We’ve recently been discussing strategies to grow your business. Studies show (and your gut probably already tells you) that long-term and repeat customers are typically more valuable than first-time customers.
A major consideration for startups is customer lifetime value, or how much the average customer spends with your business. You must observe how often and how much customers will buy over time before calculating it. Determining this figure takes at least a year or two.
Earning repeat and long-term customers for your business is the result of months, if not years, of experimentation and data analysis. If you don’t already have systems in place to capture and measure customer data, take this as your cue to start.
Once you have those reporting systems in place, let’s explore some tried-and-true customer retention strategies you can start implementing today.
The value of repeat and long-term customers
Just how valuable are repeat and long-term customers? According to recent consumer studies:
- Repeat customers spend 67% more than first-time customers.
- It costs 5x more to acquire new customers than to earn repeat business.
- Repeat customers refer 50% more people than one-time buyers.
- Converting 5% more of your one-time customers into repeat business could increase profitability by 75%.
Focusing your marketing efforts solely on first-time customers isn’t enough. You’re missing out on a valuable opportunity if you aren’t targeting marketing campaigns to loyal clients.
What repeat and long-term customers need
The following recommendations apply across industries and services. There’s a recurring theme among them — giving customers memorable experiences whenever they interact with your business.
As you read through, imagine how you can apply these tips to enhance your company’s unique customer experience strategy.
Deliver outstanding customer service
Ensuring customers have high-quality interactions with your business goes a long way.
Outstanding customer service is a major differentiator in many industries. Your competition may be outsourcing Q&A to chatbots. Or, a limited number of agents results in lengthy delays. Both can be frustrating to the end user — a major factor in whether they’ll choose to buy from that business again.
Hiring, training, and keeping great service agents is key to this process. Consider the customer’s perspective. If they can reach service agents and get the answers they need quickly, your value will go up in their eyes.
Provide personalized offers
Digital marketing tools help businesses provide personalized offers to customers.
You can work with a marketing automation platform to collect data on your customers over time, such as purchasing behavior. Use that customer data to trigger marketing activities that will encourage future purchases, such as:
- Customizable emails that suggest related products
- Ask for reviews on Google, Facebook, or Yelp
- Retargeted social media ads
- Loyalty club offering deals and rewards
By making it more convenient, affordable, and pleasant to shop with your business, customers may come to prefer your offerings over the competition. This should drum up more repeat business.
Surprise and delight with add-ons
In this highly digital age, going the extra mile for customers can help you build authentic connections.
“Surprise and delight” is a marketing tactic used to create excitement and curiosity — and ultimately, generate customer loyalty. Consider including handwritten notes with your shipments. When relevant, include product samples aligned with your customers’ personal interests. Providing free shipping and complimentary service upgrades to loyal customers won’t soon be forgotten, either.
Subscriptions are a fast-growing business model. If you offer a product that needs regular refills or replacements, consider providing a subscription service with a price incentive or upgraded shipping.
The best subscription experiences are seamless for customers. Make sure you lay out your subscription terms transparently. Use automated emails to remind customers of their next order before you charge them. And make it easy for them to delay their shipment by a few weeks or months if necessary.
Identifying customer retention trends
You should be paying close attention to your customer data. Tracking performance over time will reveal important trends. Perhaps certain types of messaging or deals worked better than others. Or, you may notice some customers are more likely to purchase during specific times of the year. These are just two of many possibilities you may discover when analyzing customer purchasing data.
Your business performance evaluations must include your customer lifetime value (LTV).
To know your customer LTV, calculate these figures, then multiply all 3 together:
- Average order value
- Average number of customer orders per year
- Average length of customer relationship (in years)
Let’s calculate an example based on a fictional honey company with an e-commerce website:
- Average order value: $29.50
- Average number of customer orders per year: 1.4
- Average length of customer relationship (in years): 2
- Customer LTV: $82.60
Your customer LTV is particularly useful when creating your advertising budget. If you know how much a customer will be worth to your business, you can figure out how much you can feasibly spend on ads while remaining profitable.
Do you have more than one ideal customer profile? If so, it might make sense to calculate more than one LTV. You’ll need a well-organized, well-maintained database to pull this off. But it’s worth the effort — you may discover one customer category is more profitable than the other, which can help advise your priorities moving forward.
Valuable data sources to increase your customer LTV
If you’re struggling to earn repeat business, don’t give up. View this as an opportunity to gain valuable feedback on your customer experience, then make deliberate changes based on what the data tells you.
Surveys are a valuable data source when seeking to increase your customer LTV.
One common approach is repeatedly measuring your net promoter score (NPS) over time. This survey helps you understand customer loyalty and enthusiasm for your business.
The NPS assigns a number value to how customers feel about you:
- 10s and 9s are “promoters” — passionate about what you offer and may even promote you to their friends, families, and networks.
- 8s and 7s are “passives” — satisfied but not blown away (yet!).
- 6s and below are “detractors” — who may actively dislike your offerings or had a negative interaction with your business.
Implementing the customer retention strategies mentioned earlier should help increase your NPS score, especially when you reward “promoters” and give extra support to “passives.”
Be careful with how you engage “detractors.” If you attempt to repair the relationship, be sure you approach the engagements with authenticity. Many customers are wise to automation these days, so ensure your outreach has a personal touch and provides tangible value.
Measuring your churn rate, the annual/monthly rate you lose customer subscriptions, is also critical. Don’t shy away from this one.
Treat it as another feedback opportunity when you lose a customer, such as through a product return or subscription cancellation. Include a survey at the top of your cancellation email or on your landing page for email unsubscribes. Review that data periodically — every month or quarter — and use that to make tweaks to your processes.
Customer experience is a constantly-evolving practice. While some tactics may work in 2022, those may no longer be relevant in 2024.
Keep your eye on your NPS score, online ratings, and other measures of customer satisfaction. Continue experimenting with new ways to earn loyalty. You might be surprised at how rewarding it is to genuinely understand your customers — and form lasting, mutually beneficial relationships.
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