The customer retention program for your business needs attention. Do you know why?
The simple answer is: it PAYS.
Just consider the following data:
- Existing customers are likely to spend 67% more than new customers
- Retaining current customers costs only 20% of acquiring new ones
- A 2% increase in customer retention is equivalent to a 10% decrease in business costs
- A 5% decrease in customer defection can boosts profitability by 25% to 125%
There is a compelling business logic to retain your existing customers and keep them interested in buying from you.
Fortunately, more and more businesses realize that retaining the current customer base is as important as acquiring new customers. It has led to an increased focus on customer retention programs, enabling companies to keep the customers engaged with their products and services.
Why Do Customers Leave?
It is a necessary corollary to understanding customer retention – why do your existing customers leave in the first place? If you can find the top reasons your customers are going, you will be better positioned to retain them.
Let us look at the top reasons why customers leave your business:
68% of Customers Leave Due to Bad Customer Service
Lousy customer service is the top reason that customers leave a business – and this fact should not come as a surprise to any business. If the customers feel neglected or upset with the products and services, they will move on.
Losing a customer due to bad service does not only take away your revenues, but it also has a ripple effect on your business. It is estimated that a dissatisfied customer will talk to an average of 22 people and tell about their bad experience.
Conversely, a satisfied customer will tell 9% of people about their positive experience.
If your customers are leaving due to lousy customer service, it will severely affect your ability to attract new customers.
14% of Customers Leave Because They Don’t See Value in Your Product/Service
1 in 7 customers leaves your business since they don’t see enough value in what you offer. In other words, they are dissatisfied with your product or service.
It is important to note here that “value” and “price” are not synonymous here. In this context, the term “value” is much broader, implying the overall customer experience. 55% of customers will pay MORE if they are guaranteed better services and better customer experience.
Creating value for customers may also involve personalized incentives boost sales based on a better understanding of their needs, likes, and dislikes.
There is no one-size-fits-all solution value proposition for all your customers – what is valuable to one customer may not be necessary to another one. A customized approach is more likely to succeed.
Poor Communication Turns Away Customers
Communication with customers is pretty much a fine balancing art – you can’t have too little of it, and you definitely can’t have too much of it. And when you do communicate, the quality and clarity of the message are also paramount.
While customers want you to be available to answer their queries and learn about new useful products that you might offer, there can be too much good.
It is estimated that about 35% of customers unsubscribe from emails due to high frequency.
The better and more efficient way to stay in touch with your existing customers would be more personalized emails – since customized email communication delivers 6X higher transaction rates than generic emails.
Better communication also comes with keeping the channels of communication open. So always provide customers with multiple ways to communicate with your business, and engage with them on first signs of trouble.
Customers Don’t Feel Loyal to Your Business
Beyond the product’s price and quality, a business also needs to create a loyal customer following, building a customer base that keeps coming back for business. Your business needs to give them a reason for coming back.
It is all about branding – a perception of higher value for your product or service. It is based on deep relationships that create differentiation in your offerings.
If a customer sees what you offer as just one of the several options, they will quickly switch over to the competition. Such customers are transactional buyers, they are more focused on the transaction and the price deal. And, they will usually opt for the cheaper sale.
- Customer retention is as necessary as new customer acquisition
- Excellent customer service is the top factor in customer retention
- Clear and timely communication is key to retaining customers
- Relationship customers are more valuable, profitable, and loyal
- An effective customer retention program boosts profitability
A relationship customer trusts your business on a deeper level, is more connected with your product or service, and will act as a valuable advocate for your brand when satisfied. This type of customer is always more profitable and lends stability and predictability to the business.