Imagine a world where it’s five to six times more expensive to acquire a new customer than to retain an existing one.
Now imagine this expense (and effort) increasing dramatically as more and more brands crowd an increasingly competitive market.
Imagining well? Okay, here’s the scary part: what I just described is reality, not dystopian fiction, and the thoughts on both the expense and competition stem from pre-pandemic analyses.
In other words, reality has gotten even more competitive, and customer retention remains far, far cheaper than acquiring new customers.
Shifting Consumption Patterns
With curbside delivery and a thousand options at consumers’ fingertips, the pandemic made a plethora of options available that were previously either only available in-store, or through decidedly non-user-friendly shipping.
This is almost a silver lining of the pandemic for consumers: choice is widespread, and delivery options have never been so numerous.
Of course, that doesn’t mean that consumer spending has risen at a commensurate rate; McKinsey’s study on the “polarization of consumption” between classes and, broadly, spending habits during the pandemic gave a highly cautious prediction for spending after the initial “consumption shock.”
“We expect a strong recovery in the United States but an unequal one,” the McKinsey authors wrote in March 2021.
They were certainly right about the inequality.
So, with the costs of getting new customers still high and consumer spending settling into new habits, how can your business effectively retain its current customers?
Ensuring Retention
B2B organizations are well-aware of, and well-positioned to leverage, the benefits of customer retention.
With 76-81% customer retention on average, B2B companies already put considerable effort into lasting and profitable relationships with their customers.
And this figure brings with it another crucial one: “77 per cent of B2B customer revenue com[es] from existing customers.”
Whether your organization is in the B2B space or not, though, your focus on retention should be similarly intense.
Thankfully, there are some quite straightforward ways to ensure a long-term and positive relationship with your existing customers—several of which are especially salient as COVID-19 continues to influence consumer habits.
Those consumer habits include an expectation of personalization.
With so many options for getting what one needs, in the manner one needs to get it, it’s no leap of logic to see how consumers are expecting an increasingly tailored experience.
Personalizing the Customer Experience
For businesses, this means employing CIPs, or Customer Intelligence Platforms, that can “allow businesses to collect, analyze, and act on customer data in order to make personalized offers that will meet each individual’s needs.”
And as to the efficacy of this personalized experience, 82% of customers are more likely to share their information with companies that provide one.
Customer loyalty programs and surprise reciprocation are other ways to increase customer retention, with both providing a reward to customers—at clearly defined points in their journey, or unpredictably—to show a deeper connection to the customer’s needs.
When streaming services like Netflix, Shudder, and others utilize algorithms to keep track of your viewing patterns, they’re able to provide recommendations that display that exact connection to customer’s needs.
Individualized suggestions show that Netflix knows your tastes, and wants to strengthen your connection to their platform by reflecting more of your interests.
Surprising customers with kind reciprocity can be “more powerful when it’s least expected” and can be a “particularly emotive way of promoting customer satisfaction and retaining happy customers.”
It’s another form of personalized experience, reminding them that your organization is motivated by more than financial gain. You’re interested in interpersonal connection.
As we consider these approaches, though, we should be sure not to become over-confident.
Tom Gale and writers like him stress the severity of the change in the status quo (the previously mentioned consumption shock, and uneven recovery thereafter). The solutions, Gale argues, might be visible, but that doesn’t mean they’re going to be easy to act upon.
Adding to Your Toolbox
The personalized experience and data-driven decision-making that many champion as the road to success are not easy to instantly activate, Gale points out.
He describes maintenance of customer loyalty “in this high-risk environment” as available only to those “expand[ing] their toolbox for customer retention, market share and wallet share gain beyond a one-size-fits-all sales model.”
Those tools include highly specified role definitions for sales and service positions, customer self-service digital tools, and “analytics to create data-informed sales plans and target growth opportunities.”
Gale calls the latter “one of the most powerful and under-deployed tools out there.”
McKinsey’s report makes a good companion point to the value of these tools—they may be lastingly important, well beyond the current juncture.
Gale is right about the importance of changes after such a major change to consumer habits, if companies want to retain customers.
McKinsey’s report targets several areas where those changes will very likely become permanent.
“We found that e-grocery shopping, virtual healthcare visits, and home nesting were likely to stick while remote learning, declining leisure air travel, and decreasing live entertainment would likely revert closer to pre-pandemic patterns,” the authors report.
The commonality among the three “stickiest” shifts? They involve a high degree of personalization, and derive high levels of actionable insights from data collected from customers.
Retaining Customers Long-Term
Success is often about differentiation—showing the consumer undeniable differences between your brand and the competition, elevating your offerings, and convincing the customer to buy your products over others.
In 2022, differentiation is more important than ever.
As consumer patterns trend towards a lasting preference for e-commerce, a wide selection of products, and the desire for a personalized experience, businesses hoping to retain customers must make these features of consumption central to their retention strategy.
Differentiate your brand by being truly personalized—funnier, more engaging, more authentic than the competition.
Present customers with suggestions and recommendations that fit their needs, informed by data gathered by CIPs.
Reward your customers (especially when they’re not expecting it) to remind them of your gratitude for their partnership.
If we take a step back, it makes perfect sense that the pandemic has created an urge for personal connections, and generally, a more human interaction.
When so many of us continue to suffer from loneliness and finding a road back to our previous lives, socially and otherwise, why wouldn’t we seek it in our consumption as well?
Customer retention might be more relevant now than it’s ever been, and to maintain it, we have to accept the sheer size of the change consumers have already gone through, and continue to go through.
We need to shift our toolbox towards personalized experience and data-driven insights, and most of all, we have to understand that this shift might be permanent.
With these efforts, customer retention will not only be possible—it might be the deciding factor in many companies’ success.
Source: Customer Retention in 2022: More Important Than Ever - TruScribe
