January 10, 2020 - Brittany Garlin
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.
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:
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.
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.
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.
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
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 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
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
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
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
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