There are multiple marketing strategies that you can use for your business. While acquiring new customers is a great hack, it’s just one part of the puzzle. The other part of this picture is retention.

Customer retention is an aspect of your business that can save you tons of money in acquisition. Doing this part right is important and should be given a good amount of attention.

If you’re looking to understand how to retain customers in your business, check out this quick guide to learn what is retention and why it’s important for sales professionals.

What is Retention?

Customer retention is a percentage that measures the number of existing customers after a certain period. The rate is affected by the number of new customers acquired and the old customers come in. The latter can be by closing a contract, not returning to buy, and canceling their subscription.

Customer retention is calculated as follows:

Retention Rate = (# of Customers at End of Period – # of Customers Acquired During Period) / # of Customers at Start of Period) X 100

You can decide on the duration of the period. It can be quarterly or even annually, depending on the nature of your business.

Why is Customer Retention Important?

Now that you understand what is retention let’s get to the nitty-gritty of why it’s crucial to a business.

Besides being just an equation, customer retention is about being able to continuously serve the people that have already experienced your business. Customer retention enables you to increase your profit margin in many ways. It eliminates that need to constantly need to generate new leads just for your business to survive.

Here are a few reasons why customer retention is vital in every business.

Save on Money on Marketing

The process of acquiring new customers can be tedious and expensive. Think about it. You’ve got to do some or even all of these things, depending on the competition in your industry.

  • PPC
  • SEO
  • Outbound sales team
  • Social media marketing
  • Email marketing

Each of the above strategies can be expensive. There are factors included such as hiring specialists to undertake the task, training your employees on the tasks, or buying the required tools.

According to a study, after all these efforts, there is only a 60-70% chance of selling to an old customer. You’ll also need to invest in keeping your customers happy. For example, by increasing the number of customer care staff.

Upsell and Cross-Sell

This is the easiest way anyone asking “what is retention” can benefit from. Many salespeople think that once a sale is made then everything is done. But you could get a new opportunity if you listen to your customers well.

For example, let’s say you specialize in lady clothes. You may realize that most of them are continually complaining about how hard getting new-born attires is. This means they may be willing to buy baby clothes from you.

If you’ve got the capital, you can test the market and add the product to your store. The best part is that you got a loyal customer base already, so it won’t be like you’ll start from scratch.

Referral System

Relying solely on cold pitching isn’t the only way to build clientele. Gaining referrals is probably the best part of retaining customers. They refer you to their friends, colleagues, and relatives.

Getting a referral is like free marketing, and it’s the most effective marketing tactic. When a loved one recommends a product or service to you, you usually trust their opinion. You’re confident they are referring to you based on their personal experience or their trusted chain of friends.

Yet once a salesperson calls you, you feel like their motive is to sell to you. So as much as the product may be good, you might be a bit hesitant in making the purchase.

This is why you need to spend more on customer retention. To encourage your existing customers to refer you to their network of friends, invest in a referral program. For instance, you can offer a discount or a gift card for every person who refers a new client.

Customer Advocates

Besides the referrals, there are customers who tell everyone who cares to listen how great and solid your product and services are. The best part is that they do it free of charge.

They are extremely vital in persuading customers to purchase your products online, and it’s just not through word of mouth and referrals. Advocates are also very active online.

You’ll find them on social media platforms, websites, product review sites, eCommerce sites, and forums. With the buyer’s journey starting online, it’s very important that you have the people passing a good word for you on your behalf.

Another way advocates help in your business is when you end up in a conflict with a customer. Remember, the angriest voices are the loudest, and they could significantly affect the reputation of your business.

Advocates help in correcting the image by building up, on the positive aspect of your business to keep the balance.

Knowing What Is Retention Can Help Your Business

Understanding what is retention is something that every marketer needs to get acquainted with. You might be putting so much effort into acquiring new customers, and yet your profit margin remains low. Focusing on adding in a strategy for retaining customers can be the answer to your troubles.

Set aside funds and excellent customer care training to keep your existing customers around. Remember, they can help you spread a good word for your business as they continue buying from you.

If you’re looking for help with coming up with a customer retention strategy, feel free to contact us today.