Your customers are the heart of your business. You provide a product or service to meet their needs, they are the reason you get up every morning and they are the reason your business continues to run so smoothly! Once your client base is well established, you must maintain it by taking good care of your customers to keep them. Why is it important to calculate the customer retention rate if you already have a well-established client base? Because having good customer retention strategies is good for your business, both for your revenues and your reputation!
In fact, have you ever thought about budgeting for customer retention? This could give you a great return on investment. This type of budget allows you to rectify the situation to retain customers when a mistake has been made and it can also be used to build customer loyalty. This budget will save you a lot of money! In fact, according to a Harvard Business Review study, it turns out that retaining your current customers costs between 5 and 25 times less than acquiring new ones. Before planning this budget, it is wise to calculate the customer retention rate to know what percentage of your customers are turning to the competition.
Whether it’s to thank them or to prevent some customers from dropping out due to a lack of commitment, customer retention strengthens your relationship with your customers and brings a lot of benefits. Customer retention should not be seen as a loss, in fact, it is the opposite! It builds customer loyalty, engages them to become ambassadors of your company, and makes up for any missteps when a mistake is made.
In order to have good customer retention strategies, it is important to have a good understanding of this concept as well as to be able to calculate the customer retention rate to be well prepared to retain your customers!
Some people believe that customer retention is only useful when they are about to lose a client. Others believe that a retention strategy only serves to repair the damage and nothing more! In reality, the concept of customer retention can be applied to many more situations. It is used to rectify the situation, of course, but also in many other contexts that are conducive to creating engagement towards your company.
Customer retention consists of various strategies that you can implement to mobilize and retain your customers, even if they are not about to replace you with a competitor.
Thanking a customer with a handwritten note slipped into their order when they have made a transaction on your website is a form of retention in itself! It shows the customer that they made the right choice by doing business with you because you care about them and you prove to them that their loyalty is important.
For all these reasons, it is judicious to calculate the customer retention rate to adopt the best strategies to retain your customers!
Calculating the customer retention rate will allow you to measure the percentage of customers who have been retained during a given period and see the percentage of customers who have churned during that period. Although the way to calculate the customer retention rate is universal, each company can draw its own conclusions to plan the best retention strategies to keep its customers!
Here are 4 good reasons why it is important to calculate the customer retention rate:
1. To understand the reasons that make your customers shop elsewhere.
Analyzing to understand what drives customers to go to the competition is essential to find ways to improve and implement loyalty strategies!
This allows you to visualize the percentage of customers you retain versus those who churn. The ability to calculate the customer retention rate lets you know your churn rate in addition to helping you implement good customer retention strategies to reduce this rate from year to year.
Sending satisfaction surveys following an experience is a great way to target opportunities to improve your service and retain the most customers!
2. To improve the service you provide daily.
Thanks to the data you will collect when you calculate the customer retention rate, you will be able to understand the churn rate and target areas for improvement. Regularly asking your customers about their experience with your company is an advantage for getting a realistic representation of why some customers churn and for seizing opportunities for improvement.
A tool like InputKit is the ideal solution to question your customers and analyze the data thanks to the feedback obtained! The information gathered will be used to improve your service and reduce the percentage of lost customers. This additional asset will enhance your analysis when the time comes to calculate the customer retention rate.
3. To build loyalty with your customers.
Why not promote a loyalty program that your company has put in place? Not only does this build customer loyalty, but it also gives them a sense of belonging and encourages them to make repeat purchases with your company! Small kind gestures to customers, such as a percentage off during their birthday month or personalized offers, are excellent customer retention strategies.
Although these people are not thinking of replacing you with competition, it is wise to take the time to thank them and to acknowledge their loyalty, which is very important for your company. According to HubSpot, loyal customers are the ones that spend the most and regularly encourage your company, so make sure they are completely satisfied! Building customer loyalty will have a significant impact on your percentage of retained customers when you calculate the customer retention rate.
4. To stand out from the competition.
Many entrepreneurs are focusing on the customer experience, as it is one of the most important issues. Indeed, if a customer has a bad experience, they will not hesitate to express themselves about it and this aspect should not be neglected! However, most companies emphasize their excellent customer service to attract new customers but they sometimes tend to overlook customer retention. According to Forbes, 44% of companies focus on acquiring new customers, while only 18% focus on retention. If you take the time to calculate the customer retention rate of your company, you will be part of this 18% and you will be able to stand out from the competition with brilliance!
