Leadership Tips: Modern Customer Retention Strategies
By Ashlie Marshall
Walt Disney famously said, “Do what you do so well that they will want to see it again and bring their friends.” And with that spirit, a cartoonist from California built the largest entertainment business in the world.
Disney understood retention. Retention is universal, it’s not a new idea, and it has always been a part of a healthy business, whether that was a 15th-century blacksmith shop or a 21st-century service-based business. Retention matters.
As the internet makes our world increasingly smaller, adapting and changing our retention strategies becomes more necessary to keep fighting for that Disney-sized goal of “doing it so well.” Why do we do this? Why is it hard to do this? The more pressing question is, what can we do to build greater retention?
I start with the why.
The why: Retention creates a healthy business
Retention creates a healthy long-term business. It does this by diminishing costs. Simply put, acquiring new customers is expensive, and retaining old customers costs less. To onboard a new customer, whole departments join forces to see a single customer cross the finish line, advertising teams, marketing teams, and sales teams. The costs – when you add them up – are astronomical. Retention doesn’t require these other efforts and expenses.
Also, there’s the reality of increased customer lifetime value. A loyal customer tends to spend more money over time, resulting in a higher customer lifetime value. This means that a business can generate more revenue from a single customer than from multiple new customers.
Another value is word of mouth. Satisfied customers refer their friends. And the friends of satisfied customers tend to be the type of people who are also likely to be satisfiable type people. This then creates brand loyalty as customers stick with what they know works. Over time this creates something of a competitive advantage because you begin removing potential customers from the lake of available customers.
Your business thrives, and your competitors can’t find a way in. At least, this is how things work in a perfect world.
Why retention is hard
Let’s be honest; things don’t also work the way they should. Retention is hard. There is a reason companies struggle to retain their customers.
I list three reasons that come to mind.
First, customer preferences evolve. Preferences and expectations are constantly changing from moment to moment. What was once normal and fine is now old and out of date. Just ask any car maker who feels the need to recreate and redesign vehicles year after year constantly. “2022 must be different than 2021,” so the story goes. If we fail to respond positively to these expectations, our “loyal” customers just might jump ship.
Second is communication. Customers want to feel valued and appreciated, and businesses must communicate with their customers regularly to achieve this. Failure to communicate can result in customers feeling neglected and choosing to switch to a competitor who shows more interest in their needs.
And finally, negative experiences. Negative experiences can kill a business and undermine healthy retention efforts. One negative experience – just one! – can turn a loyal customer into a hater. And it can be challenging to win them back. Businesses must work to avoid negative experiences by addressing customer complaints promptly and effectively.
What you can do to drive retention
Retaining customers can be challenging due to many factors, many of which may be out of your control and have nothing to do with your business. But there is something you can do.
You can listen. You can personalize. You can follow up with your customers in obvious human ways. And you can find them where they are, online.
If you can practice active listening, you will be able to learn what your customers want, what they need, and what they expect. Listening to their preferences, clear communication, and immediate attention will give you the edge in working towards a consistently high retention rate for your company.
Personalization is the key to customer retention in the modern era. Customers want businesses to understand their needs and preferences and offer them personalized experiences. Personalization can be achieved through a variety of ways, such as personalized emails, customized offers, personalized recommendations, and personalized content. Personalization can and will help businesses build stronger relationships with their customers and increase customer loyalty.
Customer feedback is a powerful tool for businesses to improve their products and services and retain their customers. Businesses need to actively seek customer feedback and act on it in real-life human ways to improve the customer experience. Customer feedback can be collected through surveys, social media, and customer reviews. The most traditional type of feedback from customers is a good ole conversation. Creating an opportunity for the customer to give you direct feedback can be invaluable. Analyze customer feedback and identify areas of improvement. They should then take action to address the issues and communicate the changes to customers. Customer feedback can help businesses build trust and loyalty with their customers, which can lead to increased retention.
Find them where they are
Social media has become an important channel for businesses to engage with customers and retain them. Businesses need to have an active presence on social media and engage with customers through social media platforms such as Facebook, Twitter, and Instagram. Using social media to communicate with customers, provide updates, and address concerns and issues can make all the difference. They should also use social media to promote their products and services and offer exclusive discounts or offers to their followers. Social media engagement can help businesses build strong relationships with their customers and increase retention.
A final word
What does all this mean, really?
In this digital age, customer retention is more important than ever. With endless options at their fingertips, customers can easily jump ship and find a better deal almost daily. It’s up to businesses to step up their game and keep their customers coming back for more over and over again.
And, so what? Retention is hard. You’re up for the challenge, and I am too. At the end of the day, we need to do what Walt suggested, do what we do “so well they want to see it again and invite their friends.” That’s not bad advice.
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February 21, 2023