It’s difficult to say whether a recession is merely looming or already inside the house, rummaging around the kitchen cabinets for the last box of Girl Scout cookies, but operationally there’s never been a better time to prioritize retaining customers you’ve already worked hard (and often paid!) to acquire. Beyond the obvious points that it’s often cheaper to retain customers than to find new ones, this notion that retention is worth investment is backed up over and over again—most commonly quantified by this 20-year-old statistic from Bain that suggests that “a 5% increase in customer retention produces more than a 25% increase in profit.”
In the grand tradition of lists on the internet, here are seven ways to try to boost that retention number and keep your CFO feeling, if not happy, at least slightly less glum.
#1 - Good Customer Experience Is A Good Thing (™)
They say that being nice is free, but offering good customer service should be the first step in any retention strategy. Make sure that you’re available, responsive, pleasant, and helpful—and people will appreciate it, you, and your brand and more importantly, they’ll want to come back. It’s worth remembering that customers might put up with a less-than-stellar experience if they have no options. When you’re the only pie shop in town everyone can just suck it up and settle for pumpkin five days in a row, but there are *very* few situations where the customers we’re talking about truly have no alternatives—so make sure they feel good. It really helps!
How much does it help? According to Gorgias, repeat customers generate 300% more revenue than first-time customers (which, duh?) and according to PWC “One in three consumers (32%) say they will walk away from a brand they love after just one bad experience.” So providing not bad experiences is a great way to increase revenue. Go figure!
The data gets even more interesting when you look at expectations by generation. According to Coveo, “Younger generations prefer self-service. 40% of Gen Z said they will desert a brand if they can’t resolve an issue on their own. But overcommitting to call deflection is a mistake, because more than 52% of Baby Boomers will drop a brand if they can’t speak to a person.” All of this suggests that helpful, multi-channel customer support is a good idea if the goal is keeping customers happy.
#2 - Easy Returns Keep Customers Returning
This point goes hand in hand with the one above about the value of good CX, but stands alone as a separate point because of the specificity of the problem and the solution. It’s somewhat counterintuitive to think about returns as driving repeat revenue, but here’s the general pitch. First, pleasant returns processes create good customer experiences, which we already know create good, happy customers. According to a McKinsey Study, “33 percent of repeat consumers would choose to abandon a retailer if they had a ‘difficult’ returns experience.” This is important because we must be in a constant state of retainment; we can’t just retain a customer once. Second, by employing something like Loop Returns, merchants can pivot those returns into exchanges, re-capturing an average 40% of revenue, and more importantly, making that sale.
#3 - Subscriptions Are Sticky
There’s a good reason that literally everything you go to buy on Amazon has a big ol’ Subscribe and Save button on it (which is incidentally how I ended up with a quarterly subscription to 64-oz bottles of Cholula). Customers love subscriptions, and almost by definition stick around for multiple purchases when they enter the program. I could quote a bunch of studies here but I’m going to respect your intelligence and we can all agree that if there’s an opportunity to offer a subscription, it’s likely worth taking.
One of the principal advantages of using a platform like Recharge is the built-in dunning to address, divert, and flag cancellations. Non-subscription customers get to drop your business without so much as a heads-up (as is their right), but the fact that you as a consumer actively need to cancel a subscription both provides enough friction to just leave it be (hence, the Cholula) and also a touch point for brands to pull out their great customer service.
Broad studies of the retention effect of subscriptions are slim to none, but the world is full of case studies showing that subscriptions are sticky, and if your product lifecycle supports them, they’re likely a good idea.
#4 - New Product Launches Keep Customers Coming Back for More
There are no studies that we could find to back this tactic up, but we’ve seen it borne out over and over again. One of the primary drivers of repeat purchases is giving customers a reason to purchase–and one of the best reasons to make a purchase is when there’s something new to buy. This is why clothes come in seasons (I mean, I guess seasons also come in seasons, but you know what I mean) and why brands like Darn Tough put out new colors of socks all the time when a simple person only really needs…I dunno, three–but it’s worth saying nonetheless. Giving customers who are already enamored with your brand a new something to buy is a great way to keep them close.
#5 - Community Keeps Customers Close & Connected
Speaking of keeping folks close to the brand: investing in community has got to be one of the buzziest ideas for digital brands now and is also one that just makes sense. Building out community–be it as a Facebook group, a Circle community, or on a forum platform like Vanilla–gives your fans a place to talk to each other and gives you, really importantly, direct access to those conversations. It’s a great way to offer VIP perks to keep good customers happy and it’s a great way to head off potential customer service issues by building trust and communication directly with your customers. As a sword, it cuts 9 ways to Sunday, and unless you’re selling something utterly without emotional attachment (like, say, tires), building community is a fabulous way to keep customers close and engaged with your brand.
#6 - Loyalty Programs Work
There’s an aspect to loyalty programs that feels like a punch card at the sandwich shop–do punch cards really bring people back? Like, you try to remember it when you’re renting that DVD or buying that hoagie, but is it really changing your behavior? It’s hard to say, but over and over again loyalty programs prove themselves as a great retention strategy. Forrester shows that “of consumers who feel appreciated, 88% plan to stay with the brand, 83% plan to spend more with the brand, and 87% will advocate for the brand.” And loyalty points, somewhat base though they may be, are a great way to show that a customer is appreciated. Moreover–and here’s the driver that really pushes this engine–earned points have to be spent, and they become a strong alternative to promotion as tactics to encourage the second or even third sale. As a bonus, programs like Smile and Loyalty Lion also include referral modules, giving them some oomph on the acquisition side as well–hopefully, in the best circumstances, acting like a flywheel to bring new customers on and then giving them incentives to both stay customers and invite their friends.
#7 - Email Is (Almost) Everything
For serious, email is really important. You’re probably gonna wanna dial that sucker in. This one really seems like it deserves its own post. Stay tuned for that one. We’ll keep you coming back more. Like you with your customers.
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