RRC = [(CF-CN) ÷ CB ] x 100
In order to calculate the customer retention rate, you need to base your calculation on a specific period. This can be a month, a quarter, or the past year, for example. It all depends on the analysis you want to perform.
Let’s take the example of a company that wants to calculate the customer retention rate of the last year in order to review its retention strategies. Let’s say this company had 3000 customers at the beginning of 2021, had 3350 at the end and there were 500 new customers added to the customer base during the year.
If we enter these numbers into the formula to calculate the customer retention rate, we get the following formula: [(3350 – 500) ÷ 3000] x 100 = 95
This shows that the company has a 95% customer retention rate, which means that it has managed to keep 95% of its customers and that 5% of the customers have been lost for the year 2021.
Once you calculated the customer retention rate for your business and know the percentage of customers who churn, you can analyze the results to determine your customer retention strategies. When you calculate the customer retention rate, it allows you to understand why customers are turning to the competition. It is a great way to keep your customer retention on track and retain your customers!
While these numbers are essential data for you to improve your customer retention, nothing beats feedback from your customers to target your improvement opportunities. To ensure customer retention and loyalty, it is important to ask your customers for their opinion to know what they think of your company! Feedback is an excellent complement when you calculate the customer retention rate aiming to keep your customer retention on track.
If you send satisfaction surveys to your customers, why not ask them how you can improve? Even if their experience was excellent, they may have constructive criticism to share with you to improve their experience on their next visit. They will feel listened to and considered and they will feel that you are doing something concrete with their feedback to improve the services you offer. This is a great way to keep your customer retention on track and to retain them by correcting the issues they raise.
Imagine if it was possible to have access to your customer’s feelings about your business. You could practically read your customers’ minds!
With a solution like InputKit, you will have the right information about how customers perceive your company and the services you offer. You will be able to know exactly what the customer thought of the reception, the service, and the inconveniences they encountered during their experience. You will be notified in real-time when dissatisfaction is detected so you can act proactively to address the situation!
All this valuable information is gathered in one place and measured with well-known indicators such as CSAT (Customer Satisfaction Score) and NPS (Net Promoter Score).
With InputKit, you can assess specific aspects of the service you provide daily and measure them with indicators that are displayed on your dashboard. This is an essential component when you calculate the customer retention rate to maximize the number of customers you retain. Stand out from the competition by measuring what matters to you and stay focused on customer retention with the InputKit solution!
Many people are convinced that when someone is dissatisfied, they will come knocking on your door immediately to report their dissatisfaction. Of course, some consumers will not hesitate to express their dissatisfaction when there is a problem with the service, but these consumers are far from being the majority! In fact, 96% of customers who are dissatisfied with a service will not complain about their bad experience. This high rate can negatively impact how you calculate the customer retention rate if you don’t implement a solution to invite your customers to speak up.
The best way to get feedback and detect customer dissatisfaction quickly is to set up customer satisfaction surveys. These surveys are a gold mine of information for you! They allow you to act proactively when a customer reports that they are not satisfied with their experience and they allow you to target areas of improvement to correct weaknesses in your service.
Some customer dissatisfaction will be beyond your control. Indeed, if a customer is dissatisfied with the price or if he complains about the colour of the walls, you will not change your rates or your decoration for this customer, which is understandable. However, some dissatisfaction will be justified and you will have the opportunity to rectify the situation through customer retention.
Let’s take a fictional example. A customer contacts you and he is not very happy, you can hear it in his voice. He is unhappy because his order has arrived later than expected and is missing items. You check the order in your system and you see that he did not receive all the products he paid for. You will offer to deliver the missing items immediately with your most sincere apologies, of course! While this fixes the mistake that was made in the first place, offering compensation in the form of a discount or including bonus items with the rest of the customer’s order will only strengthen their loyalty to your company.
It will give him the confidence to know that you have his satisfaction at heart and that when a problem is raised, you act quickly to rectify it. This mistake will be quickly forgiven and he will be happy that you have handled his dissatisfaction so well.
