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If you want to optimize your bottom line, you have to build customer loyalty. It’s a numbers game — repeat buyers spend more than new customers, according to research published by Bain & Company, and they’re less costly to pursue.
In fact, says Bain, it’s almost impossible to break even with one-time shoppers. The cost of customer acquisition is too high. To get the most from your marketing investment, you need to get customers coming back again and again.
That’s why it’s important to work on your customer retention rate (CRR). In this installment of the “What’s that Stat?” series on customer experience metrics, you’ll learn about how to gauge your CRR and what you need to do to bring that number up.
Measuring Customer Retention Rate
Measuring your CRR is simple and straightforward. You need three data points, which are:
- How many customers you have at the beginning of the period you plan to measure
- How many you have at the end
- How many customers you acquired during the period in question
Count the number of customers who purchased during the measurement period. Then do the following:
- Subtract your number of customers acquired from your ending number
- Divide that total by your starting number of customers
- Multiply the result by 100 to get a percentage
Once you have that number, you can use it as a baseline and work on improving your retention. The first thing to understand is why customers come back and buy again.
What Prompts Customers to Return?
According to research reported in the Harvard Business Review, three factors indicate that a customer is likely to return and shop again. Those factors are:
- Having referred other people
- Having never filed a complaint
- Having successful resolutions to any complaints
The last group is often the most loyal, says Qualtrics XM scientist Leonie Brown. It’s about customer perception — their trust in the company has been tested and the company has proven itself worthy of that trust.
The Importance of Issue Resolution
The happier people are with the way you resolve their complaints, the more likely they’ll be to do business with you again. This relationship has shown up time and time again in customer studies.
In 2010, Forrester found that 81% of people who were satisfied with a company’s issue resolution will work with that company again, compared to 5% who were unsatisfied. Customers’ levels of satisfaction correlated directly with their willingness to return.
In 2018, Harvard Business Review reported a study showing that when companies resolve a complaint effectively, the complaining customer is willing to pay more for service from that company in the future. Spending thresholds are highest when a company responds in five minutes or less.
It’s natural to think of unhappy customers as something to avoid, but these statistics tell a different story. Consumers who have issues are candidates for strong long-term loyalty, assuming that you can resolve their issues as well as or better than they expected.
The Role of Customer Agency
Customers feel more satisfied with an issue’s resolution when they have some agency and control over the process. It makes sense — needing to contact customer service can make a person feel helpless. How long will they have to wait on hold? If they have to hang up, will they lose their chance to resolve the issue?
It’s important to give customers as much choice as possible during the resolution process. That’s why VHT offers Callback, which allows customers to request a call from the company when someone is available. Customers don’t have to wait on hold unless they prefer that option, so they’re in the driver’s seat from the very beginning of the resolution process.
VHT also offers SMS text messaging, which is an increasingly attractive option in the customer service world. Around 89% of customers say that they want the option to communicate with brands using text, and 56% have already used text to reply to a missed call from a business.
Mindful lets customers and service representatives text using the same phone numbers that client companies use for voice. The technology features seamless text-to-talk transitions so that the resolution can go forward using whatever channel the customer prefers. It’s another powerful way of adding choice to the dispute resolution process.
CRR isn’t a customer experience metric that your company can afford to ignore. Fortunately, it’s easy to measure and straightforward to improve using a process you already have in place — dispute resolution.
Try it out for yourself. Experience Callback from VHT, or just get in touch and let us tell you how you can implement these technologies in your company. It’s easier than you think and can have a real impact on your customer service experience.