Table of contents:
- What is retention marketing?
- Difference between customer retention & customer acquisition
- Why retention marketing is essential for business?
- Retention marketing channels
- Important metrics & KPI for retention marketing
- Retention marketing strategies to follow
- Retention marketing examples
- How Zoho SalesIQ helps in retention marketing for your business
- Conclusion
What is retention marketing?
As we see the market continue to evolve and competition intensifying every day, especially in the B2B SaaS sector, it's crucial that organizations ensure customers remain engaged and loyal to their brand. This can be done keeping them fully aware of the latest features, capabilities, and growth opportunities that are offered, considering the constant changes and advancements made in the industry. By helping customers leverage these enhancements, they can be empowered to maximize their business efficiency and continue reaping the benefits of the purchased solutions. This is where retention marketing comes in.
Retention marketing is all about keeping your current customers happy and loyal instead of just finding new ones. It focuses on reaching out to existing customers and keeping them engaged via personalized services or offers, encouraging them to keep buying from you and not switching to competitors.
The difference between customer retention and customer acquisition
A lot of people mix up customer retention with customer acquisition, but they’re actually quite different. Here’s how you can tell them apart:
Customer acquisition
Customer acquisition is all about bringing new customers onboard. It includes things like marketing campaigns, promotions, and outreach to increase awareness and attract potential buyers. The main goal with customer acquisition is turning those leads into paying customers.
Customer retention
Customer retention, on the other hand, is all about holding onto the customers you already have. It’s about building a relationship with the customer, ensuring their loyalty, and getting them to come back for more by providing great service and keeping them engaged. The goal here is to provide an experience so positive that they choose to stick with you instead of looking at your competitors.
To keep it simple:
Custom acquisition = Getting new customers
Customer retention = Keeping existing customers happy
Why retention marketing is essential for businesses
Happy and loyal customers tend to become evangelists for the product, referring other potential buyers to check it out. This reduces the costs involved with sales and marketing compared to trying to acquire the same customers through other methods.
In addition to this, the following are key factors that help explain why customer retention is essential for a business.
Cost efficiency
John Addessi, who is a business advisor for the Kansas Small Business Development Center, says, “The research says it’s five to six times more expensive to find a new client than it is to reactivate an old client.”
Improved return on investment
A study by Bain & Company8 shows that a 5% increase in customer retention produces more than 5 times an increase in profit. This is due to returning customers typically buying more from a company over time. As they do, your operating costs to serve them decline as well, resulting in improved ROI.
Brand fidelity
With improved customer retention, you'll notice an increase in brand fidelity or loyalty. With an increase in loyalty, you will see returning customers buy more and spend more on products.
Brand evangelism
Customers who tend to be satisfied with a product's customer service and have reached the next level of loyalty become brand evangelists. They refer their friends and family members to check out and purchase the product. This metric can be measured with a Customer Lifetime Value chart.
From the above chart, you can see that the profit from brand evangelists can be more than double what they originally spent on the product.
Retention marketing channels
To ensure retention marketing is done effectively, you will need to utilize the correct channels to remain connected with your customers. The following are some of the channels that help with retention marketing.
Social media
A brand's social media presence helps build a community and makes the brand relatable to their consumers, cultivating a sense of familiarity. In addition to this, if the brand has an appealing presence to prospects, this increases the likelihood of them turning into customers and later recommending the brand to potential leads.
Examples of brands with good social media presence and capitalizing on it would be Duo Lingo, Scrub Daddy, and the Wilsonville Branch of Honda that saw a major spike in their social media presence and business after updating their social media strategy on Instagram.
Emails can be a very powerful tool for customer retention due to the level of personalization that can be put into them. We will also be able to identify and target the root cause of churns via emails that are customized for each demographic of customers. Moreover, consumers prefer to receive emails from their favorite brands just a few times per month5.
Messaging apps
Considering how often messaging apps are being used in this day and age, it is critical to have messaging apps be a part of a business's marketing strategy. Customizing messages for each user or user segment, and providing support for customers via these messaging apps, allows businesses to connect with customers better and also have the customer feel like they are better connected to the business.
