The benefits of a high customer retention rate for customer growth and loyalty

How to retain customers while boosting growth and loyalty

In an unstable economic climate, your customer retention is increasingly important. If the rate at which you retain customers is low, you could be leaving significant revenue on the table. Not to mention the added challenge of needing to increase your customer acquisition efforts to compensate.

A high customer retention rate has a number of follow-on benefits for customer engagement, loyalty and business growth. We explore these benefits and customer retention best practices to improve your customer retention rate.

The importance of customer retention

What is customer retention and why should you care?

Your customer retention rate is the percentage of customers who stay with you over a period of time.

Sometimes customers leave for the right reason: they no longer have a need for your product or service. Or perhaps they weren’t the right customer for you. However, if they’re leaving for other reasons, such as price, quality and value, among others, low retention rates can have a big impact.

The cost of customer acquisition versus retention is one of them. Customer retention costs can be five to 25 times less expensive than the cost of finding a new customer. [1]

5 benefits of customer retention

The cost implications are clear, but a strong customer retention rate also has a range of benefits for the business.

• Solid customer feedback
  The longer your customers stay with you, the better you can get to know them. The data you extract from their purchasing and support behaviour can be used to innovate and improve your offering.‍
• Reduced customer acquisition costs
  If your customer retention rate is high, you'll free up marketing budget that would have otherwise been spent on customer acquisition.‍
• Increased customer lifetime value
  Using customer lifecycle management to improve your retention strategy is a smart move. The better you understand how customers interact with your sales funnel, the better decisions you can make.‍
• Ability to cross-sell and upsell
  Once you know how to successfully cross-sell and upsell, you can continue to market to your loyal customers over and over again.‍
• Higher growth
  Research [2] has shown that businesses with lower net revenue churn — i.e., the rate at which customers leave the business — may see higher growth.

How to improve customer retention

If your customer retention is not where you’d like it to be, there are strategies you can implement to improve it. These tips for maximising your customer engagement and retention strategy are a good place to start:

• Optimise your onboarding and customer experience to build personalised two-way conversations into the process, resulting in stronger customer relationships.
• Review your data to identify trends and get to the root cause of your customer retention issues.
• Implement a customer loyalty program to foster brand engagement and advocacy.
• Ensure your customer service channels are easily accessible and responsive for a positive experience.

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Engage your customers in an ongoing conversation

The Pendula customer retention platform is a no-code multichannel solution to build automated workflows and create powerful two-way conversations with your customers. Talk to an expert about your business and how we can help you to improve your customer retention today.

Appendix:

[1] Harvard Business Review. (2014, October 29). The Value of Keeping the Right Customers [Blog post]. Retrieved from https://hbr.org/2014/10/the-value-of-keeping-the-right-customers

[2] Mckinsey and Company. (2016, October 26). Grow fast or die slow: Focusing on customer success to drive growth [Blog post]. Retrieved from https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/grow-fast-or-die-slow-focusing-on-customer-success-to-drive-growth