lesson 1.:Customer Relationship Management The art of managing the organization’s relationship with the customers and prospective clients refer to customer relationship management. Customer relationship management includes various strategies and techniques to maintain healthy relationship with the organization’s existing as well as potential customers. Orgnaizations must ensure customers are satisfied with their products and services for higher customer retention. Remember one satisfied customer brings ten new customers with him where as one dissatisfied customer takes away ten customers along with him. In simpler words, customer relationship management refers to the study of needs and expectations of the customers and providing them the right solution. Need for Customer Relationship Management Customer Relationship Management leads to satisfied customers and eventually higher business every time. Customer Relationship Management goes a long way in retaining existing customers. Customer relationship management ensures customers return back home with a smile. Customer relationship management improves the relationship between the organization and customers. Such activities strengthen the bond between the sales representatives and customers. Steps to Customer Relationship Management  It is essential for the sales representatives to understand the needs, interest as well as budget of the customers. Don’t suggest anything which would burn a hole in their pockets.  Never tell lies to the customers. Convey them only what your product offers. Don’t cook fake stories or ever try to fool them.  It is a sin to make customers waiting. Sales professionals should reach meetings on or before time. Make sure you are there at the venue before the customer reaches.  A sales professional should think from the customer’s perspective. Don’t only think about your own targets and incentives. Suggest only what is right for the customer. Don’t sell an expensive mobile to a customer who earns rupees five thousand per month. He would never come back to you and your organization would lose one of its esteemed customers.  Don’t oversell. Being pushy does not work in sales. It a customer needs something; he would definitely purchase the same. Never irritate the customer or make his life hell. Don’t call him more than twice in a single day.  An individual needs time to develop trust in you and your product. Give him time to think and decide.  Never be rude to customers. Handle the customers with patience and care. One should never ever get hyper with the customers.  Attend sales meeting with a cool mind. Greet the customers with a smile and try to solve their queries at the earliest.  Keep in touch with the customers even after the deal. Devise customer loyalty programs for them to return to your organization. Give them bonus points or gifts on every second purchase.  The sales manger must provide necessary training to the sales team to teach them how to interact with the customers. Remember customers are the assets of every business and it is important to keep them happy and satisfied for successful functioning of organization. An Overview of Relationship Management and Why it is Important for Corporate Introduction: Why is Relationship Management Important ? If you are working and have a bank account, chances are that you would have heard of the term Relationship Manager who is tasked with the responsibility of attending to your banking needs as well as proactive account management. Further, if you are working for a corporate and are either a marketing personnel or you are an important client for a corporate, chances are that you are either a relationship manager or deal with a relationship manager belonging to your vendors. Thus, relationship management is indeed an aspect of management which has grown in importance in recent years mainly due to the intensely competitive marketplace where the Customer is the King and hence, any corporate wishing to “stay in the game” simply cannot do without relationship management. Who is a Relationship Manager ? Before proceeding further, it would be worthwhile to understand what Relationship Management is in the first place. Consider the Relationship Manager as a One Stop Contact Person or a Single Point of Contact for the Clients who do business with the corporates. Before the advent of relationship management, it was often the case that clients used to “talk to” various departments in the vendor’s organization wherein their issues related to sales, marketing, service, production, design, pricing, and any general query had to be resolved by multiple people and departments instead of being “routed” through a single person. In this scenario, one can imagine the hassles of dealing with multiple people in the vendor’s organization and the wastage of time and the inefficiency inherent in this approach. On the other hand, imagine if you were an important customer for the corporate and you are assigned a Single Point of Contact or a Relationship Manager for all your commercial needs. In this scenario, if the deliveries are delayed or your payment has been stuck or if the product fails the quality standards, all you have to do is simply call the Relationship Manager and talk to him or her wherein you assign the issue to them and then wait for them to call you back. Indeed, just think of the “Synergies” in this process as you need not call marketing, finance, quality assurance, or sales separately and all you have to do is talk to the Relationship Manager. Moreover, this is not only efficient but cheaper as well as more “real time