Client and customer retention is more important than ever before, particularly with so much economic uncertainty going on and inflation causing many individuals and other businesses to tighten up their spending. 

From getting customers gifts to show appreciation to offering special deals and discounts, there are a lot of things you can do in 2022 to work on holding onto your most valued customers. 

The following is a guide to help you get started to form a basis for retaining your customers effectively. 

Understanding Customer Retention

Customer retention is a metric measuring the loyalty of your customers or clients or your ability to keep them over time. As well as identifying how many loyal customers you have, retention can also be an indicator of your customer satisfaction, engagement, and the sense of emotional connection to your business and brand. 

A customer relationship begins with the initial interaction, but retention metrics relate to the first purchase made and then include all the interactions after that. 

After an organization measures customer retention, it can use the feedback to analyze data on different components of the customer experience. 

To measure it and get a specific figure, you usually look primarily at the retention rate. The first step to determining your retention rate is identifying the period of time you want to record, which may be a month, a fiscal year, or some other period. 

You’ll also look at the number of customers in the customer base at the beginning of the period you measure for, the number of customers at the end, and the number of new customers acquired over time.

The formula looks like this:

• Your number of customers at the start of a time period is S
• The number of customers at the end of the period is E
• The number of new customers you add during the duration of the period is N

Then, you calculate your retention rate with this formula: E-Nx100=CRR. 

You can also look at your churn rate, which is the percentage of customers you lose during a period of time. If you have a hard time with customer retention, you’re likely to have a high churn rate. 

A third metric that can be useful for gaining a broad overview of loyalty is customer lifetime value. Customer lifetime value is the measure of the total revenue you can expect from a customer in their lifetime, which is a way for organizations to discover who their most loyal customers are. 

The longer someone is loyal to a brand and company, the higher their lifetime value. 

Your customer retention strategies are those initiatives and processes you put in place to promote loyalty and improve the lifetime value of your customers. These strategies are distinct from lead generation and acquisition. You’re focusing on those people who have already bought a product or service from you. 

You can use alternatives to calculating your retention rate to get an idea of similar concepts. For example, using a cohort analysis is one option. A cohort analysis relies on behavioral analytics to measure the behavior of your customers, as well as their engagement over a certain period of time. 

Customers are divided into segments, which are cohorts, to evaluate behavior separately. 

Net promoter scores are a way to learn more about the impression your brand has on your customers. Net promoter scores rely on asking customers one question—on a scale of 1-10, how likely would they be to recommend your brand to friends and other people they know. If someone responds with anything in the range of 1-6, they are known as detractors. Anyone ranking above a 6 is a promoter.  

Why Is Retention Important?

When you have loyal, happy customers, it’s more cost-effective than it is to get a new customer. The Harvard Business Review reports that acquiring a new customer can be anywhere from five to 25 times more expensive than keeping a current one. 

You don’t have to rely on big spending in terms of marketing and advertising. It’s an easier process to make your current customers into repeat customers because they already trust you from previous purchases they’ve made. 

It’s generally harder to convince a new customer. 

When you have loyal customers, along with repeat business, these are the people who are most likely to give you word-of-mouth advertising and recommendations to friends, family, and coworkers. 

There’s a self-sustaining sense of marketing that’s cultivated through customer loyalty. 

A loyal customer is going to be less interested in your competitors, and when they spend with you more than once, they’re likely to spend more the next time. 

Improving Customer Retention

There are so many ways you can begin to strategize and improve customer retention, including:

• Set goals. You have no way to measure your success in improving retention if you don’t have a goal. You can start with the calculation of your current customer retention rate. From there, you need a goal that’s reasonable to achieve. For example, if your current retention rate is 20%, aiming immediately for 60% isn’t necessarily going to be realistically attainable. As you’re setting goals, you want to think about the products you sell and the size of your customer base. If people need to regularly restock what you sell, then you might have more ambitious goals. 
• Map out your customer journey. You need to start to gather data on how people are interacting with your website and your business as a whole, so you can start to then anticipate what their customer journey might look like. Some things to look into include whether you get a lot of referrals if people find you on Google and how customers become aware of your business initially. Then, you can start to gauge how decisions are made. What are you doing that’s convincing your customers to buy from you, and with that understanding, how can you optimize each state and subsequently improve customer retention?
• First impressions are critical. If someone has a bad experience when they first purchase from you, of course, they’re unlikely to come back. Make things easy and welcoming for new customers. Ensure that how they checkout and receive their products is efficient, and do something little to let new customers know you appreciate their purchase. 
• What is your value proposition? The perceived value is nearly as important as the actual value. With that in mind, you need to ensure you’re positioning your business as a problem-solving solution that’s highly relevant to your targeted audience. Your value proposition needs to outline why you’re in business in the first place and what your company values are. Conveying your why’s is a way to increase your perceived value. 
• One of the most important things you can do in 2022 to improve customer loyalty is to minimize friction. Make it as easy as possible for people to buy from you in a seamless way. The fewer obstacles there are for customers, the more likely they are to keep coming back. Adding links to related products and a smooth checkout process are two of the most fundamental ways to reduce friction. 
• Provide great content that’s not intended to sell. You want to position yourself as a reliable voice that’s authoritative and trustworthy in your industry. A big part of that is consistently creating valuable content. You’re building relationships along the way so that when it’s time to make a purchase, your customers won’t even think of going elsewhere because you’re top of mind. 
• Know what the problems your customers face are and how you can position yourself to solve those. 
• Ask your customer for feedback on a regular basis. There are two big reasons this is beneficial. First, it shows your customers that you value their thoughts and opinions. The second benefit is that it’s simply the most direct way to get insight into what your customers are thinking. 
• Consider having a customer retention team. Ultimately, retaining customers is the responsibility of everyone, but having a team can keep your strategy organized. 
• Upselling and cross-selling are two critical strategies to improve customer loyalty. You have to offer a better opportunity than what initially converted a customer. 
• Improve your customer service and interactions with customers. You want to be highly engaged because this allows you not only to meet customer needs but also to be in control of the perception customers have of your brand. You want to personify your brand as much as you can. 
• Reward your loyal customers. 

Finally, customers appreciate customization in any way that you can offer it. In 2022, they don’t just expect tailored services and offerings—they often demand them. You want to make sure that you’re offering products, deals, and communication that fits the needs of your targeted audience just right. The more you know your audience, the easier this becomes. 

As part of this, you can also go heavy on the A/B testing in everything that you do so that you know how to offer certain things and how to interact with customers in a way that will resonate with them.