In the eternal quest for revenue growth and growth, it is often too familiar for companies to ignore the opportunity of retaining existing customers. The company loses an average of 20% of its customers each year. In some industries, this “churn rate” is closer to 80%! At this level, the loss of customers is critical. Few organizations seem ready to invest the resources needed to correct the problem.
- 1 The challenge of the Customer Value
- 2 A Definition of Customer Value
- 3 How to Measure Customer Retention?
- 4 How to Increase Customer Retention Rate?
- 5 Points to Remember for Customer Value
The challenge of the Customer Value
Historically, marketing teams have been investing in acquiring new customers. Conventional belief tends to say that the most effective approach is to reach more targets to sell more. In fact, Customer Value is a faster and more efficient way of developing revenue and the customer portfolio as part of upselling.
According to a study, 80% of a company’s future profits come from 20% of existing customers. It indicates that the probability of selling to an existing customer is between 60 and 70%, against 5 to 20% for new prospects. This Rule is Know and The Pareto Principle.
In other words, it is always easier to sell to a stakeholder with whom you have already started a relationship. Also, the profitability of a long relationship with a customer increases over time. Attempting to increase Customer Value is a beneficial mission for any business.
A Definition of Customer Value
Customer retention or “customer value” refers to all actions taken by companies to minimize the loss of existing business. These efforts are often manifested by loyalty programs and additional services offered to existing customers. Maintaining a relationship throughout a life cycle is essential, but it’s important to remember that the retention process begins with the customer’s first contact with the company.
How to Measure Customer Retention?
Companies can calculate their retention rate using a simple formula:
(CF-CN) / CD = Retention rate where:
CF = number of clients at the end of the period
CN = number of new clients acquired during the period
CD = number of clients at the beginning of the period.
Let’s examine this formula in action. Suppose a company has 200 customers. During a given period, it loses 20 customers but acquires 40, ultimately 220 customers. Their retention rate is calculated as follows: (220-40) / 200 = 0.9.
The retention rate for the given period is therefore 90%.
This is an important indicator to follow for any company wishing to improve its profits over time. Additional critical concepts related to Customer Value include:
- The cost of retention of the client. Amount spent on retention efforts / Number of clients retained.
- The risk of abandonment. The best way to keep customers is to identify the reasons that might motivate them to leave.
- Customer value. Because you have a limited budget, it’s important to choose which customers to prioritize your retention efforts through segmentation.
How to Increase Customer Retention Rate?
No matter how you measure the customer value and loyalty rate, the most crucial tactic in customer retention is to keep customers satisfied. To do this, you must understand the behavior, tastes, and concerns of your customers. This way you will be able to create messages and products tailored to their needs.
Social media analytics as part of an insight-driven marketing strategy provides you with information about behaviors and expectations and lets you put your customers’ needs at the center of your Customer Value strategy. Here are some strategies that will help you build customer loyalty:
Active monitoring of feedback and discussion about your brand’s products and services allows you to understand customer expectations better. Consumer feedback is essential to understanding your target audiences. The information you collect will be used to segment your potential customers and offer the different groups a more personalized experience.
- By monitoring comments and conversations online
- By analyzing feelings of mentions and segmenting insights by socio-demographic criteria
- Creating alerts and recurring reports when peaks occur in your brand and product listings.
A large chain of Spanish hotels wanted to find ways to improve customer service. Through social media monitoring, they were able to detect critical behavioral trends among their target audience, one of which, to management’s surprise, concerned specific expectations about restoration. They had no idea how outstanding the quality and appearance of their food was for the customer experience. After collecting a feed of Instagram posts about catering in hotels, the brand has created a new innovative gastronomic offer, tailored to different segments of their customers.
2. Build a community
A customer community is a place where your customers can share tips and experiences. Developing a community also allows you to take part in the conversation once the service is delivered in a different environment than the customer relationship service. These communities can be encouraged, developed and animated by brands either via groups on specific social networks or through their dedicated channels such as forums.
- By identifying online channels where conversations naturally occur
- Using “classification tags” to identify and detect relevant topics and subtopics
- By identifying the most active users in each community
- By measuring the degree of influence and interaction of the most active customers
A telecommunications company in the US is trying to improve customer service in the critical stages of the customer journey: subscription, termination, change of offer, etc. The company uses social listening to analyze its social networks and its forums and understand how its competitors act on customer relations and loyalty. The company can efficiently collect relevant information through the rigorous management of “classification tags.” Following the primary concerns of their customers, the company was able to:
Anticipate potential problems and claims before they reach and develop with customer services.
3. Improve the customer experience
The customer experience plays a vital role in customer repeat and loyalty rates. Some studies suggest that 68% of customers leave because of poor service and lousy customer service relationships.
There are two ways to improve the customer experience and overall satisfaction, which will encourage repeated re-shopping and brand loyalty:
The first is to make it easier to take into account the comments of existing customers to exploit them. To do this, support teams must be accessible and knowledgeable to solve problems and provide the correct information and answers. If you want to improve the retention rate of the customers, they must first be able to contact you easily. Customers appreciate the fast and convenient support.
Then try to create offers that directly promote customer retention, such as a Customer Value program, segmented by type and seniority. The goal is to provide additional benefits to loyal customers, identify them, officially recognize them and value them. A loyalty program can encourage repeat purchases by making your customers feel valued.
- By identifying the main factors of satisfaction and dissatisfaction and by analyzing the mentions and topics most discussed.
- By examining the feelings of the remarks (positive, negative or neutral) in real time to improve the time and quality of response.
- By creating personalized alerts and assigning mentions to the various teams to inform the organizations concerned.
A major insurance company wants to strengthen its relationship with its customers, which is why it has decided to support customer service with a tool that collects and analyzes consumer complaints and criticism. They use social listening to interpret the tone of the mentions in real time, then to transmit this information to the corresponding department to help them bring the best solutions to present to the customers.
Points to Remember for Customer Value
Attracting new customers is much more difficult and costly than building loyalty with existing customers. This is a fundamental principle of operational marketing, but all too often, many companies ignore it. In this post, we looked at some Social Media strategies that you can incorporate if you want your current customers to be satisfied and ready to make new purchases.
Remember that social listening can help you identify what customers expect from your business, and even why some of your old and loyal customers are no longer with you. Intelligent businesses use information collected from active social listening will help you retain your customers: increased brand loyalty, more word-of-mouth advertising, and better customer relationships and increase customer value for good.