oriented” meaning that there are no lags and delays arising from coordination and miscommunication aspects. Indeed, Relationship Management takes the art and science of sales, marketing, and customer service to an “entirely new level” by channelizing and routing the queries and concerns through a single point of contact who is the relationship manager. What Does the Relationship Manager Do ? Of course, this does not mean that all the queries and concerns would get addressed by the RM immediately since the RM’s job is to be the “face and the voice” that the Customers know in the vendor’s organization and once the concerns are raised, the RM would get down to work and contact the respective departments for resolution. In cases where multiple departments are involved, the RM would also ensure that there is better coordination and communication leading to efficiencies which in turn can lead to a situation where customer satisfaction goes beyond Customer Delight and instead, can easily lead to “Customer Wow” which is the pinnacle of customer service that all corporates must aspire to. What we are talking here is the essence of Relationship Management which based on the points raised so far indicates that Relationship Management is the “Management of End to End Customer Needs wherein the entire Customer Value Chain can be handled through a Single Point of Contact”. Relationship Management is also Proactive leading to Synergies and Efficiencies Having said that, Relationship Management is also proactive meaning that almost all RM’s do not stop at handling queries and concerns but also seek new business, ask for continuous feedback, meet with their clients periodically, and some who are astute become the “alter egos” for their clients meaning that they anticipate what the customer wants and give it to them even before the customer asks. This is the result of the “synergistic” combination of Marketing, Sales, Customer Service, and Contact Points for the Customers that is as much New Age Business as it is about old fashioned way of the so-called “personal touch” based customer service. Indeed, it can be said that the “wheel has come full circle” as the earlier decades management emphasized personal selling and marketing only to be superseded by automation and what we now have is the combination of technology and the “human touch” wherein customers and vendors use Big Data, Analytics, and Marketing and Sales techniques to “manage their relationships”. Conclusion: Aspiring to be a Relationship Manager? Finally, for all those of you who are aspiring for a career in Management and are already in the field or are graduating from business schools, it would be worthwhile to remember that ultimately, most career paths in organizations in the managerial vertical often lead to the designation and role of Relationship Management since this role requires both knowledge as well as experience in addition to exemplary people skills. Thus, we suggest that you take this introduction as the starting point and explore the topic in detail as well as make time to talk to practicing relationship managers so that you know the expectations, pressures, as well as the pleasures of being a Relationship Manager in the Real World. customer satisfaction Customer satisfaction refers to how well you, as a product or service provider, fulfil the needs and expectations of your customers. This applies to any interactions before and after the sale as well as during it. The following customer satisfaction definition comes from Cambridge Dictionary: “A measure of how happy customers feel when they do business with a company.” Seems simple enough, right? But the problem comes down to measuring customer satisfaction. It’s not enough to assume that a customer is satisfied because they leave with a smile on their face and don’t complain about you online. Some people might just be polite. How can you measure customer satisfaction The fact that the above definition uses the word “measure” highlights the importance of measuring customer satisfaction empirically. This is typically done using customer satisfaction surveys to gather your customers’ opinions on the different aspects of your service. You can also factor in other metrics like customer retention and loyalty to make assumptions about customer satisfaction. By measuring customer satisfaction in this way, you can identify your weaknesses and figure out how to improve your service in order to increase customer satisfaction levels. Why is customer satisfaction so important It’s much easier to forget about a customer as soon as they leave your store or click away from your website. So why should we take the time to follow up with our customers and focus on their satisfaction levels? Here are some of the key reasons why measuring customer satisfaction and striving to improve it are so important. Maximise customer lifetime value Many businesses underestimate the cost of acquiring a new customer. It is much more cost-effective to invest in retaining existing customers rather than constantly chasing new ones. If you focus on customer satisfaction, then those that buy from you are much more likely to buy from you again. This increases the lifetime value of that customer, i.e. the amount they spend with you over their entire lifetime. When customers keep coming back to buy from you, your return on investment from their customer acquisition cost increases. The bottom line is: satisfied customers are more loyal and loyal customers are more profitable for your business. Minimise customer churn Customer churn refers to those customers that