Are you Paying Attention to Customer Retention?
In an ideal world, the tremendous amount of time, money, and energy you spend in building a great business; educating your audience about it; attracting them to your company; and finally turning them into paying customers would be rewarded by a long, profitable relationship between you and the newly-acquired customer(s).
But this is not that world, is it? You know that customer relationships are far from ideal.
However, did you know…
Losing customers is easier than you think
96 percent of customers have no qualms in walking out the proverbial door if they are unhappy with your either your products or services and/or your manner of delivery.
Think that’s rough? Wait until you learn how easy it is for businesses to lose customers in today’s mega-completive age. Simple negligence or misconduct on social media – such as making rookie mistakes on Twitter (like over-tweeting), are enough to push customers away.
There are a host of other factors that can do the same.
Overall, you lose customers because of one or more of three primary reasons. Researchers of a Washington DC used a customer survey to find out the main reasons customers stop doing business with a company or service provider:
- Poor customer service is typically the reason for 68 percent of the deferring customers, who cite poor attitude of the customer service representatives or complete indifference on their part as the trigger to leave. Consequently, poor customer service costs an estimated $83 billion in losses to US companies on an annual basis.
- For 14 percent, dissatisfaction with the quality of product or service delivered is the key trigger to leave the current company and take their business elsewhere.
- Another 14 percent get lured in by competition with the promise of a better or more valuable deal.
Apart from these reasons, which mark willful abandonment of a company, the other reasons why you lose customers are relocation (in about three percent of the cases) and death (in about one percent of the cases).
Losing customers is costlier than you think
Globally, companies lose an average of $243 on every customer they fail to retain.
This figure is tabulated by considering the average of lost sales and revenue. What this figure does not include is profit loss associated with wasted acquisition costs. The real cost of lost customers also includes losses created by the ripple effect of a customer leaving.
- 95 percent of customers who are unhappy with your services and are contemplating a change do not complain to you. They leave without making a noise, which gives you no opportunity to right the wrong and win them over before they make the final shift. But they don’t just keep quiet about the bad experience…
- About 13 percent of the unhappy customers talk to their friends. Things get worse.
- While a happy customer is known to talk about the positive experience to about three or five people, an unhappy customer is known to complain about it to up to 20 people! You can forget about those 20 people bringing their business to your company.
- Furthermore, a lost customer can cause serious damage to your reputation. This is especially true if the customer had a particularly bad experience with customer service and is rather furious. You may already know how a delighted customer tells his friends but a furious customer tells the whole world. Social media has made that easier than ever before. Back in 2015, an unhappy Virgin Airline passenger wrote about his in-flight experience, which has been re-tweeted 1134 times, and has more than 3000 backlinks, and is being shared even today!
The bottom line? A lost customer costs you significant business dollars in terms of not just lost sales and revenue but also lost reputation and market share; ultimately affecting your profit margins more seriously than anticipated.
Your loss is your competitor’s gain
61 percent of lost customers go straight to a competitor when they are unhappy with their current company. Think about that. If your negligence or misconduct is the reason why you lost say 10 customers in a month, it is also the reason why your competitor gained six new customers in the same month.
The majority of businesses have it wrong
…And that probably includes you as well.
The majority of businesses continue to focus on customer acquisition when in fact they should be focusing on customer retention. 63 percent of marketer’s identify customer acquisition as the number one goal of their advertising campaign.
So why is that wrong? For the simple reason that mere customer acquisition is not the path to sustained profitability. And why is that, you ask?
80 percent of your profits come (and will come in the future) from just 20 percent of your existing customers. It’s the Pareto Principle at work. Makes sense therefore to focus on the top 20 percent of the existing customers, doesn’t it?
They are your most loyal customers and they are your primary source of sales, revenue, and profits. Focusing on nurturing your relationship with them is both natural and desirable.
Yet, most companies fail to focus on the right thing – retaining existing customers and nurturing them into highly loyal customers. The need to focus on retention becomes even more clear when you consider that fact that:
- Acquiring new customers is costlier than retaining current customers. You will typically spend up to seven times more on customer acquisition strategies than you will on customer retention strategies.
- Selling to existing customers is easier than selling to new customers. Your chances of closing a sale successfully lie between 60 and 70 percent when targeting a repeat customer. On the other hand, chances of selling to a newly acquired customer range from a mere five to 20 percent.
- Selling to existing customers is more profitable than selling to new customers. Not only do existing customers shop more often with you, but also spend roughly 33 percent more than new customers in the long run.
- Existing customers are loyal and refrain from bargain hunting. This decreases their chances of being won over by competition over pricing. Because they are less sensitive to price changes, they are also more likely to continue doing business with you even when you increase prices of certain products or services.
- Existing customers are also more likely to to try out new products or services from your company than newly-acquired customers.
- Finally, existing bring more business to you. Loyal customers double as your brand advocate and often introduce friends and family to your company (even if there is no loyalty reward at play).
It’s easy to see why that is a good thing. Referred customers come to you for zero acquisition costs and sport roughly the same level of loyalty as the contact who referred them. They are more likely to shop with you often, to spend more in each purchase, and to be less sensitive to price fluctuations.
