So you’ve grown your customer base.
You have managed to get new customers at a steady pace.
The next most important thing is making sure your customers don’t leave you.
After all, getting new customers can be expensive and when they leave, they represent a loss in future revenue.
This is customer retention.
What is customer retention?
Customer retention refers to a set of practices and procedures that seek to prevent the loss of customers and maximize recurring revenue.
After all, the costs of generating recurring revenue are generally drastically lower than the costs of generating new revenue. Making it incredibly valuable from a balance sheet standpoint.
In fact, increasing your customer retention by just 5% can increase your recurring revenue by over 25%.
Customer retention strategies vary from industry to industry but all focus on keeping your customer coming back to your business.
Examples of customer retention
A great example of customer retention comes from Amazon Prime.
A question for Amazon Prime members: when you’re looking to buy a product online, do you search it up on Google or Amazon since you’re paying for Prime anyway?
See? When you become a Prime member, you believe the sunk cost fallacy of “I already pay for Prime, so I might as well get free 2-day shipping from Amazon”.
This results in scenarios where you might pay higher prices for a product on Amazon that you would elsewhere just because you went straight to them.
This is exactly what Amazon wants their Prime members to do.
While there is debate on whether Amazon Prime fees generate profit for the company, they definitely make up any losses on recurring revenue and increased customer retention.
Why do customers leave?
Now, customer retention strategies will vary from company to company.
After all, the reasons why a customer might leave your business also vary.
It is imperative that you understand why your customers are leaving before you implement any customer retention strategies. Since you cannot solve a problem you do not understand in the first place.
Want to learn more? Check out our guide on 5 most commons reasons why customers leave your business.
We are not exaggerating when we say that customer retention can make or break your business. After all, it has a direct impact on your customer revenue.
Are you tracking your customer retention metrics? How many customers do you lose every month?
By answering these questions, you will be able to start putting the pieces together towards your new customer retention strategy.