stop buying from you, whether that’s after their first purchase or after several years of being a loyal customer. Customer churn can be very costly for your business because it means you need to go back to focusing on getting new customers. As mentioned above, a satisfied customer is more likely to remain loyal, therefore decreasing customer churn. Positive brand exposure Word of mouth is important to any business. Disgruntled customers will go online and complain about your business or its products, they’ll write negative reviews, and they’ll recommend your competitors over you. By improving your customer satisfaction, you not only avoid this, but you also benefit from positive word of mouth. Satisfied customers will recommend you to friends and family, talk positively about you online, and, hopefully, write positive reviews on places like Google, Facebook, and Yelp. Increase revenue All businesses want to increase their revenue and grow their business, but they might not always have the resources to invest in actively growing it. Once you’ve got your customer satisfaction strategy right, it becomes an effective way to grow your business and its revenue passively. While you focus on improving other areas of your business, satisfied customers keep coming back to buy from you and they keep recommending you to their peers or writing positive reviews online. This keeps a steady and, hopefully, increasing revenue stream coming in without you having to constantly work on it. Of course, customer satisfaction is something you should review on a regular basis to ensure you’re still hitting the nail on the head. What is customer loyalty? Customer loyalty is a customer’s willingness to repeatedly return to a company to conduct business. This is typically due to the delightful and remarkable experiences they have with that brand. One of the main reasons to promote customer loyalty is because those customers can help you grow your business faster than your sales and marketing teams. There are several other reasons why customer loyalty is critical to your success. Why is customer loyalty important? Customer loyalty is something all companies should aspire to simply by virtue of their existence: The point of starting a for-profit company is to attract and keep happy customers who buy your products to drive revenue. Customer loyalty is something all companies should aspire to. Here are the main benefits. Increased Share-of-Wallet Share-of-wallet refers to the amount of money a customer spends on a certain brand compared to how much they spend on the brand’s competitors. Customers convert and spend more time and money with the brands to which they’re loyal. That’ll mean more share-of-wallet for you. Better Word-of-Mouth Referrals Customers convert and spend more time and money with the brands to which they’re loyal. These customers also tell their friends and colleagues about those brands, too which drives referral traffic and word-of-mouth marketing. Increased Trust Customer loyalty also fosters a strong sense of trust between your brand and customers — when customers choose to frequently return to your company, the value they’re getting out of the relationship outweighs the potential benefits they’d get from one of your competitors. Since we know it costs more to acquire a new customer than to retain an existing customer, the prospect of mobilizing and activating your loyal customers to recruit new ones — simply by evangelizing a brand — should excite marketers, salespeople, and customer success managers alike. But how do you do it? How do you turn happy, satisfied customers into loyal brand evangelists? How do you use positive Yelp reviews, glowing tweets, and Instagram mentions to propel your brand’s growth? Well, we have a few ideas. How to Keep Customers Loyal 1. Be as generous as your customers. 2. Show your gratitude. 3. Provide benefits to your customers with every purchase. 4. Scratch the program completely. 5. Build a useful community for your customers. 6. Communicate effectively with your customers. 7. Improve upon your customer loyalty program. 8. Continuously evolve your business over time. 1. Be as generous as your customers. From the outside looking in, customer loyalty programs can appear to be nothing more than a scheme to get customers to spend even more money. (Let’s face it; we can all be cynics sometimes.) That’s why truly generous loyalty programs stand out among the rest. If your loyalty program requires customers to spend a lot of money only to be rewarded with meager discounts and samples, you’re doing it wrong. Instead, walk the walk and show customers how much you value them by offering perks that are so good, it would be foolish not to become a member. 2. Show your gratitude. You might think that, by offering a loyalty program, you’re expressing your gratitude for their business and loyalty. Think again. Your customers are routinely bombarded by businesses — your competitors included. Your competitors likely offer a loyalty program, too. What sets you apart in a way that keeps customers loyal? Expressing your gratitude through handwritten notes or direct, one-to-one messages. Include thank you notes in your product deliveries or purchase confirmation emails, or send special cards around the holidays. 