According to Clevertap6, In-app messages are capable of boosting click-through rates by over 100% compared to push notifications. Their data also shows that various industries exhibit different average CTRs for in-app messages. For instance, Fintech apps lead with an average click-through rate of 24%*, followed by food tech apps at 21%* and OTT/streaming media apps at 18.32%*.
Push notifications
Push notifications are a beneficial tool in keeping customers engaged with the product's latest updates. It can help increase click through rates and retain customers by acting as a reminder of how the product is developing and how it would be able to help them in case the app or product hasn't been used for a while. It is important to get the personalization, timing, and message being conveyed right to ensure customers are engaged and not annoyed. It has also been confirmed by Gravitec.net7 that in the first three months after implementing push notifications, a website can see subscription growth of up to 300%.
Survey forms
It is important to understand customers to retain them. With survey forms, businesses can gauge how many customers are happy or unhappy and also why. This will help approach customers better based on their survey results and improve upon whichever aspect of the product or business the customer is not satisfied with. This will also make the customers feel like they are a part of the product's development and potentially help build brand loyalty.
Webinars and events
Webinars and events shorten the distance between a customer and business and help build a better relationship between them as well. Webinars help educate customers on the potential of the product and its value. Events help build a better relationship with the customer and allow them to see the faces behind the product, providing an opportunity to connect the individuals they work with, driving brand loyalty, and creating a connection between the client and business.
Important metrics and KPIs for retention marketing
Customer retention rate
The percentage of customers a business has retained over a period of time is measured by this metric.
Formula:
Customer Retention Rate = (Customers at the End of the Period) - (New Customers Acquired) / Customers at the Start of the Period
Monthly recurring revenue
This refers to the revenue your product generates in a month from customers already subscribed to the product.
Formula:
Monthly Recurring Revenue (MRR) = Average Revenue per Account * Number of accounts in a month
Customer lifetime value
The customer lifetime value metric measures the total revenue generated by a customer.
Formula:
Customer Lifetime Value = Customer Value * Average Customer Lifespan
where,
Customer Value = Average Purchase Value * Average Number of Purchases.
Net Promoter Score (NPS)
This score is used to gauge the likelihood of customers recommending the product to their friends or colleagues.
This is calculated by sending a survey to customers asking them the likelihood of them recommending the product. After this, by setting a score to identify the promoters (customers that select 8 or higher) and detractors (customers that select 7 or lower), the formula below can be used to identify the Net Promoter Score.
Net Promoter Score = % of Promoters - % of Detractors
Revenue churn rate
The rate of revenue lost from current customers is known as the revenue churn rate.
Formula:
Monthly Revenue Churn Rate = [(MRR at Start of Month - MRR at End of Month) - MRR in Upgrades during Month] / MRR at Start of Month
Where:
MRR in Upgrades during Month = any revenue generated from upselling or cross-selling to current customers
Customer satisfaction score
This is used to measure the percentage of customers who are satisfied using the product. It can be calculated by sending a survey to customers asking if they were happy or unhappy with the product or experience, normally after a support session. Then, the good ratings can be divided by the bad ratings.
Formula:
Customer Satisfaction Score = (Good Ratings / Bad Ratings) * 100
Existing customer revenue growth rate
The rate at which your business is generating revenue from customer success is the customer revenue growth rate. This is beneficial because it helps the customer success team learn how successful they are at getting existing customers to spend more on the product to get new features.
Formula:
Monthly Revenue Growth Rate = (MRR at the End of Month - MRR at the Start of Month) / MRR at the Start of Month
Retention marketing strategies to follow
To ensure retention marketing is successful, strategies will need to be set and followed, especially in the SaaS space where revenue is primarily dependent on subscriptions. Here are some of the strategies that help improve retention marketing.
Offer quality customer experiences
Creating a seamless, hassle-free experience at every interaction is crucial for encouraging repeat purchases. When customers find your processes intuitive and convenient, they are more likely to return and recommend your business, driving sustained growth.
Streamline your operations by providing clear information, ensuring accessibility for all users, offering multiple payment options, and implementing automated renewal processes.
