When a cloud of economic slowdown looks over your business or industry (such as the negative effects of Covid-19), what are you prepared for building customer loyalty? Less informed executives often hold tight for a wild ride without taking any clear action when there is something you can do. You can improve customer retention in a tight B2B market by focusing on your best customers and enhancing your ability to serve their needs.
What is customer retention?
The definition of customer retention is the process of persuading existing consumers to continue purchasing your products (goods or services) and keeping them loyal to your company. It differs from B2B lead generation or customer acquisition strategies in that the customer has previously been converted before.
An effective customer retention strategy helps you to develop long-lasting business relationships with your valuable customers. They may even spread the news throughout their personal networks, transforming them into brand ambassadors.
Keep in mind that increasing revenue from existing customers is considerably easier than acquiring new ones.
Why is customer retention important?
Today’s B2B seller (manufacturer, supplier, dealer, or distributor) companies devote significant time and resources to improving their lead generation, lead nurturing, and new customer acquisition process. That’s ok because every company requires a steady stream of new customers. However, many B2B companies forget the critical role of customer retention in their ongoing pursuit of acquiring new customers.
What’s the problem with that? Customer acquisition cost is five times as much as retention. This means you could pay five times more to sell the same product to a prospective customer than you would to a current one. This ratio is the most important proof of the need for client retention strategies.
This should also come as no surprise. A consumer that has previously purchased from you should be more likely to do so again than a brand new lead off the press. Similarly, you’ve already spent the majority of the money necessary to acquire and nurture this consumer toward the initial sale.
At this stage, customer retention costs should be negligible – even more so if your B2B retention strategy is largely automated (and it should be).
The significance of B2B customer retention
Above all, existing consumers should have had a favorable experience with your company and products, and should be more loyal than prospective customers who have not yet trusted you with their money.
However, this presents a dilemma. How do you develop this level of trust and build brand loyalty in B2B markets, if your customer retention tactics are atrocious? Well, you cannot.
Without retention, your clients will lose interest in your brand, look elsewhere, and eventually wind up with one of your opponents who has a strong retention plan in place – before they had the opportunity to establish customer loyalty toward your brand.
Each customer that leaves is a missed opportunity to build a long-lasting and profitable relationship. According to a recent marketing study, boosting client retention by only 5% can improve earnings by anywhere between 20% and 90%. Therefore, customer retention measurement should be a top concern for each B2B company.
It does not just happen
Many B2B companies believe that customer retention occurs naturally. That is not the case. You must establish and maintain sustainable relationships with your clients. And, as with any relationship, it requires ongoing attention.
Customers do not just give you their loyalty; you must earn it. Which is precisely what customer retention techniques assist you in accomplishing. When properly implemented, retention methods ensure that:
- Customers are pleased and;
- You are adding value to their lives.
Once you’ve checked off these boxes, you’ll be rewarded with a loyal audience that will support your business without giving your competitors a second consideration.
Benefits of customer retention
Loyal customers are critical to your business’s success. However, let us examine the benefits gained in further detail:
Consistent revenue streams are generated by repeat customers. When you know that you have an existing, loyal client base, it’s easy to predict that you’ll always get your money from your B2B customers and don’t have to worry about them jumping ship.
Easier to close the deal
It’s easier to close a deal with customers who come back to do business again. Once you’ve established what customers want and developed a certain amount of faith in your brand, clients are much easier to sell to since they believe in you. In addition, they attend to spend more money on each new purchase.
Loyal customers provide complimentary word-of-mouth referrals. If you want repeat business, there’s no greater marketing technique than satisfied consumers who will promote your business to others. This method is also called customer loyalty marketing.
A higher spend might be expected throughout the most significant seasons with regular customers. Want to make a discount on your low-selling products? Repeat customers are more likely to spend more money during these types of incentives.
It’s obvious that loyal customers have amazing advantages. How can you tell whether you have a decent customer retention rate? That’s the question.
It quantifies the revenue that a single customer has provided you with and will remain to provide you with.
It refers to the percentage of customers that made at least two transactions over a specified time period.
It is generated from customer surveys that quantifies the loyalty to your company.
B2B customer retention ideas
Here are a series of customer retention tips you can put into action today.
Reconnect with past and current customers
This is the vital step of building customer loyalty. Make sure you are serving each customer’s needs, as well as adequately address new desires. Demonstrate you really understand their business by bringing specific solutions to the table.