3. Provide benefits to your customers with every purchase. Build loyalty by providing customers with awesome benefits related to your business and product or service with every purchase. The best part of this approach is that it may not necessitate creating a customer loyalty program — though that’s certainly still an option. If your company is pioneering a new product or service, a loyalty program may not be necessary. This minimalist approach works best for companies that sell unique products or services. That doesn’t necessarily mean that you offer the lowest price, or the best quality, or the most convenience. It means that you offer the only product in a certain category. Customers will be loyal because there are few other options as spectacular as you, and you’ve communicated that value from your first interaction. 4. Scratch the program completely. Considering how many businesses offer loyalty programs, one innovative idea to make yourself stand out is to nix the idea of employing a “program” altogether. Instead, build loyalty by providing customers with awesome benefits related to your business and product or service with every purchase. This minimalist approach works best for companies that sell unique products or services. That doesn’t necessarily mean that you offer the lowest price, or the best quality, or the most convenience; instead, I’m talking about redefining a category. If your company is pioneering a new product or service, a loyalty program may not be necessary. Customers will be loyal because there are few other options as spectacular as you, and you’ve communicated that value from your first interaction. 5. Build a useful community for your customers. Customers will always trust their peers more than they trust your business. Between social media, customer review sites, forums, and more, the slightest slip can be recorded and uploaded for the world to see. But, you can turn this into a positive by managing a community that encourages customer-to-customer interactions. One way to do this is with self-service support resources. If you have a knowledge base, you can add a community forum. A community forum encourages customers to communicate with one another on various topics, like troubleshooting the product or retelling service experiences. Even if they leave negative feedback, at least it’s left on your domain where you can respond to it and deal with it accordingly. A community forum can benefit your business in other ways, too — for example on the HubSpot Ideas Forum, customers can pitch ideas and upvote each other’s posts. If the idea is good, the product team will consider it for an upcoming sprint. If the idea can already be done with the product, the support team will reach out with a solution. This lets our team provide both proactive and reactive customer service through one resource. As online communities progress, you may formalize them to keep things organized. Having a consistent system in place ensures fairness and keeps customers satisfied over time. This is where customer loyalty programs come in handy. 6. Communicate effectively with your customers. Building and maintaining customers’ trust requires continuous communication. When a customer knows that your business is transparent and honest, they have trust that will have a positive experience in their interactions. This should still be the case especially when it comes to customer service and has a problem to be resolved. Good communication means your customers should know what is going on with your business. If there is a new product, a major change, company update, shortage, change in hours, or anything that a customer should be aware of so they aren’t surprised, it should be clearly communicated. This is a part of good customer service that is essential for making customers want to continue doing business with you. 7. Improve upon your customer loyalty program. While earlier we suggested forgoing the customer loyalty program, it’s still an essential cornerstone of any customer loyalty-building endeavor. It’s one of the best ways to build customer loyalty, especially if the brand keeps adding perks that make it impossible to walk away. Companies provide customer loyalty programs to their most frequent customers to encourage loyalty and long-term business by offering free merchandise, rewards, coupons, or even advance-released products. Continue improving upon yours by offering more perks and rewards as time goes on. 8. Continuously evolve your business over time. The market and the desires of your audience and customers are going to continuously change over time. Doing research and staying up-to-date in your industry reassures customers that you will always be innovative and offer the best options for meeting their needs. This doesn’t just apply to new technologies, though. Evolving should include the branding, culture, marketing, and your product itself. Customers develop trust over knowing that companies won’t be stagnant. Being aware of how to continuously improve your business ensures you’re always getting better. Loyalty to your business and your products comes with customers knowing they’re always getting the best. What is a customer loyalty program? Companies provide customer loyalty programs to their most frequent customers to encourage loyalty and long-term business by offering free merchandise, rewards, coupons, or even advance-released products. So, how do you ensure your customer loyalty program is beneficial for your business and your customers? Check out these types of loyalty programs. How do loyalty programs work? Gaining and retaining customers is the primary goal for businesses. A lot of marketing focuses on gaining customers but retaining them is often a whole different ball game. Loyalty programs work by giving customers an incentive to continue doing business with you. The incentives can be a variety of things, but they should offer a