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The customer retention rate is the percentage of customers that continue to come back for more purchases in a certain period. This can be calculated by dividing all new customers who came into your store during one month, by all old customers who were there at least one year ago. If you want more sales than this number, then it’s worth investing into marketing and other strategies like social media campaigns or ads on search engine websites.,
Retention rates are important for any company. The “how to calculate customer retention rate in excel” is a tool that can help you determine your retention rates and use it to create 7 driving strategies.
Customer retention rate is the percent of current customers you are able to keep over a certain period of time. In a classic report from Bain & Company and Harvard Business School, they found “increasing customer retention rates by 5% increases profits by 25% to 95%.”
Not only that, but repeat customers spend more each visit, are simpler to sell to, and are more likely to provide recommendations than new customers. As a result, a high retention rate is a given for small enterprises.
Customer Retention Rate Calculation
You’ll need three numbers to determine your client retention rate:
- Towards the conclusion of the time, the number of customers (E)
- During the time period, the number of new clients obtained was (N)
- At the start of the time, there were a certain number of consumers (S)
((E – N) / S) X 100 = Customer Retention Rate
As a result, the customer retention rate is computed by multiplying the difference between the number of customers at the end of a period and the number of customers obtained during that period by the number of customers at the beginning of the period.
Let’s imagine you’re tracking your client retention rate over the previous three months and have the following information:
- At the conclusion of the three-month period, you had 55 consumers (E)
- During the three months, ten new clients visited your business (N)
- At the start of the three-month term, you had 50 consumers (S)
Customer Retention Rate (45 / 50) = ((55 – 10) / 50) X 100 = 0.9 X 100 = Customer Retention Rate 90 percent X 100 = Customer Retention Rate 0.9 X 100 = Customer Retention Rate 90 percent Rate of Customer Retention
In this situation, you began with 50 clients, added 10 new customers, and concluded with 55 consumers after three months. Overall, you lost five clients and acquired ten, resulting in a customer retention percentage of 90%, which is rather impressive.
Customer retention rates and when to measure them vary greatly depending on the company and time period. Businesses that depend significantly on strong client retention will often track their retention rate more regularly and have higher retention rates. Businesses that do not depend on high client retention, on the other hand, will measure their retention rates less often and produce lower rates.
If you own a coffee shop, for example, many of your customers are likely to be regulars who stop in practically every day on their way to work. As a result, you may wish to track retention on a weekly basis. If you run a spa where individuals only come once in a while or for a special event, you may wish to track client retention for six to eight weeks or quarterly.
Here are some industry statistics to give you an idea of what a good retention rate for your company might be:
Customer retention rates varies depending on the industry.
While you can manually monitor the client retention variable and determine the rate, an integrated point-of-sale (POS) system can do it for you automatically. We suggest Lightspeed for this. Lightspeed Analytics will assess your client retention rate and give you with a full bespoke reporting suite, ensuring that you always have the information you need.
7 Ways to Increase Customer Retention Rates
Customer retention, as we’ve seen, is one of the most successful strategies to increase sales and expand your organization. At the end of the day, if you want to increase your customer retention rate, you’ll need to prioritize customer experience in every aspect of your organization and devise a strategy for delivering that experience to every individual that passes through your doors.
We’ll look at a few different techniques to improve your client retention rate in this article:
1. Recognize your customer churn.
Your customer turnover rate is inversely proportional to your customer retention rate. It calculates the amount of clients lost by your company over a certain period of time. Understanding and monitoring your customer turnover, although disheartening, will help you to recognize and fix issue areas before they get out of hand.
You can monitor your customer turnover rate with an integrated POS system, just as you do with client retention. You may also make the computation by hand using the formula below.
(customers at the beginning of the month-customers at the end of the month) / customers at the beginning of the month = customer turnover rate
Customer turnover may also aid in the identification of your target market. If your turnover rate is routinely greater than you desire, it’s possible that you’re selling to the wrong individuals; enhancing customer retention and decreasing churn might be as simple as changing your target market.
Let’s imagine you run a flower store that caters to ladies, but you have a high churn rate and want to improve your retention rate. You run a six-month marketing campaign aimed at guys, promoting your bouquets as the ideal present for their lady. This marketing change increases client retention and decreases churn.
Determine your target market and design a plan that will attract consumers to your firm and increase customer retention using your knowledge of customer turnover and retention.
2. Gather feedback from customers
Consumer feedback is a terrific approach to collect honest answers from your consumers regarding their perceptions and experiences with your shop. Customers should be surveyed to see how pleased they are and where they believe you can improve.
A basic customer satisfaction survey is the simplest method to do this. Send an email to consumers asking them questions about their experience and allowing them to provide open-ended feedback.
A customer survey is an excellent approach to find out what your consumers think about your company. (Image courtesy of Pipefy)
It’s a good idea to request client feedback on a regular basis in addition to sending out one-time surveys. This will not only help you to track the success of any changes you make to your firm, but it will also provide you with snapshots of its general health.
