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Just about every business owner would agree that attracting new clients is the key to growing any business. However, while growing your client base is important, client retention is just as essential, if not more so. Client retention refers to a company’s ability to retain its client base over time. High client retention indicates that clients tend to continue to do business with the company. Client retention is usually measured as the percentage of customers that a company manages to keep by the end of a certain period of time.
The term client retention is defined differently depending on the industry and type of business. For example, the approach to customer retention differs significantly between business-to-business (B2B) companies and business-to-consumer (B2C) companies.
In terms of customer retention, the main priority of the B2C company is to improve the customer experience for boosted customer satisfaction. Customers of the vast majority of B2C companies can churn at any point in time. Therefore, many B2C companies invest a significant amount of resources into customer research to figure out how to maintain high customer retention.
For the B2B company, the importance of retaining clients may be even more pronounced due to the higher cost of contracts. However, retention is not necessarily equivalent to product satisfaction for B2B companies. If a customer has purchased a product or service, they will likely use it until the contract is over even if they are not satisfied with the quality.
Customer retention also differs across various verticals, such as retail, software, and grocery. Companies in different verticals will have different customer retention metrics and approaches. In fact, even the importance of customer retention will differ depending on the vertical.
Client retention has a huge impact on the growth of a software company and how they are viewed as a brand by investors and the marketplace. As a company in the B2B software industry, you should turn to resources like benefits of customer loyalty pdf, benefits of customer retention pdf, importance of customer retention pdf, or importance of customer retention ppt to learn more about the benefits of customer retention. This article will explain why it is important to measure customer retention for B2B software companies, the scope of customer retention, and the economics of customer retention.
Customer Retention Strategies
There are many effective strategies that B2B software companies can adopt to establish and maintain strong customer retention. No matter which strategies you choose to adopt, it is important to have a well-thought-out plan in place. Some of the most popular customer retention strategies include superior customer support, price discounts, and customer loyalty programs.
Superior Customer Support
Commiting to providing superior customer support is one of the most important steps that you can take when it comes to improving customer retention. In general, quality customer service is only second to offering superior products and services in terms of ensuring customer retention. Many research studies have found that poor customer service can drive away a significant percentage of loyal customers.
Even if you’re offering the best products or services on the market, you can still lose your loyal customers to your competitors due to sub-par customer support. Microsoft released a State of Global Customer Service Report in 2017 demonstrating that about 96 percent of customers consider customer service the most important factor when deciding whether to be loyal to a brand.
To offer outstanding customer service, it is important to have several accessible customer support options, to resolve customer issues as efficiently as possible, to address all requests for customer service, and to have well-trained and friendly customer service agents. Overall, you want to focus on exceeding the expectations of your customers during every interaction.
You can also inspire client retention through the use of price discounts. While your customers care about the quality of customer service and support, they also care about price. One example of a price discount that can improve customer retention is offering discounts for multiple purchases. You can also offer price discounts through a customer loyalty program.
Customer Loyalty Programs
A customer loyalty program refers to a marketing approach that involves recognizing and rewarding customers for their loyalty. Research has shown that customers want brands to have loyalty brands. The Bond Brand Loyalty released a report in 2018 about the value of customer loyalty programs. They found that when customers are a loyalty program member with a brand, they spend 37 percent with said brand, on average. In some cases, consumers are even willing to spend money to become a premium member of a loyalty program and enjoy the benefits associated with this premium membership.
If you want to have an effective customer loyalty program, it is important that you reward a number of customer actions, offer a variety of quality rewards, provide your customers with several opportunities to enroll, explore partnerships to offer even more attractive rewards, and focus on your customers’ values. Some of the most common pitfalls of customer loyalty programs include making it difficult to earn points, having points expire, and having undesirable rewards.
Some resources that you should reference if you want to learn more about customer retention management, customer retention tactics, customer retention strategies in crm, customer retention strategies in service marketing, and positive customer retention strategies include customer retention strategies pdf, customer retention strategies ppt, and customer retention questionnaire pdf.
