Customer retention: how do you build loyalty among your customers?

According to a Harvard Business Review study, increasing your customer retention rate by 5% can boost your profits by 25-95%. Impressive, isn't it?

How do some companies succeed in building long-term customer loyalty? The secret lies in the art of optimizing customer retention. I recommend you take an interest in the subject if you want to future-proof your business and build on what already exists! 🚀

In this article, I propose to explore this concept in depth: what is customer retention, how to calculate it and, above all, how to maximize it strategically.

What is customer retention?

Defining customer retention

Sales people know all about it: acquiring a new customer is expensive. In fact, it's five times more expensive to convert a new user than to keep an existing one.

Beyond the cost to the company, it also turns out that existing customers are 50% more likely to try new products, and spend 31% more than new customers, according to Forbes. A real goldmine!

As you know, customer retention is all about capturing existing customers (as the name suggests).

We remind you of the definition of customer retention: it's the set of actions and strategies adopted by a company to encourage its current customers to continue doing business with it. The ultimate aim is to encourage repeat buying behavior(upsale or resale). 

Ultimately, customer retention helps turn occasional customers into loyal brand ambassadors.

Understanding the customer retention rate

Obviously, when we're looking to optimize something, we measure it first. This allows us to take the pulse of the situation and properly assess how to beef up our game.

Here, we're talking about the customer retention rate: it's the indicator that allows us to measure where we're starting from and evaluate the success of our efforts.

The customer retention rate is a key performance indicator. It provides an accurate picture of your ability to retain customers over a given period.

It's the percentage of customers you've managed to keep compared to the number you started with. And as you know, the higher this rate, the better your retention performance!

How do you calculate the customer retention rate?

Calculating the customer retention rate is actually quite simple: 

• Take the number of customers you have at the end of a period (CE)
• Subtract the number of new customers acquired during this period (CN)
• Divide the result by the number of customers you had at the start of the period (CS).
• Then multiply this figure by 100 to obtain a percentage.

👉 Here's the formula: ((CE - CN) / CS) x 100

How can you increase customer retention?

Define customer retention objectives

Unsurprisingly, to increase your customer retention rate, you need to clearly define your objectives. These objectives must be specific, measurable, achievable, relevant and time-bound - in other words, they must meet the SMART criteria.  

For example, you could aim to increase your customer retention rate by 5% over a six-month period. BUT you need clear objectives to achieve this, in other words: what do you want to achieve with your customer retention efforts?

You are looking for : 

• Reduce churn?
• Increase the number of repeat transactions per customer?
• Increase customer lifetime value (LTV)?

Retention rate is a key indicator, but it's also useful to monitor churn rate, repurchase rate and customer satisfaction.

Obviously, it all depends on your business. A SaaS will fundamentally not track the same metrics as a marketplace.

You also need to understand the factors that influence customer retention: 

• The quality of your product? 
• Your customer service? 
• The price? 

By identifying these factors, you can implement targeted actions to improve customer satisfaction and loyalty.

Choosing high-performance customer retention software

Customer retention software can make a huge difference.

It helps you track and analyze customer behavior, identify reasons for satisfaction or dissatisfaction, anticipate churn risks and implement proactive actions to retain your customers.

For example, good customer retention software can help you identify at-risk customers before they leave, based on their behavior and past interactions. 

It can also provide you with valuable information on your customers' buying habits, enabling you to tailor your offers and communications to their needs and preferences.

There are a multitude of customer retention software products on the market today. To choose the one that's right for you, consider several criteria:

• Features (data analysis, customer segmentation, churn prediction, etc.)
• Its price
• Ease of use for your teams
• Integration with your other tools (CRM, customer service, etc.)

At Modjo, we use 4 software programs to provide our customers with the best possible support:

1 - Metabase enables us to track our users' usage indicators on the platform. This is the key to gaining an in-depth understanding of how our customers use Modjo.

2 - Zendesk to optimize our communication with our customers (chatbot, emails, onboarding, etc.).

3 - Modjo to ensure that nothing is lost in our exchanges and to implement a pro-active customer support strategy. It's the cornerstone of our customer strategy, and an indispensable tool for our team of account managers.

4 - And finally, Salesforce to centralize all key information (key contacts, key dates, etc.).

By taking the time to clearly define your objectives and choose the right tool, you'll put all the chances on your side to increase your customer retention rate.

What customer retention strategies should you put in place?

To improve customer retention, there's one thing you can do: improve the customer experience. According to Zendesk, 72% of customers say they are willing to spend more for a company with a quality customer experience.

With this in mind, consider a few customer retention strategies: 

🛎️ Offering exceptional customer service

The quality of your customer service has a direct impact on customer loyalty. Make sure your customers always have someone to contact if they have a problem or a question. Be responsive and empathetic in your communications. Remember, a satisfied customer is a returning customer.

💚 Set up a loyalty program

It's a great way to retain your customers. Rewards (discounts, gifts, exclusive benefits, etc.) not only encourage them to stay, but also increase their level of engagement with your brand.

🗞️ Communicate regularly with your customers

Don't let your customers forget you. Send them regular emails with useful information, updates on your products or services, or special offers. But make sure you're not too intrusive: the aim is to stay in your customers' minds, not to overwhelm them with emails.

🎙️ Collecting and mobilizing customer feedback

Feedback from your customers is a mine of information. They enable you to understand what works, what doesn't, and what you could do better. Don't hesitate to solicit this feedback, for example via satisfaction surveys, and above all, act on it!

🗝️ Personalize the experience

According to Evergage, 99% of marketers agree that personalization helps to advance customer relationships. So think of a special journey, an attention, an offer... These gestures can have a significant impact on your customers' loyalty.

Keep in mind that every customer is unique! This is the key to increasing your customer retention rate. Retention is not an exact science, but rather an art that requires empathy, listening and adaptability. By combining different strategies and adapting them to your context and your customers, you can optimize your customer retention rate and make your company shine beyond your expectations.

Now you know everything, all that's left is to put all these tips into practice!

If you have any questions or comments, please don't hesitate to contact me to discuss the subject. ✍️