By Makanzwa Mercy Masunda and Rahabhi Mashapure 

Due to intensified competition, customer retention is becoming the holy grail (Annexcloud.com) for businesses in Zimbabwe because it plays a critical role in profitability, growth and brand perception.

Customer retention is whereby a business aims to convince existing customers to keep purchasing their products or services.   It refers to the business’s ability to keep existing customers and continue to generate revenue from them.  Or better still, it is the effort that a business makes to convert first-time buyers into repeat shoppers. In other words, customer retention allows a business to increase the profitability of an existing customer and maximize their lifetime value (LTV). The major goal is to increase repeat purchases by building customer loyalty through excellent customer service, product value and a distinct advantage over similar products or services. Therefore, it’s crucial to mind how you treat everyone who cross your way with professional since everyone is responsible for the smooth running of operations and practicing good customer relations to nurture and retain current customers.

The odds of selling to an existing customer are 60 to 70%, and to a new customer are just 5 to 20% (https://www.invespcro.com/blog – 02/03/2024). Sadly, most companies focus on generating sales i.e. boosting revenue and ROI at the expense of retaining customers. This starts a vicious cycle of investing in new customers to boost the ROI and sales figures while losing existing customers. 

THE METRICS

Metrics to measure customer retention

Source: Sarah Olson (August 16, 2023)

THE IMPORTANCE OF CUSTOMER RETENTION

Cost savings 

Retaining an existing customer is 5-25 times cheaper than acquiring a new one. It is a much more cost-effective strategy in the long run. However, this does not mean that businesses should not go for new customers, rather they should invest in nurturing existing customers because this grows business quickly and reduces the need to spend on the customer acquisition budget.

Upsell opportunities

A loyal customer is more receptive to promotions of your other offerings or upgrades. Repeat customers have a higher average order value than new ones. This is because customers with a longer relationship with a business have a sense of its value and are willing to spend more on its products. On the other hand, it is harder to upsell a new customer who still does not know whether they like your product or not.

Brand advocates

Loyal customers keep doing business with your organisation plus they also turn into brand advocates/brand ambassadors (unpaid).  The more loyal your customers, the more likely that they will share positive experiences and recommend your company to others. Loyal customers share their experience through writing positive reviews on your website; leaving positive social media comments or sharing your posts with family and friends; gifting your products to loved ones who might become loyal customers themselves and referring new customers to your business through WOM or referral programs.

Increased profits

 Many companies generate the majority of their revenue from existing customers, increased revenue results in increasing profitability.

Increased average order value (AOV)

 Repeat customers tend to spend more over time while increasing their average order value. 

Creativity and innovation 

Repeat customers helps the organisation to come up with new products which satisfies there tastes and preferences. 

STRATEGIES TO IMPROVE CUSTOMER RETENTION 

Infographic - 5 Strategies to Improve Customer Retention

Source: Oracle Netsuite (2023)

 Here are some practical ideas for improving customer retention:

Engage with customers: Look at your marketing channels and identify the best ways to engage with your clients. Do they respond best to social media, email marketing, online events or something else? Let customers weigh in on upcoming products and services, so they feel like they are part of the brand.

 Create a strong onboarding experience. When your customer makes their first purchase, create a memorable first impression, always ensure a smooth onboarding experience. Customers will likely recall any customer service hiccups in their initial onboarding, like mishandling information or not having a designated point of contact to hold their hand through the beginning.  Even if the business rectifies the conflict points, the memories will not be erased.

Reduce friction in the purchase process: The fewer obstacles or challenges customers face when purchasing your product or service, the better.  For example in ecommerce businesses fast page load times and a fast, simple checkout experience is critical. In a physical store, eliminate friction by making sure a staff member is always available to help a customer when they are ready to check out.

Work towards establishing a strong relationship instead of completing a transaction: Building relations or partnerships with clients makes them feel valued. A business should have regular meet-ups, reports, and proactive interaction with clients making them aware of what more they can achieve by staying in an association with your brand. Instead of letting your customers drop out of the sales funnel once a sale is made, engage with them to nurture positive professional relationships they can value. Constantly communicate, updating customers on the new positive developments and updates about the organization.  Consistency, is key. Delivering the same experience and message across time, locations, channels and media.

Improve customer support: Offer multiple ways for customers to reach you. This can include live chat on your website, a dedicated telephone number, email, social media and a comprehensive FAQ page online. Additionally, ensure fast response rates. Having the “right” employees through smart hiring, training and standards. Dedicated and personalized customer service can make or break the customer retention process.

Convenience and fast deliveries: as we know the majority of today’s buyers want are looking quick and easy delivery options. They like having a range of options, including none other than free delivery or fast delivery respectively. The best way to meet this criterion is to back up or cooperate with multiple carriers.

Loyalty Perks: these can be offered as loyalty programs, discount codes, special offers, VIP events, early-access benefits etc. Continuous reward-systems that offer loyal and returning customer advantage over new customers, is something that can greatly increase your customer retention percentage.

CONCLUSION

Staying in business with a customer for a long time is far more profitable than onboarding a new customer. Loyal customers do not just spend more; they also refer more which leads to reduced costs. Repeat customer statistics are key to business success and growth.