strong benefit to keep them coming back. Types of Customer Loyalty Programs 1. Point-based loyalty program 2. Tiered loyalty program 3. Paid loyalty program 4. Value-based loyalty program 5. Coalition loyalty program 6. Game-based loyalty program 1. Point-Based Loyalty Program This is arguably the most common loyalty program methodology in existence. Frequent customers earn points that translate into rewards such as a discount code, freebie, or another type of special offer. Where many companies falter in this method, however, is making the relationship between points and tangible rewards complex and confusing. “Fourteen points equals one dollar, and twenty dollars earn 50% off your next purchase in April!” That’s not rewarding. That’s a headache. If you opt for a points-based loyalty program, keep the conversions simple and intuitive. Although a points system is perhaps the most common form of loyalty program, it isn’t necessarily applicable to every type of business. It works best for businesses that encourage frequent, short-term purchases, like Dunkin’ Donuts. 2. Tiered Loyalty Program Finding a balance between attainable and desirable rewards is a challenge for most companies designing loyalty programs. One way to combat this is to implement a tiered system that rewards initial loyalty and encourages more purchases. Present small rewards as a base offering for being a part of the program, and then encourage repeat customers by increasing the value of the rewards as they move up the loyalty ladder. This solves the potential issue of members forgetting about their points (and never redeeming them) because the time between purchase and gratification is too long. The biggest difference between the points system and the tiered system is that customers extract short-term versus long-term value from the loyalty program. You may find tiered programs work better for high commitment, higher price-point businesses like airlines, hospitality businesses, or insurance companies. 3. Paid (VIP) Loyalty Program Loyalty programs are meant to break down barriers between customers and your business … so are we seriously telling you to charge them a fee? In some circumstances, a one-time (or annual) fee that lets customers bypass common purchase barriers is quite beneficial for both business and customer. If you identify factors that may cause your customers to leave, you can customize a fee-based loyalty program to address those specific obstacles. For example, have you ever abandoned your online shopping cart after tax and shipping were calculated? This is a frequent issue for online businesses. To combat it, you might offer a loyalty program like Amazon Prime — by signing up and paying an upfront fee, customers automatically get free two-day shipping on orders (plus other awesome benefits like free books and movies). 4. Value-Based Loyalty Program Truly understanding your customer requires you to identify the values and desires of your target audience — in doing so, you can encourage customer loyalty by targeting those characteristics. While any company can offer promotional coupons and discount codes, some businesses may find greater success in resonating with their target audience by offering value in ways unrelated to money — this can build a unique connection with customers, fostering trust and loyalty. 5. Coalition (Partnership) Loyalty Program Strategic partnerships for customer loyalty (also known as coalition programs) can be an effective way to retain customers and grow your company. Which company would be a good fit for a partnership? The answer depends on your customers’ everyday lives, needs, and purchase processes. For example, if you’re a dog food company, you might partner with a veterinary office or pet grooming facility to offer co-branded deals that are mutually beneficial for your company and your customer. When you provide your customers with relevant value that goes beyond what your company alone can offer them, you’re showing them that you understand and care about their challenges and goals (even those you can’t solve alone). Plus, it helps you grow your network to reach your partners’ customers, too. 6. Game-Based Loyalty Program Who doesn’t love a good game? Turn your loyalty program into a game to encourage repeat customers and — depending on the type of game you choose — solidify your brand’s image. With any contest or sweepstakes, though, you run the risk of having customers feel like your company is jerking them around to win business. To mitigate this risk, ensure your customers don’t feel like you’re duping them out of their rewards. The odds should be no lower than 25%, and the purchase requirements to play should be attainable. Also, make sure your company’s legal department is fully informed and onboard before you make your contest public. When executed properly, this type of program could work for almost any type of company and makes the process of making a purchase engaging and exciting. How to End a Loyalty Program Loyalty programs are not meant to last forever, for your or your customers. The programs, marketing, and benefits should change over time. It’s important, however, to not end loyalty programs in a way that is off-putting for customers currently in the program. A major way to avoid this is to establish a time limit to the program at the start, and remind users of the ending as it approaches. You can also give a small gift or one-time bonus at the end to counteract the negative feeling coming from losing the benefit. Now that you have some ideas for your new customer loyalty program, or how to enhance the program you already offer, you’ll also need to ensure you have a reliable way to measure its effectiveness. How to Measure Customer Loyalty 1. Customer Retention Rate 2. Negative Churn 3. Net Promoter Score® 4. Customer Effort Score 5. Purchase Habits 6. Referral Traffic 7. Social Media Mentions As with any initiative you implement, you should have some way to measure success. Customer loyalty programs should increase customer delight, happiness, and retention — and there are ways to measure these things (aside from rainbows, sunshine, and smiles). Different companies and programs call for unique analytics, but here are a few of the most common metrics companies watch when rolling out loyalty programs. 