Walmart, Amazon and Apple. The combined market cap (the cost of buying 100% of their shares) of these companies exceeds $4 trillion, and combined annual revenues exceed $1.2 trillion. These are 3 of the 4 biggest companies in the world.
But what do these three companies have in common? Yes, they’re all American; yes, they’ve all had figurehead leaders; and yes, they all sell online. But if you look deeper, what they truly have in common is a loyal and returning customer base.
Jeff Bezos, Amazon’s founder and CEO, once famously said, “we see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little better”.
Great customer experience is a great strategy for customer retention, but it is also a great way to build an army of advocates for your business to help you to acquire new customers too. But should you prioritise your focus on acquiring new customers, or retaining your existing ones.
What is Customer Retention?
Customer Retention is the process of re-engaging your current, existing and recent customer base to encourage them to continue buying your products or services.
Customer retention strategies are different to those of lead generation or acquisition as you have already invested your time, money and resource to convert the person into being a customer in the first place.
What is Customer Acquisition?
By its simplest definition, customer acquisition is the process of acquiring or gaining more and new customers through sales and marketing strategies.
Customer Acquisition strategies are often built around the process of persuasion. Either persuading a consumer to buy from you rather than a competitor, or persuading a consumer to buy your product or service for the very first time through creating a ‘need’ for what you have to sell; this is the process of customer acquisition.
How can I increase my Customer Retention?
In order to be able to increase your customer retention, you first need to understand how to measure it. You can measure your customer retention by calculating your CRR (Customer Retention Rate). There are various formulas that you can deploy to calculate your CRR, but the most commonly used is;
Retention Rate = ((CE-CN)/CS)) X 100
CE is the number of existing customers you expect to have at the end of a predetermined period of time
CN is the number of new customers that you expect to acquire within the predetermined period of time
CS is the total number of customer at the start of the predetermined period of time
And this calculation will generate you a percentage output. Benchmarking your customer retention rate is difficult to do, as it varies from industry to industry, but naturally the closer you are to 100% the better your customer retention is.
Now you’ve got an understanding of what your current retention rate is, let’s quickly look at how we can increase and improve our retention, with our 3 quick tips;
1) Reward Loyal Customers to Build Advocates
Loyal customers are only loyal because they’ve bought into your brand, your business, your product and service. They’re invested in your success, they’re proud of their historical purchases, and they want to give other consumers the opportunity to feel the same level of pride and get the same ‘deal’ as they got, making them great advocates for your brand; walking advertisements you could say.
But how do you get loyal customers to keep buying from you, or how do you get them to promote your business to other consumers? A combination of factors is key, but the most important is that you should reward your loyal customers.
Do you have a loyalty program? Does your loyalty program send bonus gifts, discounts or exclusive offers at key intervals like 10th purchase, birthday purchase etc.? Integrating a loyalty program such as Loyalty Lion could really significantly increase the number of brand advocates you have.
2) Encourage Customer Feedback
As consumers, we all like to have our say on how you could improve what you offer us so that it is a better process for us to buy and use. Historically, businesses would avoid getting customer feedback, because receiving feedback meant that you had to do something with it, which could incur cost, structuring and generally learning something you probably didn’t want to hear. But marketplaces are now so much more competitive across almost all industries, that ignoring customer feedback is guaranteed to give you high customer churn.
You should have processes in place to regularly encourage customer feedback, and you should close that feedback loop by letting your existing customers know that you value their feedback and most importantly have acted on those that are beneficial and feasible across the business.
3) Remove the Friction and Make Buying Easy
It might sound like common sense, but common sense isn’t always put into practice.
If you are selling a service, how smooth is the onboarding and set up process for your customer? Do they have to go through multiple tedious interactions and unnecessary processes?
If you are selling a product, how easy is it to find the product that you want, and once you have found it, how smooth is the checkout process?
Looking at the User Experience that you give to consumers and improving it is a great way of removing friction and improving the number of consumers who check out. Our UX Audits deliver incredible improvements to your digital customer experience.
How can I increase my Customer Acquisition?
Acquiring new customers is arguably one of the biggest challenges that we face as businesses. Whether you are selling a service, like a mobile phone call package, or a product, like a set of bath towels; the common challenge is the same. How do we get consumers to trust us with their money and their custom? And importantly, how do we get them to do this as a financially viable cost?
The truth is customer acquisition isn’t easy and scaling the number of customers that you can acquire is the main reason why Shopify Merchants come to agencies like us. We can all find case studies from 10+ years ago where ecommerce brands such as GymShark and Boohoo, were built and scaled from £0 to £1,000,000 in just a few years through a simple digital marketing strategy that didn’t extend much further than Social Media Advertising and Influencers.
But the market has moved, changed and become infinitely more competitive, and this means that simply launching a website, buying some products, and setting up some Facebook Ads, is no longer enough, in isolation, to get adequate and profitable traction. You need a full marketing strategy that operates seamlessly across multiple channels to achieve growth. Here are our three quick tips for improving customer acquisition;
1) Understand your Target Audience
It might sound simple, but the first step to acquiring new customers is to understand who wants and needs your product. The ecommerce businesses that say ‘anyone and everyone could use our product’ are often the retailers that are struggling the most, and sometimes are acquiring new customers at a loss.
The easiest way to understand who your target audience is, is to delve into the data. If you open up Google Analytics, and you look at the demographics of your most common customers, you may be surprised to find out who they are. Google Analytics can tell you what City they live in, but gender they are, how old they are, how they browse, and how many times they browse and the time between browsing before converting. This data will help you build audience personas that you can use tailored marketing strategies to engage each persona.
2) Understand where your Target Audience are
Now you have an understanding as to who the audience are, you should now take a look at the online habits of this audience group. Do you know where they spend most of their time? What publications do they read? Which celebrities influence them most? What other purchasing habits do they have? Afterall, how can you get your products in front of your target audience if you don’t know what behavioural patterns they have?
Once you have acquired this data and you have an in depth understanding of your audience you are then primely positioned to target them.
3) Engaging Consumers across Multiple Channels
We live in a digital age, where the average consumer has access to multiple electronic devices which help them to decide what they need, how and where to buy it. Think about your own household. You don’t just shop through Chrome on your laptop, you probably browse on your phone, consider purchases while on social media, read reviews through your tablet while on the train, and consume audio content through your smart headphones.
If your business is just visible via a series of Facebook Ads, you are just visible on one platform; if your target audience only sees you a small percentage of the time they are online; but they see your competitors a lot more often across many more channels, who will they buy from?
Being visible across SMS, Social Media, Email, App, Web, Podcasts, Google, and Comparison Sites - is going to give you the best opportunity to acquire new customers.
Acquisition versus Retention. Which is more expensive?
If you are responsible for allocating the marketing budget this year, you probably have a thousand questions going through your mind. How do I attribute the budget across channels? What agencies should I engage? How should I split my budget between new customer acquisition and nurturing existing customers to spend more?
The majority of marketing agencies will tell you what you want to hear, which is, spend 90% of your money on acquiring new customers; and this will sound great to you, because you’ll associate these new customers with great revenue growth.
At Blend, we will tell you the truth. It is more than 5x cheaper to retain a customer in some industries than it is to acquire one. We would recommend that you split your budget so ‘retention’ gets a stronger slice of the pie. Our growth partnerships are focused on increasing a customer's Lifetime Value, and converting more customers into loyal, brand advocates.
If you are looking to learn more about how you acquire more customers and how you can better retain the customers that you’ve already worked so hard to get then drop us an email. We will give you a comprehensive and honest assessment of where you are, and will create a tailored strategy to help you drive revenue and customer growth this year.