Hundreds of rave reviews on both Yelp and Google, 3 million visitors, an appearance on The Ellen Degeneres Show, and a video segment of their shop with over 6 million views – all for a $1 pizza slice shop called, Rosa’s Pizza Shop.
For Rosa’s, strong customer retention and national recognition was the outcome of customer loyalty and a strong devotion to the community and their customers.
You don’t need an appearance on a talk show, a viral video, or newspapers talking about you to grow your business and keep your customers. But, it’s that kind of loyalty that can get your business through a pandemic, and then some.
Below, we share how customer retention efforts get you through the toughest situations, including the current cost of living crisis, and how to improve your customer retention.
Customer retention is key to surviving the cost of living crisis
If you haven’t felt the impact of the recent inflation spikes, you must be living in 2019. Customers across the western world are feeling the sting of inflation, hovering at 9% for the western world, though it’s rumoured it may spike to as high as 18% in some countries.
And though things might level out as the year progresses, there’ll be a knock-on effect for years to come.
Inflation spurs the crisis as retailers must raise prices, negotiate with suppliers, and cut low margin goods just to keep some semblance of a profit margin.
Read our eBook on how toNavigate Through the Cost of Living Crisis
The cost of everything, from gas and food to consumer products and housing, is so high that consumers can’t keep up. They’re cutting any unnecessary spending, culling subscriptions, and tightening their purse strings.
Some businesses have experienced revenue growth since 2020, by an average of 87%, but profits for those businesses are still down by 4% in comparison to pre-pandemic years.
The only thing you can do to counteract the weight on your business, and experience growth, while maintaining profitability is to focus on understanding your customers (deeply).
With the right feedback, you can adjust your CX strategy, products and product pricing, and customer experience to match your customers’ reality today.
Customer retention rate by industry
The average customer retention rate across all industries is 75.5%. This is rather good news for most businesses since you’re 60-70% more likely to sell to existing customers than you are to new ones.
While that’s the average, customer retention rates across each industry vary wildly, and in turn, the strategies each industry must use to combat churn vary with it.
Compare fashion and fintech, as an example.
The customer retention rate for the fashion and retail industries hovers around 63%, while the retention rate for fintech sits at only 16%, with around 73% of customers churning in 7 days.
Now consider eCommerce.
During the GetUplift Online Summit, Valentin Radu, the Founder, and CEO of Omniconvert, stated in a presentation that the average customer retention rate for the eCommerce industry is 30%.
If your year-over-year (YoY) customer acquisition is 50%, the lifetime value of those customers, even with an average order value of $8, can be quite high.
If you think about it in this sense, a focus on customer retention is the difference between being profitable and simply not being able to exist.
Customer Retention Management: How to Improve Customer Retention Rates
Customer retention may look different for every company, but what remains steady is the dependence on every touchpoint that your customers encounter, particularly customer support.
Businesses can push loyalty and retention by first identifying the drivers of brand advocacy. Customer support and customer experience teams are the closest to your customers. They hear customer expectations, preferences, hesitations, limitations, and so on.
It's precisely this proximity you need to rely on if you want to drive customer retention. Here are some ways you can do that:
Ask for feedback and act on this information
Support knows more about your customers than arguably any other department. They're the best resource to tap when you're trying to learn more about your customers, why they buy, and what you can do to make them stay.
You can either skip your department to share these details or ask for direct feedback from your customers.
By fixing issues found in feedback, you should naturally improve retention rates.
Give the right insights to the right people, at the right time
The reason why one customer might churn is different from another. It has everything to do with their tolerance levels and the level of importance of the infraction.
For instance, one customer might turn to your competitors after a series of issues that they've tolerated for several months and are finally fed up with. Another customer might churn because of one single issue with your site.
The latter is actually more often the case for retailers.
Customers may shop with you once, but your shipping process was hasslesome and long, or they received damaged products. Maybe they found a better price for the same product elsewhere or found that your product didn't fulfill the value they'd initially perceived.
While it's challenging to acquire customers, and often takes a long time to build up customer loyalty, it's relatively easy to lose them.
Just two or three bad experiences with customer service cause an average of 86% of consumers to leave a brand, even if they were loyal customers for years.
These details about your customers, in the hands of the right departments, can help you build strategies to counteract issues that cause churn at the right times (such as during a customer service email).
Unify and analyse your customer data
Companies have access to more than 9,000 tools for customer insights and data collection, and these tools can generally collect millions of data points across buyer segments. The activation stack – the operational side of the tech stack – dwarfs that.
Yet, most teams don’t have the visibility they need into this data. It might be reserved for only the customer support, marketing, or sales departments, instead of customer experience, product, and operations. Or, access may be limited to specific members of the team.
More common than not, though, those that have access aren’t able to see how all of that data lines up. Tools are disjointed, and data is often separated by dozens of complicated spreadsheets with different taxonomies and categorisation and tagging methods per user.
Even with millions of data points, most teams have a hard time utilising the information. It can be overwhelming, especially when it’s disconnected and spread across a dozen tools and siloed by departments.
Unifying the data under a single platform, setting parameters for analysis, and selecting personalised dashboards to monitor, gives your team a clean and organised picture of your customers, so you can apply that data to optimisation efforts.
Create a consistent customer experience
Customer retention relies on all touch points a customer has with your business. If the experience is great on the CX side, but shipping and support are a mess, they’re unlikely to stick around, let alone feel loyal to your brand.
On the other hand, when you create an exceptional customer experience, and hold that throughout all touch points, you create fans that speak highly of you.
Beyond that, a consistent and unified customer experience creates benefits internally:
- Maintains brand consistency (especially if you have a mission and vision to uphold)
- Tears down silos between teams
- Provides a wealth of customer research by creating feedback loops across all buyer interactions
- Maintains reporting consistency down to individual customer types, which can help you personalise experiences
Build a customer loyalty program
Loyalty programs can look different for every business, and have about a million different ways of engaging and appealing to customers.
For Rosa’s Pizza Shop, the loyalty program didn’t have a structure at all, and they likely wouldn’t call it a loyalty program at all. The customers had a hand in creating loyalty. Customers could buy slices of pizza for other customer by simply paying for more slices, then hanging a post-it note on the wall.
Other customers can come in and use one of those post-its to collect a free slice of pizza at any time. Many customers come back again and again, and refer others (and even make the shop go viral), because they appreciate the sense of community in a small business. They’re happy to support a good cause (many of the free slices go to homeless members of the community).
For other brands, like Uber, loyalty is paid in cash. For every successful referral, the referrer gets $30. They also have Uber Cash, which offers 5% savings for every $100 the customer spends, and offer rewards based on points.
Empower your teams with the right technology
Often, CX teams get hung up on NPS surveys and mixpanel charts to build their product roadmaps and customer retention strategies. Direct feedback and collaboration across teams on that feedback and coordinating data should be the foundation of any strategy you create.
Empower your team to create both feedback loops with your customers and communication loops with each customer facing team.
The right technology makes it easy for them to enrich and analyse that data, share with team members and other departments, and ultimately act on the feedback.
Improve your customer retention with Unified Customer Intelligence
Only 10% of CX employees have a unified view of their customer data. They’re operating on hundreds, thousands, and even millions of data points across multiple tools within their tech stack. It’s overwhelming, chaotic, and disconnected.
How are you to measure data across several different tools without taking into account data from other tools?
Unifying your data into a single view, with common taxonomies, and filtering for the insights that matter the most to your team allows you to make decisions about your products and services holistically.
Optimising your business for customer retention then becomes an entire business strategy that alters every touchpoint to match your customer’s reality and expectations.