The What, Why and How of Customer Retention

"There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else." -Sam Walton

Yes, customer is the Boss. Some regard him as the King. The Japanese are a step ahead. For them, he is the God. Well, we all know how important a customer is. And that is why, everyone, everywhere is trying hard to be "customer-centric". With a lot of fuss around creating products that customers need, selling them at a price they are willing to pay, and acquiring more and more number of customers, most marketers tend to miss the bull’s eye- retaining the customers they already have. Today, let’s have a sneak peek into the realm of customer retention.

WHAT?

Put simply, customer retention points to the efforts you make to ensure that your existing customers keep coming back to you, again and again, and again.

WHY?

Customer acquisition is seen as a sure-shot way to increase the revenues. So, it is no surprise that most marketers are more inclined towards spending resources on bringing in new customers. While customer acquisition is definitely important, customer retention helps you spend less and gain more. It is far easier, both in terms of time and money, to sell to a customer you already have than to repeat the "awareness-consideration-purchase" loop all over again to get new customers. As the old saying goes,

It costs five times as much to acquire a new customer than to keep an existing one. 

According to a Harvard Business School report, on an average, increasing customer retention rates by 5% increases profits by 25% to 95%. This highlights the significance of customer retention in driving sales and revenue. So yes, repeat purchases from repeat customers do lead to repeat profits. 

However, it doesn’t end here. Valued customers show trust and affinity towards your firm leading to enhanced brand loyalty. Happy and satisfied customers create a profusion of free and positive word-of-mouth, which is the most cost-effective way of finding new customers. 

HOW?

Here comes the million-dollar question. How do you keep hold of the customers you already have? The answer is simple, yet not so simple! Make them feel special. Exceed their expectations. Exceptional after-sale support and service, premium offers and discounts, consistent and personalized communication- these are the areas you should focus more upon. However, they won’t work in isolation. An elegant fusion of these strategies and their integrated execution can work wonders in bringing the sheep back home.

One excellent example of amazing customer retention is Amazon. Even its vision is to be “earth's most customer-centric company”. It is one of those companies who realize that if there is anything better than finding new customers, then it is to keep the existing ones. This can be substantiated by the fact that nearly 55% of online shoppers in the U.S. now start their product searches directly on Amazon, instead of Google.

More often than not, companies ignore the little things. But, it’s the little things that count the most. Amazon’s free returns, easy exchanges and complaint addressal are few of the many little things that it does very, very well. It constantly finds a way to impress customers, so that they keep coming back for more. It played a brilliant game by launching Amazon Prime, which not only triggered retention and loyalty, but also had customers pay for it! 

So, the point is,

Make new friends, but keep the old. One is silver, the other gold. 

#StudentVoices #IndiaStudents #CustomerRetention