Benefits of Customer Retention Optimization (+ Tips for Retaining Customers Online)

Let’s assume your business only depends on sales from new customers.

So what do you do? You work hard to bring traffic to your site. You spend money to get all the cold leads coming. Again. And again.

Once they buy something, you forget all about them. You move on to finding more cold customers.

A lot of businesses online survive on this model. But it’s like running against the wind. Eventually, you’ll run out of steam because it never ever gets easier.

Now let’s look at it another way. Here’s what you could do instead. 

Right after that first sale, you look after the customer. You make sure he has a positive experience.

In short, you make him happy.

What do you think will happen next time he needs something that you sell? He’ll think of you first. And he’ll buy from you without any hesitation.

That’s what happens when you work on customer retention.

But what does this have to do with how you run your business?

Let me put it this way:

Getting the first sale (customer acquisition) is an indispensable part of the sales funnel. But it’s not the end. It’s the start of a relationship.

You and your team have worked hard to get the first sale. So when a prospect finally says “yes” to you, it’s only logical that you treat that transaction with a high level of respect.

How? You look after that person. Regard that sale not as the end of the funnel but the start of a long-lasting relationship.

Makes sense, right?

And yet many companies overlook this part of the customer experience.

Just look at the sales funnel that many of us preach. Where does it stop? When the sale happens. What happens after that? Do you put a sudden halt to the connection that you’ve worked so hard to get?

Isn’t it more logical to keep working on it, cementing the bond and growing the trust?

Am I right or am I right?

This is what you call customer retention optimization. It means you focus on keeping customers within your ecosystem so that they become repeat buyers.

You’re probably thinking that it’s not your priority. That you’re quite good at acquiring traffic and you’d like to focus your energy on that.

Here’s what I say.

The benefits of customer retention optimization are so many that you can’t ignore it. Your business will grow quicker online if you make it part of your marketing strategy.

That’s what we’re going to talk about today. Let’s talk about the importance of customer retention in online commerce.

Short on time? Here are the quick links:

The Importance of Customer Retention Optimization

Here are six reasons why retaining customers is a great business strategy.

Paves the way for customer loyalty

Do you remember the first time you saw the Dollar Shave Club advertisement? When it went viral, it got over 12,000 orders in the first 48 hours. But the company’s story doesn’t stop there. Sure. They’re great at customer acquisition. But they also know the importance of customer loyalty. They know that it is a key factor to growth. They know this so well that their 1.5 million subscriber base has steady positive opinions of the company. 

But customer loyalty doesn’t happen overnight. As Jeffrey Gitomer says, “You don’t earn loyalty in a day. You earn loyalty day-by-day.” It only happens when a customer is happy and has had a positive buying experience.

And what is so important about it?

Customer loyalty brings you repeat customers. And if you want to thrive online, you want repeat buyers. This is how you get Apple diehards who queue up outside a store. Or Amazon customers who think of the company first before going to other shops. That’s what customer loyalty does.

So work on making your customers feel valued. Let them know they’ve made the right decision to trust your business.

Gives your brand a wider reach

Nielsen research study shows that 83% of respondents in 60 countries trust recommendations from friends and family. But customers don’t recommend you just because you have a sharing button on your page. They only recommend when they’ve had a good experience with you.

Airbnb understands this well. Customer referrals are the backbone of their business. It’s how they increased their number of guest arrivals from 21,000 in 2009 to 80,000,000 in 2016.

Why? Because social proof is a powerful motivator. When your customers are pleased with your service, they become advocates of your brand. You know what this means? That you have another advertising department in your company. An advertising department that can move customers down your funnel quicker than any of your in-house staff could.

As you can see, it’s not something to take lightly. If you want business growth, then having loyal customers who are also your advocates is a fast way to get there. Work on customer retention and you’ll build this precious fanbase.

Gives a better ROI

A research study by the Harvard business school showed that increasing customer retention rates by only 5% can increase profits by 25% to 95%.

Here’s what Reichheld  & Schefter say:

At the beginning of a relationship, the outlays needed to acquire a customer are often considerably higher in e-commerce… In apparel e-tailing, for example, new customers cost 20% to 40% more… That means that the losses in the early stages of relationships are larger. In future years, though, profit growth accelerates at an even faster rate. What’s more. These customers tend to spend more over time. The longer they are with you, the more they spend on your products and services.

It costs money for businesses to get new customers. So why stop with one sale? Focus on retaining these current customers. They won’t only keep buying from you, they tend to spend more money on your business, too.

