Customer Retention

How Customer Orientation Drives a Company Forward

Having customers in focus means recognizing and fulfilling their wishes and needs. This also includes solving customer problems and taking complaints seriously. But only those who know their customers can understand them. Strengthening customer retention is a cross-departmental task, where marketing, sales, IT, and support have to work together.

When developing a sustainable corporate strategy, a marketing rethink is necessary – away from aggressive but arbitrary courting, and towards sincerely focusing on one's customers and their needs. A distinction must be made between the following terms:

1. Customer focus
   is about placing the customer and his needs at the center of everything you do and using different methods to get to know him. The products are not primarily aligned to the customer, but instead, the right target group for the product is sought.
   
   
2. Customer orientation
   the needs of the customer serve as a guide for the business strategy development or even the entire business model.
   
   
3. Customer centering
   describes the comprehensive focus of the entire company and its products on the customer.

Whosoever strategically and holistically aligns themselves to the customer and fulfills their unspoken needs is rewarded with a large number of loyal customers who keep buying from a company and recommending it to others. Sustainable growth is only possible with such regular customers. It is therefore worthwhile to look at the buyers and learn to understand them as well as possible.

Where all Efforts Begin: Winning New Customers

Attracting customers is the main goal of any and all marketing efforts. Once you know your target group, you can deduce from them where they are and which platforms, media, and channels they use. Through individual sales and marketing strategies, companies win new customers through a targeted approach that motivates them to buy. These can be advertisements, referral marketing, discount campaigns, events, or classic acquisitions. It is important to always keep an eye on the market and new customer acquisition activities to continuously advance.

It is possible to encourage new customers to make purchases without spending large amounts on advertising. In particular, this works in such a way that the product and its properties (USPs) are not the focus of the activities as usual, but an image or emotional benefit (UAP). The spirit which stands behind it could communicate that it makes life easier, meaning there is more time for other beautiful things like hobbies. Or the buyer is promised more success. Depending on the product and target group (B2C or B2B) emotional aspects play a greater or lesser role in the purchase decision. Companies should therefore deliberately emphasize this and use it to acquire new customers.

From New Customers to Regular Customers

Anyone who has already bought something from a shop more than once is considered a regular customer. The goal must be to turn existing buyers into regular customers, as caring for existing customers is known to be a lot cheaper than acquiring new customers. This should give it a firm place in corporate strategy. What is needed here are customer retention measures which strengthen customer loyalty.

The so-called impact chain of customer retention details the different phases that a customer goes through until they reliably and sustainably increase the company’s turnover. The chain consists of the following links:

1. First contact
2. Customer satisfaction
3. Customer loyalty
4. Customer retention
5. Economic success

The customer should be convinced of the company in each of these phases. For this, the company/customer relationship must be fostered.

Maintain Relationships and Build Real Customer Retention

Unlike customer loyalty, which emanates from the customer, companies can actively influence customer retention. These efforts have a direct impact on customer satisfaction. Goals and measures for customer retention can be derived from corporate strategy and should be seen as ongoing processes in customer relationship management (CRM). In addition to marketing, IT and the service department should also be involved. The customer must have a positive experience at every point of contact so that they buy again and develop a long-term relationship with the company. There are several different types of customer retention:

Since the first three items listed are involuntary customer bindings, marketing and service should focus on the last two types of customer retention, which create customer loyalty. Economic ties are the goal of discount campaigns and loyalty programs, emotional ties are the goal of product, service, and image campaigns.

But be aware – customer retention is not the same as customer loyalty. While customer retention can be involuntary through the first three points mentioned above, customer loyalty is based entirely on positive experiences. The customer is loyal to the company or brand and plans further purchases in the future – or considers them possible and, given the circumstances, likely. Brand loyalty can also be supported by targeted marketing activities. A brand must be distinctive and easy to grasp, with its products having a rational or emotional benefit.

Depending on the business model, a bond based on monopoly or contractual obligations can also be part of the strategy. However, these types of attachment do not release you from the need for emotional attachment. When a contract expires or economic circumstances change, the question if you have managed to convince the customer of your company’s offerings in all the essential points suddenly becomes relevant.

