Everybody keeps talking about the importance of lead generation. But there’s one less conspicuous yet equally as powerful a strategy that doesn’t get the attention it deserves: customer retention.
Customer retention is actually the secret ingredient to better and more stable revenue for B2Bs and NFPs. Apart from it being more economical than customer acquisition, it also increases your ROI and encourages brand loyalty.
In this post, we’ll take a look at just what exactly customer retention is, what factors might affect your efforts to retain customers, top strategies to improve customer retention and how to measure the progress of customer retention in your business or organisation.
What is Customer Retention?
Customer retention is the act of retaining your existing customers and turning them into a long-lasting, loyal customer base. Ideally, B2Bs and NFPs try to come up with a strategy and implement tactics that reduce customer churn (or the number of customers lost), and improve the customer experience.
Customer retention is known to be more efficient and budget-friendly than lead generation. In fact, according to the Harvard Business Review, boosting your customer retention rate just by 5% could increase your revenue by 25%-95%.
Customer retention is different from customer acquisition in that the focus turns from capturing new customers to keeping the customers you already have and building trust with them so that they remain long-term buyers.
Factors Affecting Customer Retention for B2B and NFP Organisations
Retaining customers depends on many factors including the quality of your products or services, the strength of your customer service, customer satisfaction rates and market competition.
Let’s break these four factors down to get a better picture of just why they are so impactful:
Quality of Products
High quality products encourage customers to stick with your company or organisation’s services. Whether its user-friendliness, personalised service or professionalism, your customers will appreciate the level of attention and detail.
Customer Service
Good customer service will positively affect your ability to retain customers. Companies that have a loyal customer base tend to respond to each and every service request, handle incidents or complaints quickly and dependably, and offer various ways to get in touch, including phone, chat or email.
Customer Satisfaction
Customer satisfaction can be measured with surveys and feedback requests. By responding directly to customers’ needs and demands and thereby improving the customer experience, B2Bs and NFPs can improve their level of customer satisfaction.
This, in turn, will not only retain your existing customers, but will increase good reviews and testimonials, and will boost your outreach through word-of-mouth and online recommendations.
Market Competition
Your competitors can influence the amount of customers you retain based on their decision to stick with your services, or switch to your competition. In this sense, healthy competition encourages B2Bs and NFP organisations to improve all of the above to always stay relevant.
Strategies to Improve Customer Retention
There are many effective strategies out there to help improve customer retention.
Here are the top 5 strategies that will take your customer retention efforts to the next level.
1. Strengthening the onboarding experience
Make sure to provide a flawless experience throughout your customers’ first purchase. This includes attentive customer service to guide them through any doubts or questions, email triggers, follow-ups and other personalised messaging.
2. Performing customer surveys
Customer surveys can provide B2Bs and NFPs with valuable insight into customer satisfaction rates, and what your organisation potentially needs to change or improve. Surveys also help predict behavioural intention.
However, performing a survey only once a year isn’t useful. Genroe advises to conduct surveys at least every 3 months.
3. Creating an education program
Educating your customers demonstrates your expertise and how much you value your customers’ continued support. Think HubSpot Academy. Customers can read up and learn more about Hubspot’s tools, thereby using them to their full advantage.
4. Starting a customer loyalty program
Offering rewards to loyal customers might be the best way to create incentive and keep them coming back for more. These programmes are so desirable because it creates affordable options for loyal customers, and increases sales for your company. A win win without a doubt.
5. Sending out newsletters
Newsletters are a very cost-effective and impactful way to stay in touch with your customers. These days, email automation helps in being consistent, and programmes such as MailChimp can provide you with beautiful, eye-catching templates.
Newsletters help in reminding your customers of your presence, and updating them on any offers or new products.
Ikea: An Education Giant
One brilliant example of an effective education programme is Ikea’s countless instructional videos and interactive design tools that guide customers toward success.
Everyone knows that most Ikea furniture requires independent construction. The concept is great and affordable but Ikea ran the risk of dealing with frustrated and burnt-out customers.
Providing customers with step-by-step instructions guarantees their success and guides them through a positive experience.
Measuring Customer Retention for B2B and NFP Organisations
Knowing how to calculate customer retention rate is crucial, and it’s not that difficult. The metric is used to measure loyalty over time. You simply must divide the total number of customers from the new customers by the number of customers acquired at the beginning of the period.
It is worth noting that this formula isn’t complete without knowing your customer churn.
HubSpot provides a useful graphic which visualises the formula:
Final Thoughts
Customer retention is equally, if not more, important than lead generation for B2Bs and NFPs. While it might not seem as obvious, developing a retention strategy can affect your organisation in powerful ways, generating more revenue and increasing customer loyalty.
By personalising your customer communication, providing educational programmes and developing a loyalty plan, your organisation can stay ahead of competitors and be intentional about customer satisfaction and trust.
To find out more about how to build an excellent customer retention strategy, book a call with MIH today.