When you calculate the customer retention rate of your company, it allows you to be prepared for this kind of eventuality and to have a budget for retention to keep as many customers as possible.
As soon as dissatisfaction is raised, it must become your priority! If you express your dissatisfaction to a company and the company takes 3 weeks before reacting to your comment, you will not feel considered by the company. You may wonder why you took the time to give your opinion if the company does not bother to follow up quickly on your dissatisfaction.
On the other hand, if you express your dissatisfaction to a company and they contact you the same day, it will create a WOW effect, even if you were initially dissatisfied. You will feel considered. In addition, you will understand that although there was a problem with your experience, the company is taking the time to listen to you and find a solution to resolve the situation. You will feel considered. In addition, you will understand that although there was a problem with your experience, the company is taking the time to listen to you and find a solution to resolve the situation. Acting quickly when there is dissatisfaction will reduce the percentage of customers who drop out when you calculate the customer retention rate at the end of the year.
The service you offer has a huge impact on customer retention. In fact, if you offer a great product, but the service you provide leaves something to be desired, your customers will quickly feel it. They will turn to a competitor with customer experience at the heart of their priorities.
Your product may have the best features at the best price, but if a customer doesn’t feel considered when doing business with you, they will go shopping elsewhere. They’ll find a competitor who specializes in the same field as you with a team that offers outstanding customer service.
To make sure you deliver exceptional customer service, you’ll need to build a team focused on customer experience and satisfaction! Caring, patient employees who are good communicators and full of good intentions are usually the best candidates to take charge of the customer experience. They will have a positive impact when you calculate the customer retention rate since your customers will not want to turn to the competition as long as they are feeling welcomed and treated well when they visit your business.
Make sure that your employees have all the necessary tools to allow them to properly assist customers. This way, your competitors will be disappointed with the percentage of customers who churn when they calculate their customer retention rate!
There may be times when you feel like your customers have had a bad day and are looking for a place to vent, but few people complain about nothing. If a customer takes the time to come back to you because they feel something is wrong with the product they recently purchased, you should take the time to listen and demonstrate empathy for their situation. Let them talk and actively listen to them, even if you think you know where they are going.
The situation may be very simple for you because you are the expert and know that the problem will be solved easily, but it is not so simple for your customer. Rather than fixing it quickly by making them feel like they’re bothering you, it’s important to use this time to clarify the situation with the customer, to explain what you’re going to do to correct it and to educate them if it’s a misuse on their part.
Educating customers is a retention strategy in itself and demonstrates your empathy and desire to help the customer rather than get rid of them. This empathy will help you build loyalty with your customer and will have a positive impact when you calculate the customer retention rate.
Nobody is perfect and mistakes are inevitable, that’s life! Even the most well-intentioned people who sincerely care about providing an impeccable experience sometimes make mistakes. Your customers have probably made mistakes too and they know that mistakes can happen at any time. When a mistake is made, no matter what mistake, it is very important to admit that you are wrong, to make it right, and to offer a sincere apology to your customer. If you care about their satisfaction and fix your mistakes, your customers will continue to do business with you despite a misstep. In fact, according to Hubspot research, 96% of people surveyed said they would continue to regularly support a company if it apologized and corrected its mistake to make things right. Acknowledging mistakes builds customer loyalty and will result in a lower churn rate as you calculate the customer retention rate.
The best way to acknowledge mistakes is to be aware of them. With an automated solution that sends satisfaction surveys to your client base like InputKit, you will have access to their feedback to better understand your business issues. InputKit allows you to communicate with your customers to discuss their dissatisfaction to correct the situation promptly. It is the best tool to catch up with a dissatisfied customer to take action in time, that is before they decide to go to your competitors. In addition to providing you with ways to act proactively, InputKit allows you to target improvement opportunities to continuously improve and retain as many customers as possible!
Now that you are inspired to put in place the best customer retention strategies for your business and that you have tools to calculate the customer retention rate, why not get a head start on your competitors by measuring your customer’s experience with satisfaction surveys? Schedule a free, personalized demo today and stop losing customers without the opportunity to act.
November 22, 2021
February 21, 2022
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