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6 Methods for Creating a Customer Retention Program

During the Middle Ages in Europe, loyalty was very important. People who worked for their liege, or king, were called vassals. They would kneel and swear allegiance to their liege, and the liege would accept by covering the folded hands of the vassal. The message is clear: "If you look after me, I'll look after you." Even though loyalty was forced, it was still a form of loyalty. Today, customers can easily choose who they do business with, and they have to work for their loyalty. But how do you keep customers coming back if you don't have long-term relationships with them? It starts when you go above and beyond what a customer expects. Getting a new customer can cost five to twenty-five times as much as keeping an old one. If you keep customers longer, you can make up for the costs of getting them in the first place. But none of this matters if you can't keep customers coming back.   program    

Customer Retention Program

Customer retention is making sure that new customers come back. A customer retention program uses different strategies to improve customer experiences, increase customer engagement, build customer loyalty, encourage customers to make repeat purchases, keep an eye on customers who might leave for the competition, and figure out why unhappy customers left. Some of these ways to keep customers are loyalty programs, referral programs, personalized emails, special offers, and changes to how customers sign up. A good program knows what the customer wants, gets the customer interested again, and gives them a reason to come back. When client retention programs work well, the number of customers who come back to buy again goes up. The average order value from repeat customers will also be higher. So how do you know if they're working? By keeping track of what customers do. Metrics for retention programs can help find out what customers need, what they expect, and what problems they are having.  

Importance of Customer Retention Program

Customer retention programs are important for businesses that want to make money, make more money, keep customers loyal, and get new customers. In a study on how customer loyalty affects economics, Frederick Reichheld and Phil Schefter showed that a 5% increase in customer retention rates can lead to a 25% to 95% increase in profits. They also showed that online businesses have to pay more to get new customers. Getting new customers costs 20% to 40% more than traditional retail, but the return on investment is higher in the long run. Keeping a customer costs five to twenty-five times less than getting a new one. But you may not see results right away. In the short term, the costs of a program to keep customers may seem high. But eventually, when customers start coming back again and again, it becomes cheaper to keep them. And there's the "word of mouth" factor: loyal customers tell others about their good experiences, who then become new customers. This can also lower the cost of getting new customers.  

Satisfaction doesn't always lead to retention

Even though it's hard to imagine a repeat customer who isn't happy, it's a mistake to think that keeping customers means making sure they're happy. Satisfying customers is a one-way street. It shows that the customer had a good time (good sale, happy with the product), but it doesn't mean they will come back. If a competitor has a better deal, some customers will go to them instead. Customer relationship management is needed. To keep current customers, you need to have active, two-way relationships with them. If you treat the customer well, keep in touch with them, and know what they want, a happy customer will become a loyal customer. If you have a Shopify store, you can build customer groups based on how engaged or not engaged your customers are. From there, you can use these to send automated emails to customers or visitors to get them interested again and turn them into customers you keep.  

How to Make a Customer Retention Program?

