Customer Retention Strategies That Every Agency Should Know

Most businesses generally focus their marketing efforts on lead generation and sales, customer retention strategies tend to be put on the backburner. Of course, acquiring new leads is great, but retaining existing customers should be your primary focus. According to Brandongaille, 12-15% of consumers who are loyal to an organization represent 55 – 70% of sales. 

This year change how your agency approaches acquisition by focusing on customer retention. Here are a few key examples to get started.

Use Social Proof In Your Marketing

Clients want to know that your agency is going to deliver and the best way to establish credibility is through social proof. Numerous studies have shown that adding testimonials on social media and websites can encourage customers to listen and engage with your brand. In general, there are six types of social proof:

1. Expert: Expert social proof is when an expert in your industry recommends your products or services or is associated with your brand. Examples: a Twitter shoutout by an expert or having an expert on your Twitter chat.
2. Celebrity: Celebrity social proof is when a celebrity endorses your products. Examples: an Instagram post or tweet about your product by a celebrity or influencer.
3. User: User social proof is when your current users recommend your products and services based on their experiences with your brand. Examples: praises on social media or positive ratings on review sites.
4. The wisdom of the crowd: This type of social proof is when a large group of people is seen to be endorsing your brand. Examples: having thousands of customers or millions of followers on your social media profiles.
5. The wisdom of your friends: This type of social proof is when people see their friends approve your product. Examples: seeing their friends use your product or follow you on social media.
6. Certification: This type of social proof is when you are given a stamp of approval by an authoritative figure in your industry. Examples: being verified on social media, Facebook marketing partner badge, Agency Vista badge.

Influence Through Cognitive Bias

People tend to associate with brands that share some sort of resemblance with themselves. Psychologists call this cognitive bias ‘implicit egotism’ and it is an important thing to keep in mind when interacting with your customers. Implicit egotism is the hypothesis that humans have an unconscious preference for things they associate with themselves. 

Working at an agency you will deal with clients from every industry, you may even work with brands internationally. Understanding how your client communicates and what their values are is important in creating a long-lasting relationship. This can be done through personalized incentives like sending them the right content and the right time. 

Another way to achieve this is through in person client meetings. If you are hosting the client meeting it’s important that you make an effort to give them a positive experience. Take into consideration if any members of your clients team have food allergies, preferences, or time constraints when planning an outing. They’ll appreciate that you actively made an effort to make everyone included and happy. 

Creating More Customer Value

Each customer is different so it’s important to acknowledge this when giving value to your clients. If you know that the decision maker’s at your clients organization want specific KPIs or analytics, make sure to include them in your reports. 

Existing customers who are loyal to your agency want to know the latest news and information from your agency. Share snippets of new product or service features and showcase how your employees enjoy playing a key part in the company. 

Many believe that exceptional customer service is achieved by going ‘above-and-beyond’. But research published in the Harvard Business Review shows that the true driver of customer retention is getting your customers’ problems solved quickly and effortlessly. It is all about consistently meeting expectations first (while avoiding any unpleasant surprises) and then going the extra mile.

Measuring Customer Retention

To see if your customer retention efforts are working, you need to measure it. Here are a few metrics you can use to measure your customer retention.

Customer Churn Rate

How often you measure your churn rate largely depends on the volume of business you conduct. For example, if you have thousands of clients, then it would be wise to track your churn rate on a monthly basis. If you have a smaller client list, you can calculate the churn rate on an annual or biannual basis.

Annual Churn Rate = (# of customers at the start of the year – # of customers at the end of the year) / # of customers at the start of the year 

Revenue Churn Rate

Calculating the revenue churn rate involves subtracting the monthly recurring revenue (MRR) at the end of the month from the MRR at the beginning of the month. Then, you need to subtract any revenue accrued from cross-selling or upselling to existing customers and then divide by the MMR at the beginning of the month.

Monthly Revenue Churn Rate = [(MRR at the start of the month = MRR at the end of the month) – (MRR in upgrades during month)] / MRR at the start of month

Existing Customer Revenue Growth Rate

Existing customer revenue growth rate can be used on either a single account over a period of time or on a group of accounts to get a bigger picture.

Monthly Revenue Growth Rate = (MRR at the end of the month – MRR at the start of month) / MRR at the start of month

Repeat Purchase Rate

The repeat purchase rate can be applied to any timeframe (i.e. weekly, monthly, quarterly). While the calculation is quite straightforward, it is essential to consider the buying needs of your individual customer since each customer has a different baseline purchasing frequency.

Repeat Purchase Rate = # of returning customers / # of total customers

Product Return Rate

The timeframe for calculating the product return rate depends on your sales volume and industry. But whatever timeframe you choose, you must consistently adhere to it.

Product Return Rate = # of units sold that were returned / total # of units sold 

Days Sales Outstanding

DSO can be applied to a set of invoices over any given time. You can determine DSO by monthly, quarterly or annual basis. For the sake of simplicity, here’s the formula for calculating the annual DSO.

Annual Days Sales Outstanding = ( accounts receivable / annual revenue ) x 365 days