1. Customer Retention Rate Customer retention is an indication of how long customers stay with you. With a successful loyalty program, this number should increase over time, as the number of loyalty program members grows. According to The Loyalty Effect, a 5% increase in customer retention can lead to a 25% to 100% increase in profit for your company. Run an A/B test against program members and non-program customers to determine the overall effectiveness of your loyalty initiative. Discover everything you need to start running effective split tests with this complete A/B testing kit. 2. Negative Churn Customer churn is the rate at which customers leave your company. Negative churn, therefore, is a measurement of customers who do the opposite: either they upgrade or purchase additional services. These help to offset the natural churn that goes on in most businesses. Depending on the nature of your business and loyalty program, especially if you opt for a tiered loyalty program, this is an important metric to track. 3. Net Promoter Score® NPS® is a customer satisfaction metric that measures, on a scale of 1-10, the degree to which people would recommend your company to others. NPS is calculated by subtracting the percentage of detractors (customers who would not recommend your product) from the percentage of promoters (customers who would recommend you). The fewer detractors, the better. Improving your net promoter score is one way to establish benchmarks, measure customer loyalty over time, and calculate the effects of your loyalty program. 4. Customer Effort Score Customer Effort Score (CES) asks customers, “How much effort did you personally have to put forth to solve a problem with the company?” Some companies prefer this metric over NPS because it measures actual experience rather than the emotional delight of the customer. In this way, customer service impacts both customer acquisition and customer retention. If your loyalty program addresses customer service issues, like expedited requests, personal contacts, or free shipping, this may be one way to measure success. Now, here are some examples to offer inspiration while you build your own customer loyalty program. 5. Purchase Habits How long do customers take to make another purchase from you? How many customers are returning products after purchasing them from you? These purchase habits let you know whether customers are loyal to your brand — or whether they’re leaving you for your competitors. It’s important to understand what, if anything, is causing a return or delaying a repeat purchase. That’s why it’s important to consistently carry out customer satisfaction surveys at least once every quarter or whenever appropriate. You could send one to a customer after they tried out your product, for example, or right after they returned it. 6. Referral Traffic Referral traffic refers to any traffic that comes to your website from places other than search engines (such as Google). Social media sites, news websites, and other online properties would all count as referral traffic. Traffic from display ads doesn’t count. What matters is how many of your customers are linking to your site or talking about you on their social media profiles. You can measure referral traffic using a tool such as Google Analytics. 7. Social Media Mentions What are people saying about you on social media? Is it positive? Or are they spreading bad word? While this isn’t so much of a quantitative measurement as others on this list, it’s still an excellent way to track customer loyalty. You can track social media mentions using a tool such as HubSpot. Tracking mentions is an important part of a social listening strategy and one of the best ways to see whether customers are loyal. You can also find out what they’re saying about you in comparison to your competitors. Best Customer Loyalty Programs 1. Sephora Beauty INSIDER 2. Virgin Atlantic Flying Club 3. Amazon Prime 4. TOMS Passport Rewards 5. Hyatt Loyalty Program 6. Swarm Perks 7. REI Co-op 8. United Mileage Plus 9. Odacité Rewards 10. Starbucks Rewards 11. PetSmart Treats 12. Sweet Green Sweet Rewards 13. DSW 14. The North Face 15. The Body Shop What is customer retention? Customer retention is a metric that measures customer loyalty, or the ability for an organization to keep its customers over time. In addition to identifying the number of loyal customers, customer retention can reflect or predict customer satisfaction, repurchase behavior, customer engagement and emotional ties to a brand. While customer relationships typically begin with an initial interaction, customer retention metrics are related to the first purchase made by a customer and include all subsequent interactions. Once customer retention is measured, organizations can use this feedback to perform data analysis on components of customer experience and customer success. For example, if