How you retain customers will determine how profitable each one is to you. Let’s explain what is Customer Retention and why is it so important for your business.
What is Customer Retention?
The process of improving a company’s rate of repeated customers and making them always coming for more is known as customer retention. Customer retention is to keep customers from switching sides, making repeat purchases, and being satisfied with the services.
& Why is it so important?
Client acquisition builds a base of clients, whereas customer retention is the process of growing client relationships and maximizing client income. In other words, you want to make sure the clients you’ve worked so hard to get will stick around, enjoy doing business with you, and continue to find value in your offerings.
When to focus on Customer Retention?
Where your store is in its lifespan greatly affects its customer retention process. As you cannot compare a store that just opened with one that has been operating for quite some time.
5 stages to identify where your store stands:
- Simply beginning: If you’re just starting, all you really need to focus on is customer acquiring. Gaining and obtaining customer at this point is at its highest level.
- Getting popular: You’re having a decent number of customers that you need to start encouraging for more purchases. And you can do that simply by Sending email campaigns promoting more items.
- Steady: Your business is now standing on a stable ground which is when you can start offering referral or loyalty programs that customers can benefit from.
- Recognized: By this stage you need to put in extra effort in your retention strategy based on your business service or product and that can be done by some offering promotions and discount vouchers.
- Solid: Your store has now successfully gotten through the opening gates. Retention is your main goal now and need to be more serious about it. You could offer gift cards at this time.
Why is it crucial to keep customers?
The performance of a business in both attracting new clients and keeping its current clientele is measured by its customer retention rate. Additionally, it enhances customer loyalty, increases ROI, and attracts new clients.
3 Main customer retention indicators:
- Repeat customer rate.
The cornerstone of customer retention is the repeat customer rate. It makes an estimate of the number of customers who are likely to buy from you again. A fantastic way to determine how effectively your retention strategy is performing in reality is to estimate your repeat buy rate. The more customers are willing to return to your shop, the higher this score is.
How to calculate repeat customer rate?
All you need for this is the number of customers who made more than one purchase in a specific period of time, a year let’s say, and the total number of unique/different customers who purchased your product. The equation is as simple as dividing those two figures to calculate the number of your repeated customers.
- Purchase frequency
This shows how frequently clients are returning to purchase from your store. This is essential when you consider that repeat customer are in many cases liable for a huge piece of a store’s yearly income.
How to Calculate Purchase Frequency?
Divide the entire number of orders placed at your shop by the total number of unique consumers during the same period of time you used for your repeat buy rate.
- Average Order Value (AOV)
This is the ideal opportunity to explain on how much every one of those purchases is worth after you have a firm comprehension of repeat customer and purchase frequency rates. This shows how much cash a client spends in your shop on every purchase.
How to calculate Average Order Value?
Using the same time frame for the above all you have to do is divide your yearly revenue by the number of orders your store processed.
Customer value: A comprehensive view of retention
At Sprint we are keen about each Customer value, which displays the genuine value of each individual client, as it is the most important part after all.
You must already be aware of your buy frequency and average order value in order to calculate it. You can actually see the results of your effort and comprehend the strength of retention marketing by multiplying these two figures together.
The best time to create a customer retention strategy is right now to consider how improving each of these metrics may help in growing your business.