How small businesses can maximize client retention
Increasing revenue tops the priority list for small business owners. The majority of small businesses, however, focus on acquiring new clients, rather than maximizing the relationships they already have.
Yet, you are more likely to reach your business goals if you can keep and sell to your current clients.
It costs more to acquire new clients than to retain them.
Think about it. The average small business spends 11.2% of their revenue each year on attracting new clients. Yet the majority of these clients visit your website only once, meaning you have just one shot. Only 5-20% of them will buy and it will cost you six to seven times more to close the deal than it would cost to sell to your existing clients.
If you can continue to foster relationships with your current clients, you will achieve a higher ROI because 60-70% will buy from you again.
But only 18% of companies focus on customer retention.
It is cheaper to provide good, quality service—and retain your current clients—than to constantly search for new customers.
Compute your client retention rate.
To see where your small business currently stands with client retention, use this formula:
Retention Rate = ((CE-CN)/CS)) X 100
CE = number of clients at end of period
CN = number of new customers acquired during period
CS = number of customers at the start of period
If you start the quarter with 100 clients and lose 40 clients, but gain 80, at the end of the quarter, you have 140 clients.
Plug this into the formula as follows:
CE = 140
CN = 80
CS = 100
Retention Rate (RR) = ((CE-CN)/CS)) X 100
RR = ((140-80)/100)) X 100
RR = 60%
Whether this is good or not will depend on your industry and your business goals. However, since it is expensive to acquire new clients, it makes good business sense to strive for a higher retention rate.
Analyze why your clients churned.
Client churn is “the loss of clients or customers,” according to HubSpot. Examining why your clients left is one of the first steps to retaining your current customers.
To do this, identify the key variables in client behavior, such as purchase patterns, product usage, and the history of customer service inquiries. Then, foster brand loyalty and client retention by creating a plan to address the unsatisfied needs of churned clients.
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Some simple ways to get started might include:
- creating a VIP program,
- targeting certain clients with special offers,
- personalizing your follow-ups, and
- always providing excellent customer service.
Also, it never hurts to put a personal touch on your marketing efforts. When a client expresses dissatisfaction, it is easy to reach out with a heartfelt apology and a special offer.
Foster brand loyalty and client retention.
The goal of client retention is to keep the clients you currently have. This means you analyzed the reason behind customer churn and created a plan to address that. So, don’t ignore your loyal clients in the process.
Allocate a portion of your budget to immediately caring for these clients. Continue to build your customer retention rate by improving your strategies to maintain relationships with current clients all year long.