How modern customer loyalty works and why you should measure it?
In the first place you should of course convince with your product and identify your target group as precisely as possible. This is the only way you have a chance to increase your sales. With all this, you should never – as is often the case – focus your business exclusively on winning new customers. Customer loyalty deserves at least as much attention!
Convey the value of your product to existing customers beyond the deal itself and support them in using it to achieve their goals. Here it makes absolutely no difference whether you sell goods or offer services. However, value mediation and support work is not (any longer) done with the quick and competent answering of customer enquiries by telephone. For optimal results, you should rather create a continuous process that strengthens the trust in your brand and thus promotes your growth.
In times of increasing digitalisation, this means first and foremost providing your customers with all the web services they need and expect. The best way to manage your target group(s) is to use customer management software such as brolio Contact Manager.
To create the perfect starting point, you should measure customer loyalty. At the data level, it depends on the number of new customers acquired and the number of customers who have left. You can determine the customer retention over a previously defined period of time using the so-called customer retention rate. Before you start to look more closely at possible strategies for optimizing customer retention, you need to know exactly what the actual situation is, that is, the current customer retention rate.
So first determine a time period. This can cover a whole year or a quarter, for example. You then apply the customer loyalty formula: Customer retention rate = ((E-N)/B) x 100.
Before you do this, however, you need to enter the following information:
- Number of existing customers at the end of the period (E)
- Number of new customers acquired during this period (N)
- Number of existing customers at the beginning of the period (B)
Insert these values into the formula.
Let’s take an example for a better explanation: You list 20 customers in your Contact Manager at the beginning of the year. The first quarter brings you five new customers, but you lose one existing customer. This brings us to the following result: ((24-5)/20)) x 100 = 95 percent customer retention rate.
In our second example, you have 44 buyers, get 12 new buyers, but lose 13. Then customer retention looks quite different: ((43-12)/44) x 100 = 70 percent retention rate.
After determining the customer retention rate, you have a very meaningful basis on which you can build further measures. Investigate whether there are parallels in the number of customers who have left the company, in terms of the reasons for their departure, or in the types of customers themselves. Once again, the brolio Contact Manager will help you with its customer categorization. You will probably recognize specific patterns which you can then transfer to your optimization process.
The central arguments for strategically precise customer management
Numerous studies have already dealt with the relevance of customer loyalty and almost all of them came to the conclusion, among other things, that appropriate measures are extremely useful for every type of company.
In particular, the factors profitability and ROI have to be considered as highly convincing in this respect: It is in fact five to 25 times more expensive to effectively acquire new customers than to retain existing ones. And with an increase in the customer retention rate of just five percent, you can actually achieve a sales increase of a whopping 25 to 95 percent.
In addition to these top arguments, customer loyalty is also a serious aspect. On average, satisfied existing customers buy more often and spend more money than new customers. If you manage to fully convince your buyers of your product, they will always return to you. This may even result in real brand advocates who actively recommend your services to others.
It is therefore more than obvious that companies should invest more in customer loyalty. However, this is not so easy at different levels. It often fails because the right customer management software is not available. Without it, it can quickly happen that direct support leads in the wrong direction and is therefore perceived negatively. In addition, the relevance of target group determination is often based on assumptions instead of clearly comprehensible and quickly accessible customer data, which can lead to entire marketing strategies coming to nothing. You can avoid these risks with the right attitude and by using brolio Contact Manager.
We would be happy to tell you in a personal meeting how our customer management software can help you to improve your customer loyalty. Simply contact us and get an immediate overview of our application by registering now and using brolio for free.