Send out post-purchase questionnaires to learn about people’s first impressions of your company. Alternatively, set up a timetable and send out surveys to your loyal customers on a regular basis. Remember that surveys are asking something of your clients, and they may want some encouragement. To increase engagement, you might provide discounts or prizes for completing a survey. You may, for example, provide a 10% discount or 100 points for completing the task.
Customer feedback capabilities are also embedded into certain POS systems, such as Square’s digital receipts. When a consumer gets an email or text message receipt from Square, they may determine whether their experience was pleasant or poor, as well as a rationale for their rating. This enables firms to gather real-time feedback and react quickly to client problems.
When consumers have a terrible experience, they won’t tell you; they just won’t return. Because of a single bad encounter, two-thirds of consumers indicated they switched to a different brand. This provides little possibility for correction or dialogue, and these days, one of the few ways to handle client complaints is online. Maintaining existing client connections necessitates monitoring and reacting to internet evaluations.
Regularly check your Google reviews, Yelp, Trip Advisor, customer service email, and other review venues. Respond graciously to favorable feedback and welcome people back. Be careful in your reactions to unfavorable reviews, and instead of becoming defensive, attempt to solve the customer’s issue.
Podium is a cloud-based customer feedback program that gathers online evaluations from more than 20 different sites, as well as text, email, other online interactions, such as Google and Facebook, into one dashboard for a simple and streamlined solution. Podium makes it simple for companies of all sizes to gather customer feedback, request reviews, and reply to comments.
Podium is a great place to visit.
When you arrange trials or give out free samples of new items in return for feedback, you’re beta testing them. This allows you to make changes before the final product is published. Beta testing is a fantastic approach to collect consumer feedback before releasing a new product, and it may also help you understand your customers’ preferences so you can make product changes that appeal to them the most.
For beta testing, we advocate including your real consumers. This will guarantee that the replies you get are representative of your target audience, and that your modifications are made in accordance with their preferences.
Beta testing is ideal for items that need client interaction, such as new software, cosmetics, appliances, or equipment. If you’re attempting something new in your company and want to see how your consumers respond before buying huge quantities or launching a significant rollout, beta testing is a wonderful way to go.
Assume you’re considering introducing a body oil line to your apparel business. It’s a good idea to try this product with a few of your frequent or most loyal clients before making a big purchase. You may discover that they dislike the aroma or find the oil excessively sticky, necessitating the purchase of a different product. Alternatively, your consumers may provide glowing reviews, prompting you to increase your purchase quantity.
More information on how to start your own beta testing group may be found in this post.
3. Make a change to your customer service.
Strong and efficient customer service will decide whether or not your customers have a positive experience with your brand and whether or not you are able to keep a loyal client base. Nearly 70% of Americans agree that they would spend more money with a company that provided better customer service, and companies in the United States lose $136.8 billion per year due to avoidable consumer switching.
Use customer input to develop rules that align with the experience your customers want, and document and educate your personnel on customer service best practices to guarantee that everyone who goes through your door has a nice time and is treated with respect.
Customer service may build or break a customer’s impression of your company. (Image courtesy of PointofSale)
Here are a few guiding ideas to consider while designing customer service rules that can help you create a great experience for your customers:
- Customer satisfaction should be a top priority: I’ll be the first to confess that the customer isn’t always correct. However, because the purpose of customer service is to produce pleased consumers, make sure that your rules favor happy customers above everything else. Allow damaged items to be returned, be flexible with your return window, and offer coupons or other forms of compensation if something goes wrong. Remember that you are a little company, therefore be personal rather than a corporate rule follower.
- Show Appreciation: Your customers are the lifeblood of your company, so show them that you care by saying “thank you” and making them feel valued. For instance, in my shop, we would give $10 coupons to everyone who bought more than $100, and we would constantly remind clients how important their support was to us as a little company.
- Ensure Ease of Resolution: While you may want your colleagues to call you every time there is a problem, this may slow down the service process and cause customers to get irritated. In fact, a third of customers believe the most crucial aspect of customer service to be getting their issue handled in a single transaction. Streamline your customer service procedures and empower your workers so that the most, if not all, issues can be resolved by a single person without the need for additional resources.
- Maximize Convenience: When consumers come to you with a problem or a request, make sure that it is your company’s responsibility to provide a solution. To minimize annoyance and demonstrate that you value your clients, make things as simple as feasible for them.
- Take Responsibility: According to HubSpot Research, in times of corporate fault, 96 percent of survey respondents would continue to buy from a firm if it apologized and corrected the problem. If you make a mistake, don’t make excuses; instead, focus on fixing the problem and accepting responsibility.
- Train Your Associates: Your staff will be the outer face of your shop and will deal with client interactions on a daily basis. Make sure that customer service training is a part of your onboarding process, and that you retrain your employees on a regular basis to keep things new. This will guarantee that your employees are ready to provide the experience you want in your store.
4. Create a Perks-Based Loyalty Program
A loyalty program is an excellent strategy to keep customers coming back to your establishment. Rewards, exclusive updates, and unique services are all part of loyalty programs, but the ultimate goal is to make consumers feel special and keep them thinking about your brand so they spend with you instead of someone else.
