Customer Retention: What, Why and How?

No matter the industry, customer retention is a definitive metric in understanding the success, stability and growth predictably of any business.

a year ago
3 min read

With the effort, time and money that every business spends on acquiring new users- ensuring that each acquired user is hooked to your product/ service for life becomes even more important.

The "mainstay" of every business : Customer Retention.

Effective customer retention strategies ensure that the life-cycle of every acquired user can be as long as YOU want it to be. In other words, Customer retention measures how long a business can keep its existing customers, active.

The very first interaction with a customer is usually the starting point of their relationship with the brand, and customer retention metrics refer to all of the subsequent interactions that take place thereafter.

Retention is about identifying and maximising loyal customers, enhancing customer satisfaction, establishing a repurchase behaviour and ensuring overall brand loyalty.

Customer satisfaction improves retention.

Organisations can analyse various components of customer success and experience based on their customer retention data. This helps businesses to understand their customer’s stickiness and their probability to stay on. In an instance of a customer drop down, customer retention data also helps in identifying the root cause and adjusting a product offering accordingly.

Retaining a customer is also more cost effective.

It is often less expensive to retain a customer than to attract a new one, considering the cost of marketing and selling to a new customer can be pretty expensive.

In fact, retention has also proven to support new user acquisitions in the long run, since they may also refer other customers to the business. For example, word-of-mouth marketing and brand ambassadorship/loyalty are more likely to occur with actively engaged and retained customers. By focusing on customer retention, businesses can improve their bottom line and build a more sustainable customer base.

Why does customer retention matter?

Organisations that focus solely on expanding their customer base with new user acquisitions instead of engaging and retaining their existing customers are at a higher risk of losing repeat customers. Holding on to existing customers and transitioning them into loyal, long term, recurring users is just as necessary as new acquisitions, if not more.

Existing customers are more valuable to a business because they are more likely to make repeat purchases.

Annexcloud data reveals:

  1. Almost 65% of a company’s revenue comes from repeat, retained customers.
  2. Further, a 5% increase in retention results in a bottom line increase of 25%-40%- a much more significant impact than acquiring new users.
Why does customer retention matter?

Strategies for better customer retention

We've covered the 'what' and the 'why' to understand the importance of retaining existing users, now let's look at some of the effective ways of retention that we think you should consider. These include but are not limited to-

  • Personalisation- From interactions at various stages of a customer’s individual journey, to discounts and offers, personalising the experience can significantly improve the experience and result in a sticky customer.
  • Incentivize and Gamify loyalty- This would increase switching costs and hence increase repeat customers. Gamification also helps build a strong flow for users to stay engaged, active and hooked to your product.
  • Get Feedback and take action on it- Customer experience is the heart of any product. With a focused retention effort which is tailored for customer satisfaction, customers will know that they are being heard and will always be valued, at all stages of your journey.
Strategies for customer retention

All these together can significantly improve the overall retention metrics of a business- resulting in a happy, retained user who trusts you and keeps coming back for repeat purchases, up-sells, and cross-sells.

That’s it for now! We will dive deep into these strategies and more in our further posts to help you stay on top of your user retention and experience.

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