So, you have defined your customer’s why and identified your brand’s audience personas to better understand your customer acquisition variables and win new customers. Congratulations on converting those leads into sales! Now it is time to take a look at your customer retention strategy and determine how to calculate and increase customer retention rate.
What customer retention methods are you implementing?
Evaluate shifts in industry trends
Do you reevaluate industry trends often? Trends shift, make sure your brand and product line evolves with the changing times. But how can you evaluate what’s trending right now?
9 methods to identify shifts in industry trends
- Read industry research and trend reports.
- Use market research tools to analyze where your competitors are focusing their resources.
- Use SEMRUSH’s Keyword Magic Tool, Answer the Public’s Questions Tool, or the free Google Keyword Planner tool to identify the top questions your customers are asking on Google. Learn how to use the tool here.
- Post surveys and polls on social media and in your newsletter to gather insight from your audience.
- Conduct 1-to-1 interviews or hold a focus group to gather clarity on what customer needs and questions aren’t being answered and forecast where your industry is heading.
- Analyze your website data using Google Analytics.
- Review your email campaign performance and engagement data.
- Evaluate your advertising campaigns and explore opportunities.
- Investigate yours and your competitor’s customer reviews to identify any areas for product improvement or new product opportunities.
Enhance your customer experience
Are you revisiting, evaluating and improving your customer experience? And why is customer retention important? Listen to your customers and product or service reviews and act on their feedback because a happy customer, is a repeat customer, is a high-value customer.
Implement retargeting campaigns
Retention marketing strategies include retargeting customers based on their behavior on your website (what did they click, what pages do they visit?), remarketing ad campaigns to reach customers who have visited your website to shop again but didn’t yet complete their purchase, customer loyalty rewards programs, and utilizing your CRM to segment customers into defined lists to improve your content strategy.
Examine the lifetime value of your customers and take a look at your Customer Acquisition Cost (CAC). It should be approximately 3 times less than the average lifetime value of your customers (this varies based on industry).
Leverage communication channels
How are you communicating with customers? Email? Social? Are you providing them with valuable content?
Which marketing channels should I use?
How should I communicate with my customers? Email or direct mail, organic or paid ads, video or infographics, search engine optimization using high-converting keywords, influencer marketing, customer referral programs, live events, virtual events, social media.
Select a few channels.
Experiment and analyze which channels provide the best return on investment or bang for your buck. Do select and invest in the highest-performing channels. Don’t dilute your resources across too many channels.
What messaging will I communicate?
Lastly, consider how you will communicate on each channel. Will you provide the same experience and strategy across all channels? Or will you take a different approach to each channel, because each channel targets a different audience and therefore requires different messaging?
Here are some live, virtual event ideas for your brand:
- Facilitate live Q&As on your brand’s FB live feed
- Host panel discussions via live webinar
- Provide interested customers with a live demo
- Provide industry best practices & tips
- Sell products live
How to calculate customer retention rate
You might be asking, how do I calculate my customer retention rate? Keep in mind, a customer retention rate applies to businesses that offer products or services on a subscription or contract basis. If that matches your business structure than use the following equation:
((E-N)/S) x 100 = Customer Retention Rate
E = # of customers at the end of the period
N = # of new customers you gained during the period
S = # of customers at the start of the period
Typically, businesses will select a period equal to 1 month, 1 quarter or 1 year.
Calculate repeat purchase rate
If you are running an ecommerce business or you offer a product or service that isn’t subscription or contract based, then you will need to calculate your repeat purchase rate. The repeat purchase rate is the rate at which a customer returns and shops with you again after their initial purchase. To calculate your repeat purchase rate use the following equation:
R/C = Repeat purchase rate
R = # of return customers
C = total # of customers
Calculate customer lifetime value
And lastly, calculating your customer lifetime value can help you determine which strategies to focus on. For example, if you have a low CLV, you might want to direct your resources towards customer retention. There are a variety of formulas to calculate customer lifetime value. Some brands even go to the extent of calculating the CLV on different customer segments. Here is a simple customer lifetime value equation to get you started:
(AOV x RPR) – CAC = CLV
AOV = Average Order Value
RPR = Repeat Purchase Rate
CAC = Customer Acquisition Cost
Create Your Customer Retention Strategy
Now that you have a better understanding of the customer retention formulas and customer retention methods are, it is time to create an actionable customer retention plan to grow your business.
Need help developing a customer retention strategy for your brand that will boost customers satisfaction and your average customer lifetime value? Get in touch today.