What was your customer retention rate in 2010? Did it increase or decrease? Did the buying patterns change? Do you know your numbers or do you need a moment to look them up? Or, are you clueless when it comes to customer retention analytics?
Falling into the clueless category is understandable because customer retention rates are challenging to measure and often disguise themselves as a soft metric. It takes months, sometimes years to accumulate enough data to accurately measure customer retention. Why bother?
A 5% increase in customer retention can increase profits 25% - 50%.
And, that is a conservative number. We've seen as much as a 110% increase in profits with a 5% increase in retention. Do I have your attention now?
We're also seeing an increase in customer retention rates for clients with an active social media presence. It's too early to draw conclusions, but the numbers are definitely trending up. Which brings us back to the question, "what do you know about your customer retention?" If you don't know what your customers are doing, how can you measure the effect of your social media strategy?
Customers come and go on a regular basis. They typically follow a pattern as they progress from Active Buyer to R.I.P. (Rest in Peace). This pattern varies by acquisition source, product, service, and channel activity. Identifying the different patterns and rates allows you to find the points where you lose customers. Once you know where they drop-off, you can implement retention strategies or stop investing marketing dollars. The appropriate choice depends on individual circumstances.
It's not too late to start measuring.
Customer retention analytics require historical information. If you have three to five years of history, you can establish retention and attrition benchmarks. The process has secondary benefits, too. It reveals people who are good targets for reactivation and highlights trouble spots if they exist. Once the benchmarks are defined, future analysis will show the effect of all of your marketing on customer loyalty.
Your social media activity is part of the marketing that affects customer retention. How much depends on your strategy and community. Updating your rates each quarter provides a map of your progress and an early warning system if something fails. Getting started now helps you determine the effectiveness of your social media strategy. Who knows? You may find that ROI you've been missing.