As a business owner, one would never say that they’re okay with losing their existing customers to a competitor. In fact, it is nothing short of a nightmare. But, facts state that around 80% of the marketing resources are being spent on acquiring new customers by an average business.
In that sense, you must understand that the probability of selling to an existing customer is much easier than selling to a new one. Therefore, you need to focus more on customer retention, which is the most powerful marketing strategy for businesses’ growth.
Loyalty software for business, like Loyera, can help you focus more on repeat customers, which is not only beneficial for your business but also for your customers.
Why are businesses not focusing on customer retention?
If you have products and services that convert your visitors into first-time sales, put more money into advertising. Investing in ads can create a short-term increase in revenue.
Customer retention may seem less alluring because the path to retaining a customer isn’t as simple as acquiring a customer. Retaining your customers, unfortunately, can be slightly more challenging to measure and implement. However, it’s important because a little 5% lift in customer retention can boost your revenue by up to 95%. Just think!
How to set your customer retention criterion?
Take a look at your current customer base and build your retention strategy. With your customer base in mind, walk through the five most crucial retention metrics you should know. Here you go:
1. Know how many customers never return to make a purchase
The number of customers who never return to make another purchase gives you a sense that your customers are not-so-engaged with your brand.
The percentage of customers who discontinue purchasing from your brand is often referred to as customer churn rate. It’s nearly impossible to have a very low customer churn rate as it is but obvious that you lose some customers over a period.
However, you cannot build a customer retention strategy if your customers are not buying from your store. What else? If this number goes over 10%, it simply means that customers are not emotionally attached to your brand.
To improve performance and reduce customer churning rate, you can have a loyalty software for business that will create a switching barrier with rewards. When customers feel like there is nothing to lose while shopping with your store, they’ve got a reason to purchase from your store again.
2. Determine what percentage of customers buy from you more than once
Once you understand the customer churn rate, the next step is to have a good grasp of your repeat purchase rate.
Often referred to as repeat purchase rate, it determines the percentage of customers who have made more than one purchase at your store. If this rate lies somewhere between 20 to 40%, it is considered as a good repeat purchase rate, which varies from industry to industry.
Around 54% of repeat customers are more likely to make another purchase. When an existing customer has already been acquired, there will be no additional acquisition cost each time they make a purchase. That way, this makes it more profitable for your business with each order.
To improve the repeat purchase rate, you can add value to every customer’s shopping experience with reward points. If customers feel like they have something to gain with each purchase, they will get motivated and return to place another order.
3. Evaluate how much customers spend on each purchase
If customers are making multiple purchases from you, gauge how much each customer spends when they make a purchase from your store. This is known as an average order value.
The average amount of money customers spend on each purchase is simply considered as the customers’ average order value. If we take repeat customers as an example, they spend more than one-time purchase counterparts. Moreover, this makes them a highly important part of your business growth strategy.
The more your average customer spends, the less you will need to spend to acquire new customers to earn the same profit. To increase customers’ average order value, you can simply offer a VIP loyalty software program for retail. This program will help you encourage your best customers to engage in valuable activities.
When your customers have the opportunity to get exclusive perks and rewards, they get motivated to spend more to access them.
4. Examine how much your customers spend with your brand overall
Calculating the average order value is not enough to paint a full retention picture. You need to layer it with the number of times a customer purchases from your store. This will help you understand the total value of your customer to your brand over time, which is often referred to as customer lifetime value.
Showing your customers a little love is essential, as retaining a customer is trickier rather than acquiring a new one. When your customer lifetime value is close to your customers’ average order value, it means you’re not inviting the right customer that will help you grow your business sustainably. If the number is less, then you are paying just to acquire new customers, which is a troublesome situation.
With value-added marketing, you can build a shopping experience that extends the purchase. In fact, value-add marketing is a great way to build trust with new, existing, and prospective customers. If customers feel like you’ve invested a lot to offer them little moments between their purchases, you can keep your brand at the top of your customers’ minds when they purchase from your store.
5. Learn how many customers you’ve already retained
If you have already got a loyal group of customers, understand who they are and why they’ve purchased from your brand, it will help you unlock lots of great insights. Moreover, these insights will help you build your customer retention strategy.
A valuable way is to measure your overall customer retention rate, which helps you get an idea of how many customers are engaged and ready to buy with you.
The total percentage of customers that have stayed with you over time is simply known as the customer retention rate. Even a small lift in customer retention rate can increase your annual revenue by 95%.
Loyal customers who are committed to your brand are the best advocates and refer your brand to friends and family, which is why you need to focus on creating great shopping experience.
Creating an experience that makes customers feel valued and appreciated will simply improve your retention rate. If they don’t feel appreciated, they simply move to your competitors for shopping. Show your customers that you value your business and offer them a reward each time they engage with your brand in a meaningful way.
Putting all five tactics together
While there is a lot to look up, do that extra labour to go through, and calculate, It’s worth making an effort to build a customer retention baseline.
Every retention plan has to start somewhere, and retention metrics are the perfect way to start the creation of your overall customer retention strategy.
You can go with Loyera, which is a loyalty software for business that efficiently helps in managing your customer retention strategy.