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Reveal Your Marketing Weak Points with These Customer Retention Metrics

Did you know that it’s easier (and often less expensive) to keep a client, than it is to find a new one? Customer loyalty is all about bridging that gap between what a client expects from your business, and what your company is actually doing to meet those expectations – or better yet, exceed them! A lack of customer retention is like a leaky bucket: there’s not much point filling your business up with new clients if the current ones keep dropping out the other end. A well-rounded marketing strategy includes paying close attention to customer retention metrics – and the best way to retain a customer is to make sure that they’re happy.

Taking Client Pulse-Checks

Before we delve into how to measure customer retention rates, we need to take a look at some methods for understanding and improving customer satisfaction. After all, if they’re not satisfied, your customers aren’t going to stick around to be measured! There are a number of customer satisfaction metrics you can use to help determine just how happy your buyers are; and faithfully engaging in customer surveys – whether they’re in-app, post-service, or strictly email-based – is a great way to get this exploration started. Some of the key elements you should try to uncover with your surveys include:
  • how well you’ve lived up to your customers’ expectations overall,
  • how likely they are to buy from you again, and
  • whether or not they’d recommend your company to someone they know
Remember, your company’s reputation is essential to your survival in today’s peer-reviewed world, and happy customers will help your business grow.

How to Measure Satisfaction

Using the established customer service metrics below in conjunction with your client surveys, will give you a valuable opportunity to improve both your customer relations and potentially, your sales. Customer Satisfaction Score (CSAT): As the most basic of the satisfaction metrics, the CSAT involves asking your customers to rate their overall satisfaction with your product, service, or business, based on a range of numbers. Ideally, the smaller a range you provide, from 1 to 3 or from 1 to 5 for example (dissatisfied through very satisfied), the easier the question will be for your clients to answer. Your company’s CSAT score is the average of these rankings. Customer Effort Score (CES): When it comes to helping your company generate repeat business, the CES can be a handy tool. This score is based on how easy or difficult your customer found it to deal with your company, or to have a problem fixed. Research shows that the more effort a client has to invest in getting an issue resolved, the less likely they are to remain loyal to your business. The metric generally involves a series of numbers from 1 to 7, ranging from very low effort, to very high. Net Promoter Score (NPS): Online or off, a bad review can be toxic. In a world that revolves around customer promotion, your ideal goal should be to not only keep your customers coming back, but to have them bring their friends. The NPS measures how likely a client is to recommend your business to someone they know, and it’s usually based on a scale from 1 to 10. Your score is derived from subtracting the percentage of fault-finders from the percentage of promoters.

Customer Retention Metrics

One potential way to reveal weak points in your overall marketing scheme is to track the hard results of your direct mail campaign. Another is to measure how many of the customers your campaign brought in are continuing to buy from you. Calculating customer retention relies on two important metrics:
  • Customer retention rate (CRR)
  • Dollar retention rate (DRR)
To understand how many of your customers tend to stay with you for the long haul, you should make regular use of these calculations on a monthly, quarterly, and annual basis, depending on the nature of your business. Benchmarking your retention performance is one of the best ways to connect your marketing and customer satisfaction efforts with the results they achieve.

Calculating the Customer Retention Rate:

As a measure of how many of your customers you managed to keep within a specific period of time, the CRR works with three important pieces of information: how many Clients you had at the Beginning of the period (BC), how many New Clients you gained during that same period (NC), and how many Clients you had at the End of the period (EC). The calculation is measured as a percentage, and looks like this: CRR = [(EC-NC) / BC] x 100 While the formula looks complicated, all you’re really doing is subtracting any new clients from the number you finished up with, dividing that result by the number of clients you started out with, and turning it into a percentage. Comparing this figure, period over period, can play a key role in helping you to reach your customer retention goals.

Calculating the Dollar Retention Rate:

Although it’s really more to do with measuring the retention of the revenue your customers bring in, than it is about the customers themselves, the DRR is still a valuable measurement tool. By using software or spreadsheets to track the sales from each of your individual clients on a regular basis, you can figure out whether they bought more or less from you this quarter, for example, than they did in the last. This metric lets you better focus your marketing and customer retention efforts because it encourages you to be proactive in reaching out to lagging clientele with a friendly hello. Hanging on to clients is paramount, but hanging on to clients who spend consistently and reliably is even better. When used in conjunction with the CRR, the information you glean from your DRR metrics can contribute to the much bigger picture of what’s really going on with your business – and it will allow you to take the necessary steps to keep your clients engaged, and buying from you.
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