Customer Retention is as Important as New Customer Acquisition
New customer acquisition is always a top priority for companies across every industry and their sales teams. It is why businesses invest a great deal of time, human resources, and budget to lead generation efforts. And with good reason – revenue growth is key to every company’s success and sustainability. The absolute first place to look when building and growing a business is growing your customer base.
However, your company should not overlook another important revenue source – customer retention. You already have existing customers with whom you have a current customer relationship. Retaining them should be a key part of your sales strategy. It should be a priority. The hard work of acquiring them as a customer has already been completed. Now the job of your sales team and other supporting employees is to provide an exceptional customer experience to ensure you have and retain many loyal customers. Your goals and an essential part of the sales plan and strategy should be a focus on customer loyalty, customer success, and customer satisfaction and there are many reasons why:
- Customer acquisition cost (CAC) – the cost of acquiring new customers is 5-7X higher than retaining current customers. Build business growth with the number of customers you already have.
- Renewals – if your current customers or a percentage of them are satisfied with your company’s products or services and how they are solving their pain points, renewing their contracts should be a relatively simple step to continue monthly recurring revenue (MRR) with them.
- Repeat purchases – your current customer base and the active users of your products or services can continue to contribute to your company’s bottom line through purchase frequency. If you put a consistent effort into customer satisfaction, your average customer can be a valuable revenue contributor for the lifespan of their engagement with your company.
- Upselling – your salespeople are already engaged with the customer. The next step of upgrading a product or service to a higher revenue level may not be a difficult step, especially with a happy customer who may have additional needs for your products or services.
- Cross-selling – a successful sales team understands the customer’s needs. Helping them solve their daily pain points with complementary products or services is a real possibility with a happy customer and a win-win for everyone.
Customer Retention Metrics Will Guide Your Strategy
Your customer retention strategy should include goals and an understanding of the customer journey, total number of customers, number of new customers, and number of returning customers. There are a multitude of tool to help pull all this data together from popular SaaS companies like HubSpot, Salesforce, Marketo, Eloqua and many others. These tools can help you measure customer retention, determine your KPIs (Key Performance Indicators), and set your benchmark metrics as you plan your strategy.
There are key customer retention metrics that should be central to your retention strategies in your overall sales plan:
- Customer lifetime value (CLV) – the total worth of a customer to a company over the entire time of their relationship. Retaining existing customers is a great way to drive growth as the cost of retaining a customer is far less than that of acquiring a new customer.
- Lifetime value (LTV) – the lifetime worth/spend of customers in aggregate. LTV is an aggregate metric, whereas CLV is calculated at the individual customer level.
- Customer churn rate – the rate at which customers stop doing business with a company. This can be a percentage of service subscribers who discontinue their subscriptions within a given time period, end a contract, or do not continue to purchase products. It is also known as rate of attrition.
- Churned customers – those customers who choose to stop using your products or services. In other words, it is when a customer ceases to be your customer.
- Cancellations – the act of a customer choosing not to continue to purchase your company’s products or engage in your company’s services. Valuable data can be discovered in this process – why did the customer cancel, can an alternative solution be offered, can your company win them back, and how can your company win them back.
- Customer retention rate – the measurement of the number of customers that a company retains over a given period of time. It is most commonly expressed as a percentage of the company’s existing customers who remain loyal within that time frame.
- Revenue churn rate – the percentage of monthly recurring revenue (MRR) your company lost as a result of downgrades and cancellations by current customers in a given period of time. It is a metric that is typically calculated monthly.
- Product return rate – the percentage of sales orders that have a product return. This is a metric that must always be considered when calculating the monthly revenue numbers. Further study of this metric can help determine how to eliminate or reduce this issue in order to maximize sales.
- Referrals – the act from an existing customer who provides the name and contact information of a prospect to his sales rep. Sales reps are taught to always ask for referrals following a successful sale and at multiple points during a customer relationship. This may not be a retained customer but it is an action that optimizes the relationship with a current, satisfied customer.
- Repeat customers – people who buy from you multiple times and would be considered loyal customers.
- Loyal customer rate – the number of customers who have made a repeat purchase with your company within a given time period.
- Repeat purchase rate – the percentage of customers who come back to your company for another purchase. This metric will always range from 0% to 100%, of course, the higher the number the better for your total revenue.
- Growth rate – the rate at which a company increases revenue from sales during a fixed period of time. Growing retention sales numbers is a great way to grow overall company revenue with less investment of new acquisition costs and human resources.
- Net promoter score (NPS) – a metric used in customer experience programs. It measures the loyalty of customers to a company with a single-question survey. A score from this survey is reported with a number from the range -100 to +100, with a higher score desirable.
These metrics can help you design the optimal strategy to retain customers. Customer retention is an extremely important element in a sales plan. It cannot be said enough – retaining customers is far more cost-effective than new customer acquisition while, at the same time, it is a huge time-saver for your sales team.
Your marketing team can compile this information for you and play a vital role in your customer retention strategy. A well-timed marketing campaign can help keep your company top-of-mind so that retaining them as a customer will be an easy step. Gathering information on your current customers’ thoughts about your company and their engagement with you is fundamental to your success in retaining them.
B2Bappointmentsetting.com’s Customer Retention Services can be a valuable resource to any sales organization and B2B company. A telemarketing campaign can help your company prepare the customer for the end of a contract, get ready to renew that contract, purchase more products, or engage in your services.
- At a pre-determined period of time, contact with the customer begins. It could be 3 months prior to the contract end date or the end of the month for the last 3 contract months, as an example.
- Concerns and issues with your company’s product or services can be discussed so that the sales team understands any issues that must be addressed to retain them as a continuing customer.
- Any promotions, pricing, special rates, or special conditions can be introduced to the customer at this time.
- An appointment can be set for the salesperson to renew the customer and add additional products or services to the contract.
A telemarketing calling campaign is designed to make customer retention a natural part of your company’s sales process and a reliable key element of your revenue growth plan each year. Customer Retention Management should always be a high priority for B2B companies and their sales organizations.
How can B2BAppointmentSetting.com help you with your customer retention efforts and free your sales team from time-consuming tasks so that they can focus on closing sales with retained customers and generating revenue? We are a skilled, expert B2B appointment setting services company who deploys only the highest quality, experienced B2B appointment setters and calling agents. Contact us today!