Starting your own business can be an incredibly exciting time. New research has revealed that more British businesses have been set up at the start of this year than any first quarter in history, with more than 200,000 companies created in the UK.
But as business begins to boom, owners tend to be so focussed on acquiring new customers, they often forget to pay attention to the customers they already have.
In this article, we explore exactly what customer retention is and the ways in which it can benefit your business.
What is Customer Retention?
Simply put, customer retention is the collection of activities that a business uses to retain existing customers. For example, if you gain 10 new customers this week, you have to think about ways that you can keep those customers over time to maximise your overall sales. The success of these strategies is what is known as customer retention.
Ways to Improve Customer Retention
There are dozens of tools and strategies you can use to gain a high customer retention rate. Here are 2 examples of different activities that you can consider using:
Discount Codes – This could be a reward customers receive once they’ve made a purchase, encouraging them to make another purchase in the future to utilise their code. It’s a good idea to put an expiry date on these which you can send in the form of an email reminder to give customers a gentle nudge to use them before it’s too late.
Complimentary Gifts – these can be a nice added touch, acting as a token of gratitude to thank customers for their ongoing support. It could be an included sample of a new product you’re releasing, or a voucher to spend in-store. Online food vouchers prove to a popular choice too.
What Industry Experts Have to Say
We recently caught up with premier Shopify plus agency Statement on a conversation they had with Jordan Bourchier-Lee, Partnership Manager at LoyaltyLion, who commented:
“We always give the tip of making sure that new customers are signing up to your newsletter. Make sure they’re signing up to loyalty schemes, make sure they’re incentivised to follow you on Instagram and Facebook. Whilst you may have a huge spike in transactional orders on a peak weekend, the dividend is getting paid in the next 12 months following.”
Calculating Your Customer Retention Rate
Your customer retention rate (CRR) is the figure that represents how effective your business is at keeping your customers happy over a set period of time. There’s a simple formula below to calculate your customer retention rate:
CRR = ((E-N)/S) x 100
CRR – customer retention rate
E – end number of customers retained over the selected timeframe
N – new number of customers gained over the selected timeframe
S – starting number of existing customers you have during the selected timeframe
If you’re unsure, there are plenty of online resources that can help you work out your customer retention rate with just a few clicks!
Holly brings a wealth of experience in both print and digital publishing. As Modern Retail’s Content Editor, Holly is passionate about helping independent retailers to thrive in today’s ever-changing market.