Choose the best customer retention strategy that fits with your business goals and then keep an eye on the metrics to make sure it's working. These six customer retention strategies are part of an effective customer retention program:
  1. Education programs after the sale. Education adds value to a product after it has been sold. It also shows your commitment to a long-term relationship and sets your business apart from competitors. When a customer sees that you're giving them more content, they're more likely to come back, and their loyalty to your brand will grow. Some examples are training videos, support forums, frequently asked questions, and blog posts. Some education programs that happen after a sale are called "customer success programs," and they might have an upsell or add-on part.
  2. Loyalty programs for customers. Reward customers who buy from you again and again by giving them points or perks they can trade in for discounts, products, or other rewards. Customer loyalty programs strengthen the relationship between a brand and its customers. It tells the customer, "We appreciate you coming back." Loyal customers mean a higher rate of customer retention and less customer turnover.
  3. Incentives. Freebies, downloads like digital loyalty cards, and special pricing for current customers are all examples of incentive-based customer retention strategies. With incentives, there are more repeat customers.
  4. Referral programs. Customers who bring in new customers should be rewarded with discounts, points, or money back. Getting new customers costs less when you have a strong and effective referral program.
  5. Response from customers. Customer satisfaction can be measured with information from surveys, polls, comments, customer complaints, and reviews. This information comes from how well your customer service team is doing. The first step in the customer feedback loop is collecting survey results and reviews. This information is then used to look at how people act and what they like. In turn, this leads to better management of the customer experience. Analysis of feedback data can help you lower the number of customers who leave and increase the number of customers who come back.
  6. Automation in marketing. Automation can help simplify customer retention strategies in a number of ways, such as keeping customer data up to date, keeping track of what customers buy, managing tiered loyalty programs and incentives, and getting customer feedback.
Strategies look good on paper, but you'll need to look at how well they work to know if you really have a good plan for keeping customers. This is where metrics for keeping customers coming in. The eight retention metrics that show if you are keeping customers or losing them are:
  1. Customer retention rates. Customer retention rates show how many customers stayed with a business over a certain time frame. This rate is affected by both customer loss (churn) and customer gain (new customers). To figure out the retention rate, add up all the customers, take away the number of new customers, divide by the number of customers at the start of the period, and multiply by 100. Here's how it works: End-of-term Customer Count - Number of New Customers / Number of Customers at the Start of the Term) x 100 = Customer Retention Rate.
  2. Rate of customers leaving. Churn is the number of customers who leave a business. If the rate of customers leaving your business goes up after you start a new strategy to keep them, it could mean that the strategy isn't working.
  3. Change in monthly recurring revenue (MRR churn). This shows how much money was lost when a customer left. If your MRR is going down, you need to do more to keep your customers.
  4. Rate of growth in sales from existing customers. Monthly revenue growth rate = (Monthly recurring revenue at the end of the month - Monthly recurring revenue at the beginning of the month) / Monthly recurring revenue at the beginning of the month. This shows how well the customer retention program is doing at getting customers to come back and spend more money.
  5. Customer lifetime value. This calculates the customer's lifetime revenue potential based on how many times they are expected to buy. The formula: Lifetime value of a customer = (Customer value x Average customer lifespan). Because customer lifetime value is based on how many times a customer buys from you, a rising value shows that your retention program is working well.
  6. Net promoter score. To figure out the net promoter score, you need to ask customers how likely they are to tell others about your products. The formula is: Net promoter score = (number of promoter scores/total number of respondents) - (number of detractor scores/total number of respondents). Customers with high scores are the most loyal. Mid-range scorers are likely to leave the team. Low scorers are a threat to your brand because they talk badly about your business to other people.
  7. Repeat purchase rate. This works out how many of your customers buy more than one thing over a certain time period. It shows how well the customer is doing. So, the higher the number, the more likely it is that your customer loyalty program is working well.
  8. Repeat customer rate. How do you measure customers who come back? Divide the number of customers who bought more than one thing by the number of customers who bought something only once. A total number of customers who have bought from you more than once/Total number of customers = repeat customer rate. The strategy to keep people from leaving is working better the higher the percentage.
 

FAQ about the Customer Retention Program

What is an example of a customer retention program?

There are many ways to keep customers coming back. One that people know is the Starbucks Rewards program. When a customer pays for coffee with the Starbucks app on their phone, the transaction is written down. Starbucks keeps track of what customers buy and where they are, which helps them offer more personalized incentives. Value over the life of a customer is also easier to track. If your business doesn't have enough money to make its own app, you can collect customer information at the point of sale.  

What are the three different types of customer retention methods?

  1. Reward programs. Reward customers who keep using your product, buy it again or buy something else from you. The structure of the program can be tiered, based on points, cash back, punch cards, or a subscription service.
  2. Educating the customer. This could be YouTube videos, blog posts, documents from the customer service team, or podcasts that can be linked to personalized emails and social media posts.
  3. Offers made just for you. The better you keep track of information about your customers, the more you can match special offers to what each customer wants. Machine-learning analytics are used to build offers or step-by-step programs that lead to higher-value rewards.
 

What is the most important factor in keeping customers coming back?

Superior customer service. Service starts with the onboarding process, which can include a smooth sign-up process (to keep customers from leaving right away), a personalized welcome email, product demos and walk-throughs, tutorials, and helpful customer support. By providing great customer service, you earn the trust and loyalty of your customers.
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