Marketing is often seen as an exercise in acquiring new traffic. No business can indeed operate without a stable client base, and the first step in achieving that stability is ensuring a constant flow of new customers, bringing in a fresh pool of revenue.
While this aspect of marketing is crucial, solely relying on bringing in new customers to turn a profit can lead to an imbalance in a business plan and ultimately put many businesses in a risky predicament if they somehow lose their means of generating new traffic.
One aspect of marketing designed specifically to combat this is customer retention.
Rather than putting all of one’s resources towards generating new traffic, customer retention operates under a system of practices that work to rotate a pre-existing customer base in the effort of creating multiple transactions from people who’ve already engaged with your product or service.
As helpful as this marketing field is, it’s equally important to keep an eye on certain customer retention metrics to make full use of the system.
Below, we’ve compiled a list of 4 top customer retention metrics to monitor and why they are so important.
Simply put, your customer churn rate refers to the rate at which customers stop engaging with your business. Customer attrition and loss are a perfectly natural part of any business – no brand can maintain a perfect customer retention rate for very long, and even those that do only tend to be under a certain threshold of customers. Ironically, the smaller a customer base is, the lower the churn rate generally is – but a smaller customer base doesn’t tend to generate the kind of revenue that keeps businesses afloat for very long.
Attrition will naturally happen as your brand grows – the wider your audience, the more fringe customers you’ll attract. These customers are likely to make one-time purchases based on immediate needs or experiments. The customers you should watch out for with churn rates are likely to make multiple purchases and display a measurable level of brand loyalty.
These will often be customers who have signed up for other engagement like mailing list subscriptions and social media following or who promote your brand to others. They will be the customers to retain, so monitoring the churn rate between them will be key to finding the best practices to keep them around.
When we speak about customer retention, it can be tempting to see it as an exercise in simply keeping people around for the next purchase. But why is this important? While there is always an element of retention, meaning not actively sliding backward, it’s also prudent to include customer retention metrics that proactively measure growth within an existing client base.
Aside from the obvious benefit of monitoring growth in general, growth within a loyal client base means your business is finding new ways to create transactions that your customers are interested in. Creating new engagements can stop a client base from stagnating and silently disengaging with a brand and lead to a stronger relationship with your brand.
While presenting your customers with new products to create new transaction channels is a fantastic way to stimulate growth within a pre-existing customer base, you can also assess customer retention through your established products and services.
If your business is set up so that customers are encouraged to make repeat purchases of the same product, you have a leg up on revenue generation and customer retention. Customers who engage with products through multiple transactions display a certain level of product satisfaction and represent a portion of the client base that can keep a business running for years.
Not only do these repeat purchases generate more revenue, but these are customers that do not need to be marketed to again. In theory, this means that their second purchases and every purchase after that increases in value because – unlike their initial purchase – no marketing resources are spent on encouraging them to buy the second time.
As a result, the cost of encouraging repeat purchases should be assessed in different ways. Do you discount sales to repeat customers? Does your business run a mailing list or social media account that keeps your product in your customers’ inboxes and news feeds? Do you offer a support line for customers to engage with?
These are all different ways in which resources are spent to create repeat purchases, but they also offer a much cheaper and more effective alternative to cold marketing once customers are through the doors.
This is the metric that will require business owners to tuck their egos away. It’s never fun having a product returned – but you shouldn’t view this as a failure so much as information to help understand an aspect of your business that could be hindering customer retention.
Offering exit surveys and avenues for customers to express why they return products can give you key insight into how customers engage with your product. Once the problem is known, it can be addressed to prevent unnecessary future attrition.
DashboardFox is the affordable BI Platform that could be exactly what your business needs, regardless of the metrics you have to measure for your business.
Among its many amazing features, we will highlight three great ones that are the usual reasons why businesses choose us among the many others.
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DashboardFox allows you to bring all that data together and share with the stakeholders who need it.
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Reach out to us! We at DashboardFox love to show people what we can offer to the table, either through a meeting or through a live demo session that you can book for free. You might even be lucky and receive a free trial from us! We’ll be waiting!