Factors that drive Customer Retention
Purpose of any business is to create and retain a customer because high retention is always a deciding factor for achieving high profit. A research done by Bain & Company has revealed that a 5 % increase in customer retention rate increases the profit from 25% to 95%. As we all know that it takes so much money to acquire new customers, the loss of each customer comes at a high cost. Increase in the average revenue you earn per customer, in turn, could be invested more in the company’s growth, creating a virtuous cycle.
The best example of retaining customers to a large extent is Amazon. The company’s subscription program, Prime membership was a great success in retaining customers. 73% of the free trial subscribers converted to paying subscribers and 91% of the first-year subscribers have renewed for the second year.
Factors that increase the retention rate
Let us see the 7 major factors that drive retention on which the companies should work to stop defections/churn (rate of loss of new users) as early as possible
- Providing high-quality product/service that continually addresses their needs, making it a must-have product for the customers.
- Refining the new user experience and making the users experience your product’s core value as quickly as possible.
- The use of triggers, such as mobile notifications and emails can be effective in helping to trigger the usefulness of your product in a user’s mind.
- Must be constantly watching competitor’s new feature or promotion and make your product being “top of mind” with the customers. Communicating to the customers about your product’s new features and benefits easily accessible to make them stick with you. Out of sight, out of mind.
- Looking for the opportunity to capitalize on the power of stored value, the more information customers have saved with your app/product, the more likely people will return to access the data and add more to it.
- To solidify user’s commitment to your product by making the use of it habitual for them. It can be done by convincing them of the ongoing rewards hey will receive from returning to your product or service.
- Consider having a large number of more specialized products with a limited number of features rather than loading all possible features into a single product.
In order to ensure maximum retention, your first area of focus should be on early retention of new users. Also putting efforts at the resurrection (winning back customers who have abandoned your product) can also be valuable since it increases the revenue. To proceed this, first investigate why did they disappear in the first place just simply by interviewing them. By creating specific custom email and push notification campaigns for these customers can sometimes bring them back.
With all these efforts put to place, every customer who is ultimately retained will represent ongoing opportunities to earn more revenue for your company which is our ultimate goal.
Community Manager, Cultiv8