Customer acquisition is one of the top priorities for any business that offers products and services. However, many companies forget that acquiring customers is only one side of the coin – you need to work to retain these customers, which is where customer retention strategies come in.
Did you know that 80% of your future profits will come from 20% of your existing customers? The right customer retention strategies can ensure that you don’t lose out on that much profit. In this article, we’ll discuss:
- What customer retention is
- Why it is important
- How to calculate customer retention rate
- Five strategies that B2B companies can implement to improve their customer retention rate
Let’s dive right into it.
What is Customer Retention?
In marketing terms, customer retention is the process of engaging existing customers to continue patronizing your products or services.
Customer retention is an essential driver of your business’s growth. It’s simple, really: the more customers you retain, the faster your business grows.
However, companies have spent more resources on acquiring new customers than on satisfying existing ones. According to this report, “44% of businesses focus on customer acquisition while just 18% focus on retention.”
However, in today’s low growth and highly competitive marketplace, customer retention joins acquisition as an important area of planning and analysis.
Since many companies prioritize acquisition over retention, does it make sense for your business to go against the grain?
Let’s see some of the crucial benefits that “retention-centric” B2B companies will enjoy.
Why is Customer Retention Important?
First of all, don’t get us wrong – customer acquisition is essential. However, focusing on it at the expense of customer retention is dangerous to the future growth of any business.
While retention is not as sexy as acquisition, it is more profitable. What is more, this profitability is just one of the advantages of customer retention.
Let’s now consider some of the biggest reasons why your B2B company should prioritize customer retention.
1- Retention is cheaper than acquisition.
If you are looking for a way to save costs, retention, not acquisition, is the way to go. Why? Because acquiring a new customer is five times the cost of retaining existing customers.
Even without crunching numbers, this makes sense. Just think about all the legwork that goes into acquiring a new customer. Some of the things you have to do include:
- Running email campaigns
- Retargeting leads
- Creating web banners
- Prospecting leads
Each of these has a cost, and the costs add up to be something expensive (at least more expensive than what it’d cost to retain an existing customer.)
2- Loyal customers spend more.
Retaining happy customers is not only more cost-effective, but it is quite profitable. Accenture reports that 57% of consumers spend more on businesses that they are loyal to.
Furthermore, customers are five times more likely to indicate that they will buy only from a brand that they are loyal to.
3- Word of mouth marketing
There are so many advantages to referral advertising. For example, 85% of millennials, 83% of Gen Z, and 80% of boomers trust referral advertising.
Word of mouth marketing is powerful and can help to extend the reach of your brand further than you imagine. Referrals generate leads cheaply per customer acquisition.
Not only do existing customers buy more from you, but they also refer friends and family – at no extra cost to you!
4- Lower Cost Per Customer Acquisition
A successful customer retention strategy reduces the cost per customer acquisition because your customers are already used to your sales process. Thus, you spend fewer resources pushing a retained and loyal customer through the sales process.
Furthermore when you add new customers but lose existing ones, your cost per customer acquisition rate rises. On the other hand, adding new customers without losing existing ones will not cause any increase in the cost of acquisition.
How to Calculate Customer Retention Rate
A healthy customer retention rate (CRR), as we have seen, offers loads of vital advantages to every business. So how can you calculate this rate? It’s pretty easy.
Here are the steps:
- Calculate the number of customers you have over a period (week, month, year).
- Subtract the number of customers you have acquired over that period.
- Divide the result of the subtraction by the number of customers you had at the start of the period.
- Multiply the value by 100 to make it a percentage.
In simpler terms:
5 B2B Customer Retention Strategies That Work
1- Have a good customer onboarding program
Customer experience does not end at the point of sale. After closing a sale, ensure that you have put things in place that will help your customer.
If your customer begins to use the product or service without knowing how to use it correctly, it will leave them frustrated – and ready to head over to your competition.
Thus, take customer onboarding very seriously. Some successful onboarding techniques include:
- Video tutorials
Video tutorials are not only great for your employee onboarding but are also useful for customer onboarding. They help to educate new users. This article is an excellent guide to onboarding clients with videos.
- Welcome emails
These prove essential in the customer onboarding process. By leveraging this tool, you can drive long-term engagement by your customers. Vero has written an in-depth article on how to utilize welcome emails.
Newsletters and onboarding emails might not directly affect your bottom line, but they can help your customers become well-versed in using your product. Here’s a guide to mastering customer onboarding newsletters.
- On-demand webinars
Webinars are an excellent way of educating customers on using a platform, product, or service. If you are a B2B company, use it to boost customer retention. Learn how to use webinars effectively here.
- Case studies
Case studies and testimonials constitute social proof and will remind your customers of the value of your product and how they can get the best from it.
These guides will assist them in getting the most from your product, keeping them happy and loyal.
2- Use the right engagement metrics.
Tracking the right metrics will help you to innovate and improve your offering. Some of the vital metrics you should note as a B2B Saas company include:
- License Utilization – this metric shows you just how many customers are using your product
- Usage Frequency – it tells you the number of customers that rely on your product or service.
- Feature Adoption – when you add new features to your product, the feature adoption metric tracks the features your customers use and how they use them. Therefore, it is easier to know whether they are deriving value from your product.
By tracking the right metrics, you will pave the way for a “retention-centric” brand that will enjoy growth now and in the future.
3- Use customer feedback
Receiving customer feedback – and acting on it – can provide you invaluable insights into how your customers feel about your business. And when you work on the input, it yields rich rewards.
For example, a survey by Apptentive discovered that 97% of customers have a higher chance of developing loyalty to a business that acts on their feedback. In comparison, 55% will likely drop a company that fails to implement customer feedback.
Thus, do not only hear and implement customer feedback but also make it clear to each customer that their voices are being heard. Doing so will strengthen their loyalty to you.
4- Reward your customers
Showing your customers how much they mean to you is one way to retain them and build loyalty.
There are different ways to show your appreciation and reward your customers. Some successful reward programs include:
- Sending handwritten ‘Thank You’ notes
- Offering free learning resources (webinars, ebooks, coaching)
- Host fun events
- Promote them on your social media pages
- Celebrate them on their birthdays
- Offer discounts
- Give free products or services
Surprising your customers with rewards is more powerful than giving them something they might feel they’ve earned.
5- Take advantage of exit interviews
No matter what you do, it is virtually impossible to have a 100% customer retention rate. But even customers you lose can help you with retaining those that are still with you.
Exit interviews are an excellent way to pry into the thoughts of the leaving customer and find gems that can improve your marketing efforts.
Customer retention might not be as attractive as customer acquisition, but its benefits can be massive for your business, as we have seen in this article.
The five strategies that we have discussed; great onboarding, using the right metrics, listening to feedback, rewarding customers, and wringing as much as you can from exit interviews can help you to improve your customer retention rate. Check out this post to understand more about marketing metrics and how they can be measured.