Attracting new customers and clients is one of the biggest thrills for businesses. Seeing your marketing efforts pay off and your sales leaders secure new business is a sure sign of growth and success. But why aren’t these clients staying?
Why put all this time, effort and resources into pushing your product or service to new people if none of them stay? Let’s answer these questions, and look at how you can improve customer retention.
Why customer retention is important
Customer retention is important because it provides a solid foundation for revenue. Meeting targets isn’t reliant on your sales team desperately securing sales if you already have those few loyal customers already. This also means that you can focus more effort on your sales team nurturing leads methodically, a process which may take slightly longer, but secures happier and more loyal customers in turn. Retaining customers is also important because it helps you to build up a reputation for providing a good service. If you’re retaining customers, it’s probably because they’re happy with what they’re getting from you. Encouraging repeat customers to leave reviews, or offering referral incentives can be a great way to use your existing customers to your benefit.
What is a good client retention rate?
A good client retention rate varies massively based on your industry, product and/or service. However, in most cases, a retention rate anywhere between 35% - 84% is considered pretty good. This is a very broad range but that is because retention rates vary massively based on industry and intent.
Consider this: if you’re offering a professional service such as marketing, you’d hope that your work is good enough for the client to make an easy decision to continue working with you pretty much every time; this is something you have a large amount of control over. If you’re a restaurant owner, even if the service you provide is really good and your customer has a near-perfect experience, it’s still likely they’ll try a different restaurant next time.
Of course, this isn’t always the case, and there are still ways to improve retention (like offering incentives), but this is why different industries naturally have different rates.
The challenges of customer retention
Customer retention efforts come with a number of challenges. Trying to retain your customers is often a fruitless endeavour, which can be demoralising as well as a waste of resources. Customers often look for solutions elsewhere for reasons completely out of your control, and it isn’t always easy to determine which customers are a lost cause from the beginning.
It can also be difficult for managers to juggle between focusing on customer acquisition or retention. Of course, a balance of both is ideal, but with limiting budgets and harsh targets to meet, how do you find the sweet spot? If you are a business owner, consider discussing with your managers the best ways to balance resources so that you can promote new business, but also nurture your existing clients into long term happy customers.
What effects does a lack of customer retention have on businesses?
A lack of customer retention can be damaging in terms of public image and perception. Low retention rates likely mean there are some elements of your product or service which aren’t meeting their needs. This could lead to bad reviews, but also leads to low recommendations and just general poor image.
Another effect of low customer retention is that all of your business is reliant on lots of consistent new leads being converted to new customers. This leads to an increase in financial pressure on sales teams which takes their focus away from bringing in high quality sales, and puts it on simply getting people through the door. Overall, this is going to damage the environment within your business, likely increasing stress and lowering productivity.
Identifying reasons why you aren’t retaining customers
So let’s have a look at why. Why are you not retaining customers? What can you do about it? Below are a few reasons you might not be retaining, and some ways to amend this:
- You’re not connecting with your customers - Customers want to feel cared about beyond just receiving a good product or service. They want to feel as though they are valued, and that they’re not just a source of income for you.
Consider what industry you work in and determine what valuing customers looks like for you. You could offer loyalty deals and discounts; or perhaps, share bespoke information based on what your data shows each customer is looking for specifically. This personal touch can be a great way to impress customers quickly. Well trained sales teams also know how to develop a personal connection with customers (on behalf of your business), from the very first conversation. - Poor customer service - 81% of satisfied customers are more likely to spend money with you again if they have a positive experience. This statistic alone tells us one thing: keep customers happy at all costs. Poor customer service could be failing to meet promised expectations, failure to quickly resolve issues, and bad communication in general.
To amend poor customer service, consider investing in your customer service team through training, and ensure that they have all the tools and programs required to understand your customer base and quickly resolve queries. - Inconsistent customer experience - Customers expect an experience which is consistent from beginning to end, across all points of contact. They want you as the solution provider to understand what they want early on, and maintain this information moving forward.
This usually starts with sales, who need to be effective at understanding each customer as an individual, and communicating this information down the sales funnel. Sales training can be a reliable way to ensure that your sales team has these skills, but make sure you have a company-wide communication strategy which sees everybody on the same wavelength. - High competition - No matter what industry you are in, there will always be fierce competition. You need to show your customers that you are more valuable than any other provider, and you also need to remind them.
Of course, these reminders can’t just be “don’t forget how great we are,” but they need to be subtle ways to keep customers sweet. You could promote the most unique features of what you sell, or make an effort to ensure your customers understand all of the features and benefits of your solution to their problem. This will keep them on side, and eliminate their need to look elsewhere.
Retaining customers and clients isn’t easy for anybody. But dedicating the resources towards this cause could yield game-changing results for your business. Make sure to invest in customer service, ensuring a positive journey from start to finish. A journey which they’ll hopefully restart.
If you want to learn more about how Mentor Group can help your business adopt a revenue-centric strategy, and transform the revenue potential of your organisation in the process, visit our Contact Us Page or reach out directly to info@mentorgroup.com