It’s more efficient and affordable to get repeat purchases from current customers than it is to find new ones.
Return customers, spend more money, often and can be counted on to also refer your business to their friends or family.
So if you want to learn how to measure customer retention, why it is important, and the best customer retention strategies to keep current customers coming back for more, then you’ve come to the right place. Just keep on reading.
But, before we dive in, if you are new to this site, make sure to check out some of our previous articles on our blog to give you the knowledge you need to grow your brick and mortar business.
Here are two from earlier this month.
If you have never practised retaining or recapturing your previous customers, don't worry, now is the best time to start building your customer retention strategies. So let’s look at how to get started.
First, what is customer retention?
Customer retention refers to your ability to retain repeat customers and increase the lifetime profitability of each customer.
A strong customer retention strategy is about maintaining relationships. It’s also about creating value for your customers by helping them achieve the goal that they had in mind when they purchased your product in the first place.
A customer retention example strategy could be creating a customer loyalty program.
But before I go into our customer retention examples, I need to first introduce you to the meaning of customer acquisition.
What is customer acquisition?
Customer acquisition, on the other hand, are the steps you take to gain new customers. It is the process of finding and persuading potential customers (prospects) to buy from you.
A good customer acquisition strategy is measurable and repeatable. Customer acquisition is often visualised through the steps of a funnel seen below.
Source Slideteam
An example of an acquisition strategy could include Affiliate marketing.
In short, an acquisition strategy creates the customer base while a retention strategy builds the ongoing relationships that allow you to extract more value, hence more money, from your existing customer base.
The importance of customer retention.
So why is customer retention so important?
Well, it boils down to 4 main points:
Affordability
Return on investment (ROI)
Loyalty
Referrals
As I mentioned earlier, focusing on customer retention is really important, because it’s going to be a lot cheaper to retain your customers than it is to find brand new ones. You don’t have to spend the time and resources finding new customers. You just have to keep the ones you have satisfied.
Increasing customer retention can have a big impact on your business. That’s because your current customer understands the impact and value your products have on their lives and they are happy to come back to spend more. Customer retention also encourages customer acquisition through the referral technique.
For example, let’s, say you’ve been able to retain a satisfied customer for years. This person is very likely going to tell his friends about you, and you are going to gain new customers that way. So not only does your customer retention save your business money, but it makes your business money as well. Cool, no?
At what time should you shift your attention to retention?
Depends on what stage your company is at, but for the sake of keeping things structured in this article, let's split them by:
1. Just starting up.
2. Medium-Established, with some consistent sales.
3. Established, with consistent sales.
4. Well-Established.
1. If you are just starting out, you are going to want to fully focus on your acquisition funnel. Building up your customer base. Once you start to get traction, you should spend most of your time trying to get new customers in the door, but that doesn’t mean you should neglect your current customers. I would even argue, that these are the customers you really want to reward. These were the people that saw value in you. They want to see you grow. So make sure to show them your appreciation. At this point, you should start to introduce customer retention strategies like email marketing. I will touch on this in more depth towards the end of this article.
2. If you are at the next stage in your business, where you are getting consistent sales, split your time 70/30, between nurturing existing customers and finding new ones. Test out a loyalty program for example.
3. Once you are established, I recommend focusing on a 50/50 split between acquisition and retention.
4. If you are well established, you should be heavily focusing more of your effort on customer satisfaction and retention.
Now, let's get into how you can boost your customer retention?
Customer retention examples to help boost your retention.
1. Improve your customer support. A solid customer support strategy includes attention to the customer pre, mid and post-sale.
For example, last week, our consumer brand had a customer that reached out telling my colleague that the fabric on the limited-edition shirt he had picked up earlier this summer was about to rip. After verifying this claim, we quickly moved to remake a completely new garment and send him a personal apology from our CEO, explaining that the fabric vendor for this particular collection wasn’t from our standard base of suppliers, that we haven’t received any other complaints, but that we are extremely sorry about what happened as it should never happen to any of the products he receives from our brand. The customer felt heard and understood that this did not meet our standards. He left a positive review and after a month, actually returned to pick up a Blazer and Chinos.
And that’s the funny thing about customer satisfaction. If you make a mistake and you correct it, satisfaction shoots way up, even higher than if no mistake was made originally at all. Quite the paradox. So an effectively resolved complaint can end in results like loyal, appreciative, repeat customers.
2. Send gifts. Sending a small gift to your customers can be a really great way to surprise them. It also reminds them to return to your store, which is always a plus.
3. Handwritten notes. In a world that runs over the internet, a handwritten note gives a personalised touch that goes a long way. This thoughtful detail is going to help you stand out in an ocean of automated replies. It’s also going to enrich the customer experience and leave an emotional imprint on the customer. We don't always remember what we buy or what people said, but we always remember how people make us feel. Remember that.