Get deeper with the buyers you already have
This does not mean locking them in with the proprietary product but becoming indispensable to them through value. Be familiar with multiple decision-makers at each customer location. This helps keep the account open and maintains customer retention even if key players change jobs.
Reduce what you do before discounting your price
Many companies are tempted to make a sale at any cost. Have a clear plan for profits on every transaction. If you have to discount prices, reduce the number of services you provide.
Be selective to achieve customer loyalty
Be selective about the customers who get an investment of your time. Focus on your most profitable customers by volume, frequency, and ability to pay. If focusing on them means losing a few deadbeat accounts and having time to spend with key customers, then by all means.
Help customers buy more from you
Know the total spent in each area of products you provide, compare this with what they buy from you. Often you will find they spend only a small percentage of what they could with your business, giving them a good reason to buy more from you.
Customer retention means understanding customers
Have a clear understanding of your customers’ current needs. Exactly know what they need now. In a tight marketplace, they could have different priorities than at other times. Orient your focus to solving problems to which they have an immediate need.
Improve job skills of those closest to the money
Utilize internal or low-cost training to increase individual proficiency as it improves the customers’ experience or your company’s ability to produce income. Start with customer service skills, and then work up through “how” to improve individual job performance. Not only will this help you keep customers, but you increase your company’s overall value.
Improve your value for customer retention
Work with strategic partners to improve your value to the customer. Improve your customer relationship by bringing high-quality providers to your customers. They would help reduce costs or improve customer performance with your product. Introduce specialized skills with specific solutions.
Accelerate the collection of accounts receivable
Your business will need more cash to serve existing customers, and it does not matter how much income you produce if you are not collecting it. Do more cash business, and look for ways to be paid faster.
Customer retention requires a strong stance
During tight markets, customers are going to be concerned about price, enticing offers from your competition and will judge your business by its perceived stability. For a successful customer retention ratio, it’s critical you stand strong and stay in front of customers by solving real problems. You will retain accounts when you are proactive instead of reactionary in light of the economic landscape.
Often your customers are just as concerned as you are about a tight B2B market. The best test of customer loyalty is adversity and how you handle it. Improving sales flow, focusing on your best customers, and enhancing your ability to serve customer’s needs demonstrates strength.
Calculating customer retention metrics – CRR
Customer retention statistics are critical since it enables the assessment of customer loyalty. Fortunately, there are a variety of relevant retention indicators that you can use to gauge your customers’ loyalty.
Customer retention rate (CRR) is a key indicator that helps measure customer loyalty, so it’s a good choice for figuring out where to start and go on. The percent of customers who stayed loyal over a while indicates the client retention rate.
Customers that stay loyal to a company contribute to its revenue, which helps explain the importance of retaining customers. Your retention rate is an indication of how many customers you’re maintaining. If your retention rate is low, it implies you’re keeping less customers. On the other hand, if your retention rate is high, your customers are more loyal to your company.
Even if 100% retention is the ideal it is unlikely that a B2B company will achieve it, and all will experience some percentage of customer churn. While retention rates vary by industry, they typically over 30% on average.
Formula for calculating Customer Retention Rate
To calculate your retention rate, three data points are required: the quantity of customers at the start of the period (CS), the quantity of customers at the end of the period (CE), and the quantity of customers recruited over the period (CA).
Subtract CA from CE, divide by CS, and multiply by 100 to convert to a percentage. This is your CRR, customer retention rate.
By demonstrating the average length of time that customer segments will stay with you and the average amount of revenue those customers will generate for your business. Most significantly, customer retention strategies enable you to improve your services and products by focusing your business growth on the satisfaction of your existing customers.
Customer loyalty is a critical component to consider in every business. Over time, a committed consumer will almost certainly purchase the goods again. As a result, customer retention strategy has a significant effect on a B2B organization’s profitability.
Additionally, customer retention metrics can be used to segment the target B2B market. In other words, any industry could be classified into segments based on the level of consumer loyalty.
There are three distinct types of loyal customers: the absolutely loyal customer, the rather loyal customer, and the other buyer. Through contact with those three sorts of committed clients, each firm can classify the industry and ascertain its own shortcomings.
In conclusion, if you know how to take advantage of customer retention strategies, your business will continue to expand. Your customers will eventually come back to you and continue to purchase products (goods or services) from you.
At the end of the day, you’re responsible for meeting your clients’ demands, listening to their concerns, and providing expert answers. If your customers feel valued, they will develop a growing level of loyalty to your brand.