Everyone wants to improve customer retention, but few know exactly how to make that happen. Instead, companies spend millions trying various methods that yield little to no results. Instead of falling into this endless trap, wouldn’t it be better if you knew what the key drivers of customer retention are? Look no further. This is your guide into increasing profit the natural way.
The Four Drivers
To identify any form of driver, it’s essential that you begin with outcomes. Your primary outcome in this scenario is profit, which means increasing revenue and lowering overall cost. That is, assuming you have a positive gross margin and no loss in revenue.
Since these two factors drive profit, you’ve already identified your first two drivers of customer retention. To ensure those two drivers happen, you also need to prevent customer loss and thus have found your third driver. At the same time, improving customer loyalty ensures your first two drivers are met and creates the fourth driver. To recap, the four drivers are:
- Increasing revenue
- Lowering the overall cost
- Preventing customer loss
- Improving customer loyalty
You could continue down this interconnected road, but these four main categories are all you’ll need to start with. Now that you’ve identified these drivers, here’s how each works to retain customers and ultimately increase your profit.
Consider this driver the main support of retention. The more loyal the customer, the more likely they are to provide repeat business and avoid your competitors. So, how do you increase their level of loyalty? The answer lies in customer service.
Effectively handling complaints and providing top-quality service through your CS department is just one aspect. True CS encompasses the entire buying process, from the moment a customer walks through the door to the moment they leave with bags in hand.
The same is true in digital spaces as well, creating a buying experience from entering the site to making the purchase and receiving a tracking number. So, create an experience that focuses on each customer leaving your store delighted.
A more difficult yet necessary step, loss prevention requires you to anticipate when a customer may lose loyalty and create a strategy to win them back. This is often done through a save offer, such as a mega discount or other incentive. Make sure you’re not spending more to win customers back than they regularly contribute to your profits, though.
All you need to do here is look at customer touch points. With the right customer value management tool, you can easily analyze this data and make your efforts far more successful by timing them correctly.
For instance, knowing when marketing emails are more likely to be viewed allows you to limit the cost of that campaign by optimizing timing. This comes with massive savings for your business. If you’re unsure about a CVM tool, contact DecisionLink for more information about how they can help your business.
This final driver boils down to upselling and cross selling. Increasing initial price is only going to drive customers away, but you can leave them feeling as though they walked away with more value by adding complimentary products to their final tab. At the same time, you’ve successfully netted more profit while leaving them thoroughly satisfied for better retention.