Helps you understand customers better

The smell of freshly mowed grass. It takes us back to many memorable summers. But did you know that this is the smell of a chemical that plants emit to warn other plants in the area?

The signal helps plants in the vicinity to prepare for an “attack”. One plant’s “feedback” becomes another plant’s impetus to protect itself.

If feedback is important for plants to thrive, it’s even more important for you as a business. And where do you get feedback? From customers.

But the problem is that new customers rarely volunteer to give their opinions (unless they have a very negative experience). So you’ll have to seek it. And do you know who is more likely to give you feedback? Repeat customers.

They’re already invested in you. They know you. They trust you. So you only have to nudge them a little.

And what’s so important about feedback? It’s a wealth of information showing you what matters most to the people you serve. It’s valuable data you can never get just from plucking it out of your team’s heads. It’s raw, real and true to their needs. It tells you what they need. How best to attract them. What products or services to put in front of them.

When you have this information, you can easily serve and support your customers so that they are more likely to keep buying your services or products.

Repeat customers spend more

Can you remember the first time you prepared to jump into a pool? Do you remember the panic in your body? Legs shaking. Heart beating. Brain screaming. Then you made a half-hearted jump. It wasn’t too bad, you found out. So you tried it again. And again. And again. And the more you tried, the more joy and excitement replaced the fear.

A website visitor’s first purchase from you is much like this. It’s coupled with fear, inhibitions and uncertainties. And often, to get them to make that leap requires a lot of resources from you — a lot of coaxing, reassurance and money.

But once they make that first purchase. Their initial fear lessens. If they have a good experience, they might buy again. The more they buy from you, the more familiar they become with your brand. Until a time arrives when it becomes second nature for them to think of you whenever they need a product you sell. That’s because you’ve established trust. And they don’t have to go through the big fear that comes with buying from an online store for the first time.

Don’t believe me?

Forget about your customers for one moment. and think of your own buying habits. Don’t you buy the same brand? Or from the same online store? Or regularly read the same blogs?

Your customers are no different. Nurture them after that first purchase. Build a relationship with them and it becomes easier for them to say yes to all your other offers.

It’s low hanging fruit that will drive you more sales

I’m not saying that you should put customer acquisition on the sidelines. What I’m saying is that we should never underestimate the value of customer retention. I come from an SEO background and I see a lot of my peers focus too much on acquiring sales through traffic. Yet they’re unaware that they’re already sitting on a gold mine because of the current customers they have.

Let me explain this further.

Let’s say you have a well-targeted new visitor to your website. You know what the typical conversion rate is for eCommerce sites? Five to twenty percent! But do you know what the conversion is for recurring customers? Sixty to seventy percent!

You can convert new customers all you want. If you have a great conversion funnel and strategy, you will. But looking at these statistics, the smart thing to do is not only to work on customer acquisition but also to promote customer loyalty through customer retention optimization.

Where do you start and how do you improve customer retention?

So you’re all hyped-up. You’re now convinced of the benefits of customer retention. And you’re ready to build a strategy to retain customers online. But how do you do it?

That’s a whole new post. But in a nutshell, it has a lot to do with improving your relationship with your customers. It’s like cultivating a friendship. It takes time. It requires regularly checking in. It means engaging them when they’re on your site and even when they’re not.

Here are some things you can incorporate in your strategy:

  1. Don’t just get feedback right after the purchase. Regularly ask customers what they think about your products after using it for a week or two (and even more). And don’t just leave the answers in a Google sheet. Use this feedback to improve customer retention.
  2. Be willing to invest in activities that are not scalable but make your customers feel valued.
  3. Focus on keeping your existing customers feel that they’re part of your community.
  4. Engage with customers even when they’re not on your site. For instance, on social media.
  5. Have a robust and active email communication strategy. Regularly get in touch with them so that even when they’re not looking for something specific, they’re still aware of your business.
  6. Invite them to take part in a company project or event if possible.
  7. Focus on training your customer service team. They’re the face of your company when dealing with existing customers. And they play a vital role in making customers feel happy and valued.

Let’s Recap

If you want exponential growth in your business, give equal attention to both customer acquisition and customer retention. You’ve already completed the difficult task of the first sale. So getting them to buy from you again becomes easier. But that’s not the only benefit of customer retention. It also

  • Paves the way for customer loyalty
  • Gives your brand a wider reach
  • Gives better ROI
  • Helps you understand customers better
  • Repeat customers spend more money
  • Low-hanging fruit for more revenue
Author: Kurt Philip

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