Build trust with your customers
Trust is essential for customer retention; without it, all other strategies may fail. To cultivate trust, promise only what you can realistically deliver regarding your products, pricing, delivery times, customer support, and overall experience. Consistently meeting or exceeding these expectations lays a strong foundation for loyalty and enhances customer retention.
Ensure consistent quality
Maintaining high product or service quality is vital for building trust and retaining customers. Establish clear quality standards and implement rigorous control measures throughout the product lifecycle to address issues before customers notice them. For service-based businesses, regularly train employees to uphold these standards and monitor their performance. Gather customer feedback to ensure your offerings meet or exceed their expectations.
Enhance UX and UI
A well-designed user experience (UX) and user interface (UI) keep customers engaged. Regularly conduct usability testing across different user personas and gather feedback to identify and resolve pain points. Simplify navigation and reduce clutter to help users find what they need quickly.
Retention marketing examples
Companies utilize retention marketing to keep customers coming back to their brand and spending on their product. Here are a couple of real-life examples of brands utilizing retention marketing.
Harry's Razors
Everyone who uses them needs to replace their razors. Harry's razors identified this, and through a subscription-based model, they continuously send razors to their customers.
As opposed to using repeat email campaigns, they convert one-time buyers into repeat customers from the offset by offering them huge discounts with the subscription model.
This allows the customer to have a steady supply of razor blades on hand and also the business to have a consistent source of revenue.
SugarCRM
SugarCRM collects feedback regularly through voice of customer (VoC) surveys and also through relationship and transactional surveys. They have SugarClub where they can directly interact with their users and get a better idea as to how they can improve their product and drive customer retention.
Osume
Osume is a keyboard accessory brand. They target consumers who are looking for aesthetically pleasing key-caps that are built to last.
They identified that their consumer base primarily comprises of members from the tech or gaming community; these individuals tend to use Discord a lot. So, Osume created a Discord channel to develop a sense of community with their customers, allowing them to be better connected and understand them better.
How Zoho SalesIQ helps in retention marketing for your business
A lot of features that help with retention marketing are available in the SalesIQ application. Its ability to integrate with multiple other products also gives it an edge in understanding and communicating with customers. Some of the features of SalesIQ mentioned below help a business meet their retention marketing goals.
Push notifications:
The Mobilisten SDK from SalesIQ allows you to extend the functionality of your application including providing the ability to directly send push notifications to customers' smartphones. This allows organizations to better interact with their customers by directly utilizing push notifications to their smartphones.
Client feedback
Feedback can be gathered directly through the live chat, enabling customers to share their thoughts in real time. This lets businesses acquire the required information to improve the service or product consistently.
Insights into customer behavior in real time
Gather insights on customer behavior, website browsing patterns, past interactions, and preferences to customize your offerings and engagement strategy with the visitor tracking feature.
Prompt, personalized communication
Customer behavior data that's collected on SalesIQ can be used to automate proactive live chat invitations, providing assistance when customers are most likely to need it with the Triggers feature. Relevant offers and discounts can be shared at optimal times, and customers can be kept informed about product updates that align with their interests.
Conclusion
Retention marketing is essential for any business aiming for long-term success. It’s not just about acquiring new customers; it’s about fostering loyalty and building lasting relationships. By investing in retention strategies, you can enhance customer satisfaction and drive sustainable growth. Prioritize retention, and watch your business thrive!
References:
1) https://www.manageengine.com/products/service-desk-msp/managed-services-market.html
2) https://www.zoho.com/simplifiedCX/acquisition-retention-and-the-virtuous-cycle-of-business.html
3) https://www.zoho.com/blog/salesiq/customer-retention-strategies.html
4) https://www.manageengine.com/products/service-desk-msp/managed-services-market.html
5) https://blog.hubspot.com/marketing/hubspot-blog-marketing-industry-trends-report
6) https://clevertap.com/blog/in-app-messaging-to-boost-user-retention/
7) https://gravitec.net/blog/15-must-know-web-push-notification-statistics/
8) https://www.bain.com/insights/prescription-for-cutting-costs-bain-brief/
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