Customer Retention Definition
The customer retention definition is the percentage of customers that a company manages to keep by the end of a certain period of time. The attrition rate, which is defined as the percentage of clients a company has lost over a given period of time, complements the retention rate. For example, if a company has an 80 percent retention rate, it also has a 20 percent attrition rate.
The formula you can use to calculate the client retention rate is as follows: ((total number of clients at the end of period – number of clients acquired)/(total number of clients at the beginning of the period)) * 100.
If you already know your attrition rate, you can also calculate the customer retention rate using the following formula: 1 – AR, where AR is the attrition rate.
It is important to calculate and keep track of the client retention rate for each period, so that you can make changes to your client retention strategies as you see fit to keep your loyal clients. If this number is low, you know that you need to make adjustments or invest more in your customer success strategy. If this number is in a favorable spot, you know you’re doing a good job and the business is healthy.
You can learn more about what is customer retention and customer retention definition by authors by referring to resources like customer acquisition and retention PPT.
Average Customer Retention Rate by Industry
Not only are there a variety of approaches to customer retention depending on the industry, but different industries tend to have different customer retention rates. Therefore, when it comes to setting goals for customer retention for your company, it is important to take average customer retention rate by industry into consideration.
For example, automotive customer retention strategies should differ from restaurant customer retention strategies or client retention strategies real estate. The reason for this is that the average customer retention rate restaurants is different from the average customer rate for the automobile industry or real estate. Even different companies in the same industry will naturally have different customer retention rates. For example, the salesforce customer retention rate will differ from the HubSpot customer retention rate. Context matters when it comes to client retention.
However, the customer retention formula does not differ depending on the industry. The retention rate formula excel, customer turnover rate formula, and the insurance retention rate formula are all the same.
The 2017 Product Benchmarks report (released by Mixpanel) indicates that the average customer retention rate was 20 percent or below for many (if not most) industries. What’s an above average retention rate for companies in finance or media industries? 25 percent or higher!
Within that same report, you’ll find that the average customer retention rate also varies across industries. The average customer retention rate was 20 percent or below for most industries. 35 percent retention or above in the SaaS industry is considered above average. For the ecommerce industry, the recent trend is a customer retention rate around 6 percent. Each industry is different, so it’s important for teams to use an average that’s most relevant to their business.
To learn more about average customer retention rate by industry, how to calculate customer retention rate in ecommerce, and how to retain customers in retail, there are many resources you can refer to online.
Customer Retention Examples
One of the best ways to learn about effective customer retention strategies is through example. Read below to learn about a few brands that have exhibited masterful execution of customer retention strategies. These brands are great examples to follow if you want to learn how to retain customers who are leaving.
Its stellar rewards system is a major reason Starbucks has managed to amass a strong loyal customer base over the years. Starbucks’ customer rewards system focuses on rewarding customers for doing business with them on a regular basis. Customers are encouraged to return through special offers, exclusive access, and discounts. Starbucks is frequently lauded for its customer rewards program. Starbucks’ rewards system allows customers to earn points toward free food and drinks.
As stated above, some customers value customer service above all else. All it can take is one top-notch customer service experience to turn someone into a customer for life. Similarly, all it can take is one particularly bad customer service experience to turn someone away from a brand for good. Southwest Airlines recognizes the importance of excellent customer service for client retention, which is why the airline company has taken to social media to offer customer service.
Southwest Airlines uses social media websites like Twitter to offer prompt customer service. If you want to see examples of Southwest Airlines’ use of social media to provide customer service, all you need to do is take a look at their Twitter page.
One way you can turn a customer into a loyal customer for life is by going above and beyond. LinkedIn employs this strategy by offering surprise gifts and rewards to their customers. Top users regularly receive boxes of goodies from LinkedIn. These gifts are unexpected and function to create a strong connection between LinkedIn and customers with the added benefit of brand exposure as users often take to social media to share their experiences.
There are many other resources available that include other customer retention examples, customer retention company examples, and customer retention strategies case studies. These resources come in the form of customer retention ppt download, customer retention strategies slideshare, customer retention strategy template, and a literature review on customer retention pdf.