What Is Customer Retention?

US companies make a lot of effort to attract new customers. It's good to see because it creates more opportunities for everyone – including consumers – by introducing us to a whole range of new products and services that we might not have found out about otherwise. However, having a loyal customer base is more important than continually attracting new customers. Retaining existing customers is also cheaper than finding new ones. It makes sense for a business to focus on converting existing loyal customers into brand ambassadors. That's what customer retention is all about.

Read on to discover how to improve your customer retention rates.

Customer Retention: the Basics

Customer retention is the process of maintaining the customers you already have. It's a much more effective way to market a business. Why? Because you're increasing the rate at which they will buy from your company again in the future. There are three things you need to do as a business to achieve customer retention:

1. Provide an excellent product or service.
2. Communicate with your customers effectively.
3. Find a way to follow up after closing the initial sale.

Achieving customer retention can be one of the most challenging parts of running a business. It's difficult to keep old customers interested in what you have to offer, especially as they will never remain as profitable as new customers. However, there are some ways that you can successfully retain your customers.

Customer Retention Rate

The customer retention rate is the percentage of happy customers who continue to buy from a company. The term also includes customers who remain loyal despite being offered competitive products and services by other companies. The average customer retention rate is around 20%, so most customers will not continue to do business with a company once they find better deals elsewhere.

Customers won't give away loyalty easily, as their priority will always be finding a better deal. If you keep your existing customers happy, they're more likely to spend money with your company. Undecided customers are more likely to be tempted away by competitors who are offering better prices at the moment.

Customer Retention Levels

Different customer retention levels depend on how much you're willing to commit to your customers' success and how often they purchase from your business. The customer retention strategies that work best usually follow up with happy customers to find out what they thought about the products or services you provided and what they want to see more of in the future.

Customer Retention Strategies

Suppose you're looking for some customer-retention strategies. In that case, there is a wide range of ways that businesses can keep their existing customers happy, so they'll continue providing business for as long as possible. Here are just some examples:

1. One-to-one Marketing

Find out what your customers want and then supply it to them. It's a good idea to ask their opinions and give them more of whatever they like best. If your customers tell you something about the products and services you provide, be sure to take their feedback seriously.

2. Customer Advisory Boards

These are the recommendations and ideas from people who regularly buy from you. It can be a great way to discover what your customers want and then supply it to them.

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