Customer Churn vs. Customer Retention: The Struggle is Real
Did you know that existing customers are 50% more likely to try your latest products than shoppers who are new to your brand? More importantly, industry research shows that they tend to spend 31% more!
That’s why customer retention is so important. It’s your company’s ability to keep customers engaged over a period of time. Customer churn is a retention metric that refers to the rate at which customers stop doing business with you after making a purchase. Retention and churn can be valuable indictors that something is amiss with your products or services — thus driving customers away. But when you’re confident in your offerings, and you have processes in place to keep customers happy, you can grow your brand and achieve desired sales success.
The metrics that matter
You customer retention rate can make or break your business because it measures how successful you are at acquiring customers and how successful you are at satisfying them. It’s much less expensive to retain existing customers than to acquire new ones. In fact, it costs five times as much to attract a new customer than to keep an existing one. And increasing customer retention rates by just 5% can increase profits by 25% to a whopping 95%! Yet, 44% of companies have a greater focus on customer acquisition compared to 18% that focus on retention.
In a perfect world, your brand wouldn’t experience customer attrition — and therefore wouldn’t experience any customer churn. What these metrics have in common for a business on the rise is bringing customers back. Depending on the industry, there are different strategies that work to get the figures where you need them to be.
Customer retention strategies for happy shoppers
Whenever a customer cuts ties, your brand suffers. Take at a look at three different industries and the plans and programs they commonly implement to reduce customer retention and customer churn rate.
Mail order. Catalogs continue to remain effective marketing tools. Depending on your audience, just 15% of millennials are likely to ignore direct mail, compared to 50% who say they ignore digital ads, according to a USPS report. Catalogs land directly in customers’ hands, while emails can be deleted before they ever see the light of day. So for catalog shoppers, what are some great ways to keep them engaged?
- Include targeted offers in your mailing. Since your recipients are already familiar with your brand, you’re more likely to achieve a higher response rate if you offer suggestions based on prior purchases.
- Reactivate dormant buyers. Reactivation strategies play a huge role in retention. Send lapsed customers a postcard with a short survey to learn why they stopped shopping with your brand. Drive them to your site and incentivize them to respond with an exclusive discount or free shipping.
- Don’t limit your business to seasonal catalogs. Keep your customers engaged throughout the year. Consider sending out trend reports or “look books” with a sneak peak of what’s on the horizon.
Retail. The U.S. consumer spends $10 out of every $11 at brick-and-mortar retail stores. They spend six times more in store than they do online. That’s largely because a brick-and-mortar’s in-store-experiences — the ability to see, touch and sample products and have face-to-to-face interactions — help increase sales and encourage repeat customers.
- Send reminders of special dates and upcoming events. Is there a Columbus Day sale coming up? What about Thanksgiving? Or a store’s anniversary event? Think of holidays as opportunities to reach out to customers and give them a reason to pay your store a visit.
- Establish a loyalty program. Did you know that 66% of consumers who belong to loyalty programs will modify spending to maximize rewards? And they’ll continue to return for future purchases to earn even more rewards to cash in later.
- Be proactive with customer service/support. Seventy-three percent of consumers reported that receiving good customer service from a retailer increases the likelihood they will spend more money than they had planned. Make it a priority to answer customers’ questions and tackle any issues quickly and effectively if you want to drive loyalty and repeat purchases.
Publishing. In the last year, a report from subscription software company Zuora reported a 30% churn rate for consumer publishers. With information so accessible online, it’s growing more challenging to get customers to pay for content. That’s why publishers are refining retention tactics, such as:
- Rewards programs. New York magazine creates incentives for users to return to their site and remain for set durations to gain some type of bonus or discount.
- Acquisition email marketing. According to Hearst Connecticut Media Group, implementing a robust engagement and acquisition email marketing program has been the single largest contributor to their improved subscriber retention.
- Offer time-sensitive subscription promotions. Time-limited promotions are a great way to drum up urgency for customers who want to score the best deal on their subscription. For readers approaching renewal, for example, purchasing another year’s subscription at a discounted rate can help close the deal, especially for readers who are on the fence about renewing.
CRM remarketing for better re-engagement
No matter the industry, today’s marketers employ CRM remarketing systems — a highly effective marketing technique to reach targeted customers via online display advertising while using data from a customer database. CRM remarketing gives your brand the power to leverage retention and reactivation campaigns across various digital channels.
Trigger programs are a tried and true method of CRM remarketing where targeted messaging is “triggered” by a specific action or behavior. Trigger-based remarketing solutions can span multiple channels:
- Email. These can include a reminder about an abandoned cart item or an alert to a discount on a previously viewed item. Research by Experianshows that e-commerce customers who receive multiple cart abandonment emails are 2.4x more likely to complete a purchase than those who receive only one.
- Direct mail, such as a personalized postcard. Triggered postcards are great for reaching site visitors who haven’t yet opted into your email list and email recipients who aren’t opening your emails.
- Social marketing. Extend the reach of your marketing message onto platforms like Facebook. You can dynamically determine an audience based on factors such as products viewed, emails opened (or unopened) and more. Offer varying formats or sizes of ads to help to improve the chances that you’ll catch their attention.
Finally, don’t ignore prospecting while you’re busy retaining and reactivating existing buyers. To keep your customer list strong, make sure you’re investing in replacing those who won’t return regardless of how aggressively you cultivate them.
Taking a data-driven approach
Whatever strategy you’re using to retarget and re-engage, you’re ultimately relying on data to determine the most effective ways to reach your audience. Data appending is the best way to cross-check, renew and update your available data, so you can improve segmentation and reach ideal customers at every touchpoint. Remember, when you know why customers leave, you can work smarter to get them to stay — and the team at Specialists can help. If you’re looking to improve your methods of customer retention, reduce your customer churn rate and increase customer engagement, contact us today to learn more.
People also ask…
What are the best practices of a data-driven marketing campaign?
- Take a hard look at your house file. Is it clean, accurate and complete?
- Segment your most profitable customers. Treat high-value segments as your most important
- Target smarter. Understand the data attributes you should be leveraging.
- Collect data at multiple touchpoints. Predict behavior patterns and establish measurable goals.
- Measure, evaluate and modify. Identity the metrics needed for success.
What constitutes value in a customer’s lifetime value (LTV)?
LTV combines the purchases of one customer and adds them up to express a single per-customer dollar figure. The basic premise for determining value: following a customer’s initial purchase, identify the expected sales that your company should gain over a set period of time. Be sure to separate the expected LTV from the initial purchase, as each has its own profit/loss.