For example, in my store, we established a VIP program that allowed our most loyal customers early access to sale days, “Item of the Month Deals,” and unique SMS alerts about all of our discounts and deals. Our VIPs were by far the most frequent spenders and the most inclined to develop a bond with our brand. Furthermore, the initiative not only rewarded but also strengthened client loyalty by keeping a channel of contact open. (We’ll go into omnichannel marketing in more detail later in this post.)
You may manually maintain track of your loyalty members for smaller-scale businesses using Excel, Google Sheets, or other platforms. Otherwise, you may employ loyalty program software to get greater control, the ability to contact consumers rather than waiting for them to come to you, and statistics on loyalty program use and effectiveness. Most POS systems (including Lightspeed and Square) offer built-in loyalty and tracking features.
You should define the framework of your loyalty program in addition to putting up a method for keeping track of your members. Two structures are described in detail below:
- Rewards
- Services for Subscription
Create a rewards program that allows your members access to exclusive bargains or presents as a means to “thank” them for their support. Punch cards are used as a reward by certain firms that have a pretty homogeneous product assortment or depend on regular sales. In essence, a punch card is used to keep track of how many transactions someone has made, and if they reach a particular amount of purchases, they are eligible for a free item.
Print punch card rewards on the back of your business cards to save space and money.
You may also use points as a reward system. This implies that clients earn points when they spend money with you. They are eligible for promotions, shop credit, or free things after they have accumulated a particular amount of points. To keep track of all the moving elements, this system often depends on POS or loyalty software.
Finally, as a reward for your program, you might provide unique offers or items. This might imply that clients who participate in your rewards program have access to their own sales or special offers. To inform loyal consumers about your services, this rewards program often depends on phone or email contact.
Another way that you can engage with your customers and help boost your retention rate is through Services for Subscription. Services for Subscription offer either exclusive content or packages that are delivered on a weekly/monthly/quarterly/annual basis. Subscribers pay for the services in set amounts at scheduled intervals.
For example, a soap company may provide a subscription service in which customers pay a set monthly fee and get three seasonally perfumed soaps delivered biweekly to their home. This strategy establishes a dependable consumer base and encourages brand loyalty.
Create a subscription service if your clients currently buy your items at regular periods. It may be a seasonal capsule clothing package or a weekly coffee bean delivery service. Think outside the box and see if you can repurpose any of your existing items to use in a subscription business.
Another alternative is to charge a membership fee for access to special material. You may, for example, send out a newsletter that provides subscribers advance notice of new products before they reach the stores. Subscribers don’t receive something physical in this case, but they do gain access to something. In general, these packages are less expensive and need a lot of exclusive access to be worthwhile for customers.
5. Make use of omnichannel marketing strategies
The purpose of omnichannel marketing is to create a unified and memorable brand experience by combining physical and digital marketing methods. Let’s imagine you’re buying at a local boutique and submit your email address at checkout in order to get updates on new arrivals. When you come home a few hours later, you get an email from the same boutique offering a new member’s discount of 25% if you follow its Instagram account.
Suddenly, you’re seeing this brand everywhere in your daily life, from your email to social media to while you’re out shopping. As a result, you become a regular customer who comes to this boutique for all of your clothing needs.
Omnichannel marketing is the integration of a customer’s experience across both digital and physical channels. This marketing technique is also a wonderful method to increase client retention, as we can see from the example we described.
To reach consumers, omnichannel marketing employs a variety of various marketing channels.
6. Make a Special Offer
Offering something distinctive is another approach you may utilize to increase retention. People will have no choice but to buy with you if no one else provides your exact product, service, or experience.
For example, in my boutique, we spent a lot of time training our employees and keeping our floor stocked with colleagues so that we could provide great customer service such as styling, clothing recommendations, and a nice and outgoing staff. Customers not only recommended friends to our business more regularly, but they were also more likely to shop with us over other local boutiques, thanks to our unique attentive and welcoming shopping experience.
Consider how you can improve your services, improve customer experience, or provide a unique product that isn’t available anyplace else. Make sure buyers are aware of the uniqueness of what you have to offer by promoting those distinct characteristics.
7. Volunteer or participate in a community or humanitarian cause.
Porter Novelli revealed in a recent survey that 78 percent of customers are more likely to recall a brand with a purpose or goal, and 71 percent would choose to buy from a purpose-driven firm over the competition. Working with a local charity or aligning your company with a humanitarian group can help your company stand out in the eyes of customers and increase client retention.
You may give a percentage of your profits to charity, host fundraising events, or get help from philanthropic organizations. Similar to farmer’s markets, pop-up stores, and partnerships with other companies, you may participate in community activities.
Conclusion
Customer retention is one of the most successful strategies for increasing sales and expanding your company. Although the technique for estimating client retention is straightforward, raising your rate might seem like an art that requires a great deal of trial and error. Overall, increasing your customer retention percentage requires providing a pleasant customer experience and maintaining open lines of contact with your customers. Use the suggestions above to direct your client retention efforts, and watch your company grow.
The customer retention rate is a key metric for businesses. This article provides 7 driving strategies to help increase your customer retention rate. Reference: customer retention rate kpi.
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