A strong customer retention rate makes running your business cost-effective and efficient, says Registered Chartered Accounting firm Drumm Nevatt & Associates.
According to a report published by Harvard Business Review, onboarding a new customer is anywhere between 5x and 25x more expensive than retaining a customer you already have.
“Your customer retention rate is the percentage of customers you’re maintaining versus the portion that you’re losing,” says Craig Nevatt, Director at Drumm Nevatt & Associates.
To calculate your customer retention rate, take the total number of customers you have at the end of a period and take away the number of new customers obtained during that period. Then divide that number by the customers you started with.
But how can you improve customer retention? Of course, the obvious answer is to improve your service or products. But there are additional, perhaps unexpected, ways you can increase your customer retention rate and strengthen the bottom line for your business.
If you don’t know how your customers feel about your products and services, you won’t be able to provide them with better ones. The best way to find out is to implement ways to get customer feedback. “When you know how customers feel and what they like and dislike, you can identify and adjust your approach and better meet their needs,” advises Craig.
Just because someone has brought your product or service doesn’t mean you should stop marketing to them. If you aren’t implementing a marketing strategy that maintains an active presence in your customer’s minds, they will most likely not remember you. You can do this via social media, email newsletters, giveaways etc.
In CallMiner’s 2020 report on Customer Churn, the top factor in low customer retention is customers who feel poorly treated by businesses but who would prefer to stay loyal if they received a better customer experience.
All it takes is one less-than-stellar experience or an opportune meeting with a competitor for your customers to make the switch.
Customer retention can be achieved through measures as simple as setting up a loyalty programme which sends bonus gifts at significant intervals or grandfathering-in prices when rates increase. Make sure customers know how much you value them by thanking them and acknowledging that they’re valuable customers.
“When you track your customer retention rate, you can measure the effectiveness of your sales and service efforts as well,” comments Craig.
Whilst increasing retention rates is rarely an overnight success, if you’re not actively seeking options to improve customer retention, you may miss out on some simple solutions.
Contact Drumm Nevatt & Associates for all your business development, bookkeeping and accounting needs.
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