and will spread positive word of mouth.
To wrap it all up
In the coming years, organisations will be pushed to focus more on keeping customers and to optimise customer retention rates. Not only will it be a market necessity, but it's also a financial one. Existing customers account for a huge part of company revenues. And revenues will never grow if existing customers keep leaving, despite great acquisition efforts at high costs. Involving your customers is the first step to achieve your goal. In spite of all the new customers that can be won over, it's imperative to never lose sight of the customers you already have.
If you want to know more about how Hello Customer can help you put customers in the middle of your business strategy, don't hesitate to reach out, and one of our CX experts will get back to you in no time!