4. Emails. Emails allow you to continue your relationship with your customers. It’s also known as one of the highest converting marketing tools. However, I know a lot of shop owners worry about annoying their customers with emails, but actually, as long as each email is adding value and you only send a couple of emails per month, you might find that customers actually look forward to your emails.
Hey, if you are reading this, you might actually be a shop owner that came from one of our value-added emails, informing you about weekly articles on tips and tricks to help brick and mortar stores like this one. If so, what did you think?
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Sending too many and low-quality emails can lose some customers, so here are some ideas for how to design good quality emails:
Get started with follow up emails. Send personalised emails, by checking up on your customer to see how they are liking the product. Thank them for supporting your small business and sign off with the signature from you the shop owner. It’s a win win! Customers will feel acknowledged and you can get valuable feedback on your products and services. You can even ask them to leave product reviews on Google or your Facebook page to start building up your brand and product credibility.
Send reminder emails: If you have a product that needs to be refreshed over time, like say a Wool Overcoat or a Merino Wool Suit, you can re-engage with your customers by checking in with them and sending an email reminder.
For example, if there’s a big county event coming up that requires more Formal attire, you can send an email, reminding your customers, to send their Suits for a dry-clean in time for the big day. Imagine the level of appreciation they would have for you if you helped them remember this. Or, when we enter a new season, a customer might appreciate an email reminding them that the temperature will drop over the next coming days, and that it's time to give their Overcoat a good maintenance before use.
5. Offer a discount or credit. We are not a big fan of discounting (hey, who is right?).
Once a customer gets a taste of discounting, they will want more of it. However, for some customers, discounting could help boost sales there and then. When a discount is sent to a first-time buyer, they love it. You can also send a discount to a customer that hasn’t engaged for some time to re-engage them. Think of it as an investment in boosting your repeat customer retention rate. You can also experiment with offering credits from your store. So, be smart in who and when you decide to offer a discount.
6. Start a loyalty program. A loyalty program is also a great way to increase purchase frequency because it’s going to motivate customers to purchase more often to earn those valuable rewards. This creates two-way value. Your customers get more value each time they shop and you get repeat business.
Most loyalty programs fall into one of four categories:
You got points
Tiered
Social media
And paid programs
Examples of companies that utilise these successfully are Starbucks rewards and Sephora beauty insider rewards.
You can encourage customers to sign up by giving them an instant reward when they create an account with you.
To build a successful loyalty program, you need to have perks that your customers can avail of, that entices them to join and be active members of your loyalty program.
For example, if you know your customers are interested in football you can get tickets for upcoming games, or if they are interested in getting in shape, you can team up with a gym or a local trainer, to get a few free classes with a personal trainer to give away. This will also benefit the trainer as it's a way for him to show more potential clients why they should choose to work with him.
How to measure your customer retention?
Once you start executing these strategies, you want to track if they are actually working.
Here’s how:
You can measure how healthy your customer retention is with two metrics:
Repeat customer rate
Average order value
But the bottom line to improving your customer retention rate is understanding your metrics, knowing which numbers to focus on and how to measure them.
With that in mind let’s dive into repeat customer rate head-first.
Repeat customer rate.
Measuring your repeat customer rate is the key way to measure how well your customer retention strategy is working.
How to calculate your repeat customer rate?
By taking the number of customers that purchased more than once
/ by the number of unique customers.
Make sure you are only counting within the last year (365 recent days).
Your average order value.
Your average order value is the second metric you want to look at. This metric refers to the average amount a customer is going to spend per transaction.
How to calculate your average order value?
Just take your yearly revenue
/ number of orders (sales) your store processed.
Increasing the average order value maximises your retention strategy effort.
The last metric I want to share with you is customer value.
What is customer value?
Customer value is the ultimate goal of retention marketing because it helps you understand how much each of your customers is actually worth.
How to calculate your customer value?
Purchase frequency x average order value = Customer value.
Final words.
Now you have the tools to get you started on creating loyal customers. Remember, loyal customers, are your best salespeople and business asset. They cost less and earn more because they already know your brand and appreciate the true value of your product and service.
Crafting meaningful, human connections with your customers is the most enriching part of owning a business. So, I hope you use these tools, not only to increase your revenue but to build your relationship with your customers as well.
What better way to build customer retention than offering your customers a truly unique in-store shopping experience. Does allowing your customers to design garments, pick fabrics and get perfect fits sound like something that would keep them coming back for more? The RJ MTM System will deliver an experience to your customers which makes them the creator of their garments. Creating their own clothing results in a greater emotional connection with the experience and they will have your brand to thank for this. Interested in seeing this for yourself? Take a Visual Tour with me. Find out how your store and brand can wow customers, keep them coming back for more products and do both of these things by lowering your monthly inventory costs by up to 50%! All you need to do is to send an email to Frank at info@rjmtm.com, telling him briefly about your business and a date and time that works best for him to call you. A no strings attached chit-chat to find out your business can be transformed into a Menswear super-powered temple.
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Cheers,
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