Customer retention can be based on pricing strategies.
Customer retention is a concept that refers to the set of actions developed by a company to ensure that its buyers or users continue choosing its products or services . This is the strategy put in place in order to build loyalty.
The idea of retention refers to preventing someone or something from disappearing or leaving. Customers , meanwhile, are those who buy from a business or hire the services of a company or professional.
Therefore, whoever purchases an item marketed by a firm X becomes its customer. Retention aims to ensure that the same customer makes another purchase , preventing them from opting for a competitor's proposal or from not making any purchase.
Importance of customer retention
Various studies show the importance of customer retention. Surveys and research have shown that an existing customer spends more than a new customer and is much more likely to try a new or newly launched product.
On the other hand, it is known that it is more economical to retain buyers or users than to attract new ones . In other words: the investment for retention is lower than that needed for acquisition .
Stable customers also tend to show more loyalty in times of crisis. They also tend to recommend the brand to their family and friends, which is essential since the vast majority of people trust more in companies that are recommended to them by those close to them.
In short, it can be said that customer retention contributes to increasing profitability . Likewise, it is key to preserving cash flow.
Content marketing can be part of customer retention.
The strategies
There are multiple strategies that can be applied to increase customer satisfaction and achieve retention:
- Optimize customer service : Providing personalized attention and providing effective technical support are relevant issues. After-sales service must consider channels such as social networks, chatbots and virtual assistance in general.
- Implement loyalty programs : Rewards programs and loyalty cards help increase customer loyalty. In this sense, discounts and special promotions can be offered.
- Receive customer feedback : Empathy and active listening are needed to know and understand the needs and evaluations of buyers and users. Satisfaction surveys about the quality of the product or service can help define the best way to influence post-purchase behavior.
It is important to indicate that customer relationship management (CRM) software is a useful tool for developing these strategies. With its reminders and alarms, it can be used to establish effective communication. It also has tools for personalizing email marketing , makes it possible to segment customers and helps manage complaints and claims.
Customer retention aims to build long-term relationships.
Customer Retention Examples
Take the case of a shoe manufacturer. As part of its engagement strategies, it holds raffles among those who buy its new model and share a photograph wearing it on social networks and mentioning or tagging the company account.
Another example of an initiative that targets retention is the development of customer events . A beer brand can organize exclusive shows by famous artists, giving one ticket in exchange for five empty bottles or cans.
Post-sales monitoring can also integrate customer retention actions. A technology company that makes business software contacts its buyers a week after the acquisition and then again a month later to learn about the customer's experience and listen to their suggestions.
Metrics and calculations
There are several calculations and metrics linked to customer retention that are important for decision making. One of the most important is the Customer Retention Rate .
To calculate this rate, the number of clients at the beginning of a period, the number of clients at the end of the period and the number of new clients throughout the period must be considered. The formula is the following:
Customer Retention Rate = (Number of customers at the end of the period – Number of new customers throughout the period) / Number of customers at the beginning of the period * 100
Suppose a company has 500 clients at the beginning, 530 clients at the end and added 40 clients in the period. According to the aforementioned formula, the Customer Retention Rate in this case is 98 .
Repeat Purchase Rate , Customer Lifetime Value , and Customer Churn Rate are other metrics that are often considered.
Taking these estimates into account, it is possible to establish whether the customer retention strategies applied are effective or if, on the contrary, modifications are necessary. Given what was mentioned above about the importance of customer retention, investing resources in the analysis of this data is a decision that is usually the right one.