It’s no coincidence that some of the most popular and successful brands in the world have excellent customer retention strategies. A better customer retention strategy means more of your former customers will come back to make future purchases – or continue subscribing – leading to increased revenue, better reviews, more word-of-mouth momentum, and greater stability.
So what is it that separates the best companies and worst companies, in terms of customer retention?
Customer Retention as a Top Priority
First, the best brands treat customer retention as their top priority, rather than as an afterthought. Oftentimes, entrepreneurs and new business owners focus on making their business as appealing as possible and reaching new audiences quickly with novel marketing and advertising campaigns.
While this is important, and it’s capable of helping a business attract ample new customers, it’s ineffective if you don’t have a solid customer retention strategy in place.
As an illustrative example, consider which of these scenarios is better. Would your business rather attract 1,000 new customers per month while losing 950 customers per month or attract 500 customers per month while only losing 100 customers per month?
Scenario A has much better customer acquisition rates nominally, but the net customer gain is functionally 50 customers per month, instead of the 400 granted by scenario B. Therefore, scenario B is definitively better.
Measurement and Analysis
The best companies also know the importance of measurement and analysis. It’s not enough to merely practice tactics that increase customer retention; you also have to measure your customer retention rates and determine how they change over time.
This is important for several reasons:
- Not all customer retention strategies are guaranteed to work. Just because you think something will increase customer retention doesn’t mean it will. For example, you might hypothesize that reducing a monthly subscription cost by $5 per month will make customers more likely to stick with your brand – but that’s not necessarily the case. Measuring and analyzing your results will be able to demonstrably prove or disprove its effectiveness – and help you decide whether to keep the tactic in place.
- Experiments lead to better results. AB testing and other types of experiments are the best way to determine which variables are most important for influencing customer behavior. Instead of picking a strategy and sticking to it indefinitely, the best brands try out many different approaches simultaneously and keep the ones that work.
- Value and worth can be proven. It’s often stated that customer retention is less expensive and offers a better overall return than customer acquisition. But can you prove this is the case? The best brands can because they measure and analyze their performance in many different ways.
Accordingly, most successful brands have a customer retention feedback loop in place. They actively measure customer attitudes with short surveys, they aggressively measure customer subscriptions and purchases, and they have an analytics approach in place to help them crunch these numbers on a regular basis.
Flexibility and Adaptability
Customer retention in 2021 is hardly the same animal as customer retention in, say, 1991. That’s because the best brands have let the pack in flexibly adapting to new circumstances – and they’ve introduced countless interesting new ideas. They’re willing to adapt with the times, rather than sticking to customer retention tactics that no longer work.
Generally, these new adaptations come from one of three key areas:
- New technology. New technology is constantly developing. Harnessed properly, this technology can allow a business to engage with their customers in new ways or give the business the information or resources it needs to make its core products and services better. For example, you might develop a new mobile app that makes it easier for customers to track their purchases and bank loyalty points. Or your might develop a new core feature that makes your product more reliable and more useful, making your existing customers even more invested.
- Customer feedback. Customer feedback is everything to the most successful brands. They’re constantly issuing customer surveys and listening to customer ideas as a source of inspiration. Many times, your customers will be willing to tell you exactly what they want – and exactly what will keep them as paying customers.
- Competitor ideas. It’s also common for the top brands in a given niche to research their competition and see which strategies their top competitors are using. If it seems to be working well, they might copy or tweak the strategy for themselves – or devise something that’s even better.
Customer retention isn’t always straightforward, and even the best brands occasionally slip. However, if you make customer retention your top priority and you’re willing to do research and change things up, you could put your business in a much better position to retain its customers.
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