May 17, 2019
Increase customer loyalty
Investing in customer retention is the way to go if you want to see skyrocketing growth and a healthy boost in profits. Don’t believe us? Then perhaps the following stats may change your mind:
- Returning and repeat customers make up just 8% of visitors, but they deliver a whopping 40% of revenues according to a study of 33 billion visits to 180 e-commerce websites (Adobe). In this context, a 1% increase in return shoppers would deliver a 10% increase in overall revenue.
- 71% of B2B customers feel disengaged with or indifferent toward B2B businesses and their offerings (Gallup). In other words, these customers are ready and willing to walk away from your business at any time.
- The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is less than 20% (Invesp).
The message is clear: If you want to boost your performance, spend more time on retaining valuable customers and less time looking for the next quick sell. And following the steps outlined in this post, you’ll be on your way to increasing customer retention — and driving profit at the same time. Win-win.
Identify your most engaged customers
It’s time for a little predictive modeling with customer data. It sounds intimidating, but don’t worry — you don’t have to be a data scientist to uncover valuable insights. All you need to know is how recently each customer made a purchase, how often each customer makes purchases, and how much money each customer spends. These three data points enable you to produce an RFM (recency, frequency, and monetary) model, which is similar to lead scoring.
The premise behind the RFM model is simple: Customers who have made purchases recently, make purchases regularly, and spend a lot of money on your products or services are likely to respond favorably to future offers. Customers with high aggregate scores are your most engaged customers, while those with lower scores are your least engaged customers. At its core, RFM modeling is a segmentation tool — use it to identify customers who are both engaged and disengaged, then segment them accordingly.
It’s also important not to ignore disengaged customers — in fact, you can gather powerful insights from this segment. These customers usually fall into 2 or more categories. The first set of customers likely disappeared after purchasing a single product. But the second set spent a significant amount of money on your products or services in the past, only to become disengaged recently. Preventing churn is critical for many businesses and changes in behavior (for example, decreased product usage) can be a warning sign that a customer will disappear. By using the journey below, you can reduce the chances of this happening by taking action as soon as these behavioral changes start happening.
Use marketing automation to prevent disengaged customers from leaving
Reconnecting with disengaged customers should be an essential element of your customer retention strategy. And now that you’ve identified opportunities to reconnect with disengaged customers, let’s talk about how marketing automation can help you win them back. Because marketing automation enables you to send offers triggered by an activity or event, you’ll never miss an opportunity again.
Here’s how it works: By using Smart Segments, you can define several audiences based on your RFM data. You can define each audience by recency (e.g., customers who haven’t made a purchase in over a year), by how much revenue they’ve contributed to your business in the past (e.g., revenues exceeding $3,000), by frequency (e.g., customers who made purchases at least once per month during the period in which they were active), or other relevant characteristics. You can even create audiences based on a combination of data sets.
Once you’ve identified your customer segments, you can design journeys triggered by audience membership. The idea here is to offer disengaged customers purchase incentives (such as exclusive offers, coupons, discounts, and deals) that encourage them to resume their relationship with your brand.
Keep engaged customers happy
Of course, it’d be a terrible idea not to pay attention to your happy customers. After all, they’re the ones who are exhibiting a commitment to your brand. To keep your most valued customers satisfied, create loyalty programs that reward them for their behavior. Loyal customers are the most cost-effective to serve. Why? Because they spend lots of money on your products or services but need little investment to keep happy. Their commitment to your brand also makes them less sensitive to price changes, less likely to switch to a competitor, and more likely to engage in recommended behaviors.
We now know there’s a strong relationship between loyalty and customer retention. So, how can you earn the loyalty of your best customers? By rewarding and keeping them engaged. When customers promote your brand on their blog or on social media, send them a thank you postcard. For customers who do so continuously, send a free gift or give them a discount on a premium product or service. The idea here is to reward desirable behaviors, so experiment to figure out what rewards delight your audience.
By designing a customer retention program using those three steps, you’ll increase customer engagement, multiply your customer retention rate, and maximize profits.