a drop in customer retention is reported, an organization can use this to help identify the root cause and adjust its product offerings. Customer retention is critical because the cost of acquiring new customers is much higher than retaining existing customers. Retained customers are also more likely to engage in word-of-mouth marketing or become brand ambassadors. Why is customer retention important for businesses? If an organization does not focus on customer retention but instead focuses solely on expanding its customer base, it is potentially losing out on repeat customers. While the process of gaining new customers, or customer acquisition, is important, it is also much more expensive. Maintaining customers and transitioning them into recurring customers is just as important of a process as gaining new ones. According to the Annexcloud.com blog post titled “21 Surprising Customer Retention Statistics For 2021,” almost 65% of a company’s business comes from repeat customers, while focusing on increasing customer retention by 5% can increase profits by 25% to 95%. The more loyal an individual becomes to a business, the more likely they will try new products or bring in new customers. Both customer retention and customer acquisition are important and should be balanced fairly. How to measure customer retention and key metrics Customer retention is typically measured in terms of retention rate and should be monitored continuously. The first step to determining this rate is to identify the period of time an organization wants to record. This can range from a month to a fiscal year or beyond. Other factors used to determine the retention rate include the following: • the number of customers in the customer base at the start of the period (S); • the number of customers at the end (E); and • the number of new customers acquired over time (N). These metrics should be recorded. Once retrieved, the formula is applied as follows: E-N/S x 100 = retention rate For example, if an organization starts with 750 customers and ends with 950, but acquires 625 over the period of time, the customer retention rate would be 43.3%. This image shows how to calculate customer retention. Customer retention strategies Some best practices and strategies to follow when considering customer retention strategies include the following: • Offer personalized service. Personalizing services to the customer can improve a customer’s experience and lead them to become repeat customers. • Use data to provide personalized support interactions. Data gathered about customers can help aid organizations in knowing their preferences, enabling them to build more personalized services. • Build trust. Building relationships with customers will help increase brand loyalty and trust. • Use social media. Social media sites such as Twitter, LinkedIn and Facebook can help an organization reach out to its customers, build relationships and trust, and even respond to customer support queries. • Incentivize loyalty. This can be done through customer loyalty programs or by offering discounts or credit. • Gather customer feedback. Gathering feedback from customers enables an organization to further personalize experiences. • Improve customer support services. Implementing a live chat or help desk tool, putting an emphasis on responding to customer support queries quickly and encouraging customers to create accounts can all help increase customer retention. All these customer retention strategies together can help build more trust between an organization and a customer, which can help increase the chances of current customers becoming repeat customers. Examples of customer retention Because customer retention can be achieved through various strategies, one organization’s attempt to gain repeat customers may look very different from another. Here are a few examples: This image shows different ways to collect customer data. Sock and apparel retailer, Bombas, donates a clothing item to a homeless shelter or homeless charity with every purchase. This process helps people in need while also enabling the customer to help by purchasing items. This can help build customer retention, as individuals may want to become repeat customers in order to fill their needs and give to their surroundings at the same time. Websites, such as Dollar Shave Club’s landing page, have a bot that will answer customer questions. Customers can type a question or select from a preset list of commonly asked questions. This can increase the chance of a customer making a purchasing decision, make them feel more welcome and potentially leading to repeat purchases. Businesses such as London-based Caffé Nero offer loyalty cards to incentivize customer retention. For example, if a customer orders a coffee or tea, they get a stamp punched on a card, and after nine stamps, they can get a free beverage. This strategy gamifies customer retention, as buyers will feel more accomplished coming back to fill out the stamps for the reward of a free drink. Assessing customer retention is valuable to organizations as it measures the happiness of customers and delivers the following benefits: • It can drive repurchase and product extension behavior. • It provides a quantitative metric for customer loyalty that can be compared or communicated. • Loyal customers are worth approximately 10 times as much as their first purchase. • Increasing customer retention leads to increased revenue. • Drops in customer retention could help identify weak spots in the business’s strategy. • Customer retention is faster and cheaper than customer acquisition.