Once you have won them over, you can quickly turn these referred customers into brand evangelists and have them refer new customers as well. Another ripple effect gets produced, although this time it is a positive one.
Customer retention can be deceptively simple
Given how massively advantageous customer retention is for your business, you would think it must be a complex process. You would be wrong! Customer retention is simpler than you think.
As you may remember, poor or negligent customer service is the number one reason why retention efforts fail. This is followed by customers feeling unsatisfied with the product/service and being wooed away by competition. Thus, if your business offerings are up to the mark, customer reten3on is all about treating customers right for most part.
And the good news is, treating customers right does not mean making no mistakes. To err is human after all, and quality customers understand that very well. This means, treating customers right is about placing them first; displaying genuine interest and compassion when attending them; admitting mistakes; and correcting mistakes or compensating for them within time.
The true value of customer retention
You know by now that customer retention is the only way your business can attain and maintain sustainable success. You know how retention is cheaper than acquisition and how repeat customers are more profitable for you. Wondering exactly how beneficial it can be for your overall business? Let’s put a number on it.
By retaining customers with exceptional customer service, nurturing the relationship, and boosting loyalty; you can see significant raise in your bottom line. A mere five percent rise in loyalty will help you raise overall profits by 25 to 95 percent!
Customer retention is an opportunity you just cannot afford to miss.
How Lead Nurturing Can Boost Your Sales
It would be wonderful if all you needed to do to make a sale was to collect a lead’s name and email address and send them one email. Unfortunately, that’s not the way marketing works. If that’s all you’re doing to turn leads into customers, then you’re probably not making many sales.
The solution is labor intensive but worth the effort. Nurturing the leads you get can help to build trust, overcome objections, and close deals.
Why is Lead Nurturing Necessary?
Let’s start by talking about why lead nurturing should be an integral part of your marketing strategy:
- In any industry, at least 50% of the leads that come in are people who are not yet ready – for whatever reason – to make a purchaset.
- In the absence of lead nurturing, the majority of your leads will never become customers.
- Companies who engage in lead nurturing generate 50% more sales than those who do not, and they spend less doing it.
In other words, lead nurturing helps to do two important things at once. It increases your sales, and it also decreases your overhead. Nurturing leads might seem like a lot of work, but it doesn’t have to be expensive. Its primary goal is to build relationships with leads so that when the time comes for them to make a buying decision, the choice is an easy one.
Lead Nurturing Methods to Try
Now that you understand why lead nurturing is important, let’s look at some specific techniques you can use to turn the new leads you get into paying customers.
It stands to reason that if you want to get the biggest possible bang for your buck, you should spend the majority of your time nurturing leads who are highly likely to buy from you. But how can you tell? Here are some metrics you can use to determine the viability of a lead:
- Basic demographic information such as age, gender, education level, and so on can help you determine if a potential lead matches your typical customer persona.
- For B2B companies, looking at a lead’s company – including their business model, revenue, and products – can help you determine if they are a good fit for your product or service.
- Online behavior can be a good predictor of a customer’s intent to purchase. A lead who scans your content for information but doesn’t engage with you in any way should be scored lower than someone who registers for your website or downloads gated content.
You should develop your own scoring system based on your business’s needs and criteria. Once you have assigned a score, you can decide which nurturing activities make the most sense for the leads on your list.
Email marketing is still one of the best ways to grow your business. It’s affordable and extremely versatile, and you can manage it easily using autoresponder software.
After you have scored your leads, you can use the information from the scoring process to segment your list and send out targeted emails based on what you have learned. For example, if you know that the purchasing manager for a large company is interested in a particular product you sell, you can send that person a series of emails designed to teach them about your product, reassure them about its value, and overcome any objections they might have to buying it.
If you do it properly, each email you send should move your lead a little closer to making a purchase. Research shows that personalized emails are more effective than generic ones, so consider using your lead’s first name to build trust.
Social Media Nurturing
Another tool you can use to nurture leads and turn them into customers is social media. Here are some things that can help you make the most of your social media contacts:
- Remember that social media is a two-way street. You can’t post content and then ignore it. Instead, share content that is relevant and useful to your followers, and then engage with them when they ask questions or make comments. The more you respond, the easier it will be for your followers to believe that you care about them. Caring builds trust, and trust makes sales.
- Use social media tracking tools to figure out which content engages your followers. Not every piece of content you share will be a winner. If you want your social content to help you make sales, you should track each piece of content’s performance and then use what you learn to guide your social media strategy going forward.
- Remarket to leads on social media. Facebook and other social media sites offer remarketing options that can help you reach out to people who have visited your website without subscribing to your list as well as those who have abandoned shopping carts.
These are all easy things to do and they can make a big difference in your sales.
What do your leads see when they return to your website? If they’re seeing the exact same content they saw the first time around, then you’re missing out. Instead of having a static website that fails to nurture leads, think about using smart programming that tailors itself to individual customers.
These three nurturing options can help you take even the most reluctant leads and turn them into paying customers. At each step along the way, you can build trust, overcome objections, and help your leads make the decision you want them to make.