~It takes months to find a customer, and only seconds to lose one~
Although many organizations drive all their efforts into acquiring new customers (44% companies prioritize acquisition over retention), it is retaining them that defines business success. The set of activities a business participates in to ensure repeat purchases customers is what drives customer retention. Many organizations today are making the most of analytics to drive retention – by leveraging existing data to draw useful insights, they can improve customer retention and maximize the lifetime value of customers.
Why Customer Retention is Important
The goal of customer retention is not just to keep customers around for a long time, but also to grow and expand those relationships when measured through up-selling and cross-selling, conversion rates, and the number of recommendations. With businesses losing $1.6 trillion per year due to customer retention, here are some reasons why customer retention should be the top priority of any organization.
- Existing customers generate far more revenue than new customers. According to Gartner, around 80% of an organization’s future revenue comes from just 20% of existing customers!
- Retaining existing customers requires far less effort, time, and resources as compared to acquiring new customers.
- It is through existing customers that organizations can bring in new customers through word of mouth, positive feedback, and social media likes and follows.
The Role of Analytics
In the world of digitalization, businesses track a large amount of data about their customers: attitudes, product usage, behavior, trends, purchase history, preferences, etc. However, harnessing this huge volume of data and converting it into relevant information to increase personalization, relevancy and retention is a challenge. With the average global value of a lost customer being $243, customerretention requires businesses to leverage analytics to unearth insights about customers. Analytics plays a crucial role in customer retention:
- Understanding customer behavior:The main role of analytics in retention is in understanding customer behavior. Analytics takes customer information from a company’s CRM system and helps them get insight into purchasing behavior in order to optimize marketing campaigns, improve customer experiences, and enhance retention and loyalty. By applying attributes of customer behavior and results of customer profiling to current marketing campaigns, organizations can ensure highly relevant and targeted messaging and interaction with customers that is vital for customer retention.
- Assessing customer engagement:For a retail customer, analyzing customer preferences and deducing buying behavior using analytics is fairly straightforward; organizations can gauge customer activity over a certain period of time and can easily spotcustomers who are most likely to leave even before they discontinue services. But for an automobile customer, purchases are highly infrequent; unlike a retail customer who might purchase items every few weeks, the so-called purchase cycle of an automobile customer is not every few weeks but say, five years. Through analytics, organizations can assess the likelihood of some level of customer engagement such as warranty or after sales service; it is through analytics that organizations can optimize customer engagement and promote retention behavior.
- Building predictive models:Since retention behavior differs between industries and in some cases, even between businesses, it is through analytics that organizations can build predictive models and predict customer activity, product usage and engagement levels. Any change in behavior can instantly be identified, and appropriate marketing campaigns, product recommendations, rewards or loyalty programs can be put in place to ensure customer retention. Amazon,for instance, processes past purchase history, ratings and likes and Netflixleverages user ratings to produce new movies and TV shows.
- Personalizing campaigns: With rising customer expectations and technology advancements, the ‘one-size-fits-all’ method does not work anymore. Using analytics, organizations identify the right product based on relevance, frequency of purchase, and demographic data and market it at the right time using the right medium to individual customers. Targeted and personalized offering to the most profitable customers can drive customer retention in a big way. 80% of consumers indicated they are more likely to do business with a company if it offers personalized experiences.
- Evaluating campaigns in real-time: With analytics, evaluating marketing campaigns in real-time and determining ROI becomes easy. Based on how campaigns are being received, organizations can enable quick course correction if the campaign is not meeting desired results. Tracking campaign metrics and acquiring insights into customer interest levels can enable marketers to take steps to influence the customer’s decision to leave and plan future campaigns and activities to ensure retention.
Analytics for Success
Given the high costs of customer acquisition across industries, reducing customer churn using analytics is essential to success – increasing customer retention rates by just 5% increases profits from anywhere between 25-95%. Analytics empowers organizations to understand customer behavior and provide personalized customer service by offering relevant and timely recommendations. Since one single action is never enough to reduce customer churn, analytics can enable organizations to determine the most effective combination of marketing messages, time, and channel to connect with every customer. It is through analytics that organizations can study customer preferences and attitudes, improve and sustain relationships and drive customer loyalty and retention for success.