Holistic Measures for Successful Customer Relationships

Successful customer retention requires a holistic strategy in which the marketing department and others participate. A high level of customer satisfaction is essential for good customer retention. For this, the customer must have an all-around positive shopping experience. This starts with the first contact with the company, goes through the purchase decision and the purchase, and also affects complaint management. Close cooperation between marketing, sales, customer support, and IT is needed here.

• Customer needs and feedback must be taken seriously and incorporated into future developments. When companies meet their customers at eye level and listen to them, this not only produces valuable suggestions for improvement but also gives customers a feeling of appreciation. The implementation of an effective Voice-of-the-Customer program should therefore either have already taken place or should be at the top of the list in customer relationship management.
  
  
• To create sustainable satisfaction, the customer must be delighted. The wow effect can be caused by many things, for example by a delivery that arrives faster than expected; through proactive care; or by responding quickly to customer inquiries or solving problems.
  
  
• It is not only in classic advertising that the so-called „penetration“ is used - the effort to bind the customer to a brand or a product by repeatedly contacting him across channels. This will also help maintain customer engagement: due to the recurring interaction with various marketing measures, customer retention to the company is strengthened and existing customers can become regular customers. However, it is important not to overshoot the target and to make contact too often or in too many places. This quickly creates the opposite effect.

Results at a Glance: Measuring Customer Loyalty and Retention

Controlling is essential for the successful implementation of customer loyalty programs. This is the only way to ensure long-term success and to reinforce the most effective measures. The effect is often delayed and only seen long after measures have been implemented. A survey must, therefore, be carried out at appropriate intervals. In addition to „hard“ key figures such as an increase in sales or an increase in the number of subscribers, customer retention can be measured using different methods:

• Customer retention rate: this value looks at the long-term customer development and compares the number of existing customers in a certain period. This shows a movement of emigration or a rising trend.
  
  
• Upselling relationship: this is the ratio of purchases where only one product was bought to those where more than one product was bought.
  
  
• Customer Loyalty Index: this survey asks three questions that were aggregated into a satisfaction index.
  
  
• Net Promoter Score^®: A micro-survey on the likelihood of recommendations along with an open comment field. The Net Promoter Score is a very efficient measurement method for the continuous execution of short surveys at the various customer touchpoints as well as for tracking customer satisfaction development over time.

Turn Customers Into Regular Customers with Retention Marketing

If you want to turn existing customers into regular customers, you can use retention marketing and set targeted impulses to increase customer purchases. The most profitable customers are determined on the basis of an internal ranking and especially „looked after“. That also includes being open to letting less interesting customers move if necessary in order to have more resources available for the really important customer group. Retention marketing is based on a well-maintained database with relevant customer information and a strategically planned lead management. The goal is that of a lower churn rate.

Prevent Customer Churn and Successfully Win Back Customers

The likelihood that an unsatisfied customer will buy again or recommend the company is almost zero. Therefore, a negative experience or better offer from a competitor is enough to lead to this. So-called churn management aims to win back customers who have already left.

It can be divided into the following five steps (Schüller, 2007):

1. Identification of those customers who have canceled or want to cancel
2. Analysis of the causes of termination
3. Planning and implementation of recovery concepts
4. Controlling and optimizing success
5. Churn prevention

An easy-to-recognize signal for a migrating customer would be, for example, their cancellation of a service (such as a subscription). There are a few more signals that can also be picked up in e-commerce. A prerequisite for the early detection of emigration is constant data collection and analysis.

These warning signals announce customer churn:

• The number of complaints has increased
• Changed buying behavior, frequent cart abandonment
• Late payment
• Contract terms are questioned
• Communication is reduced

Successful churn management is based on a meaningful churn analysis. All contact points and customer actions are recorded in a central database. This survey is complemented by methods to determine customer satisfaction, for example, the Net Promoter Score. If the number of critics increases or the number of promoters falls in favor of the indifferent, it is high time to get to the bottom of the reasons for the growing dissatisfaction.

Customer retention can only be successful in the long term with the help of comprehensive measures and knowledge of your own customers. In today’s fast-paced world, it is important that companies do not stand still, but constantly develop and improve - also and especially in relation to the customer, who has more options than ever before.