15 Customer Retention Strategies that Work 15 Customer Retention Strategies that Work part 1

15 Customer Retention Strategies that Work

 

 Customer retention is incredibly important for growing a sustainable business, but before we look at some strategies for improving it, let's put an important data point front and center:

According to the Harvard Business School, increasing customer retention rates by 5 percent increases profits by 25 percent to 95 percent.

This is important to consider when evaluating your own customer loyalty strategies because in the customer service echo-chamber there is a lot of "hoo rah" about taking care of customers, but little discussion on the business side of things.

At Help Scout, we do things differently; we're all about loving customers, but we also aim to prove that great service is more than just the right thing to do—it's also good business sense.
In order to help you increase your own retention rates, we've compiled a list of our 15 favorite tips (backed by academic research and case studies) on increasing customer loyalty, divided into five easy-to-browse sections.
Let's begin!

Communication

It's hard to create loyal customers if they aren't paying attention to you. Given this fact, below are our favorite bits of research on clear communication with customers.

1. Stand for something.

The quickest way to get customers to ignore you is to not stand for anything. A study by the Corporate Executive Board that included 7,000 consumers from across the U.S. found that of those consumers who said they had a strong relationship with a brand, 64 percent cited shared values as the primary reason. If you want loyal customers, you need them to care about you ... so what do YOU stand for?

2. Utilize positive social proof.

While negative social proof ("Nearly 90 percent of websites don't use heat mapping software!") has been proven to dissuade customers rather than encourage them, numerous studies on customer motivation have shown that positive social proof ("Join 20,000 of your peers!") is often the most effective strategy for getting people to listen.

3. Invoke the inner ego.

Despite what we often say, most people like things that resemble them in some way. This cognitive bias is called implicit egotism, and is an important thing to keep in mind when communicating with customers. In order to attract the sort of customers you want, you need to identify your target customers down to the last detail and then craft a brand message that perfectly matches their pains, goals and aspirations. It's easier to fill this existing demand than to create one.

Selling

If customers don't enjoy your selling process, they'll likely never do business with you again. Thus, selling to customers the "correct" way is an integral part of creating customer loyalty. Below are a few studies to help you improve the process.

4. Use the words they love to hear.

Not all words are created equal. Certain persuasive words encourage customers to buy more than others, in particular: free, new and instantly. When customers hear these words (and the promises they imply are backed up), they'll enjoy their purchases more than they would have otherwise.

5. Reduce pain points and friction.

All businesses, no matter the industry, are going to have to sell to the three types of buyers that are out there. According to neuroeconomics experts, nearly a quarter of these buyers will be conservative spenders, or "tightwad" customers. George Lowenstein of Carnegie Mellon University recommends using bundles, reassuring words (e.g., change "a $5 fee" to "a small $5 fee") and reframing as strategies to better sell to these conservative buyers. Read more about his advice here.

Reciprocity

Reciprocity is the social construct that makes the world go 'round ... or in your case, keeps your customers coming back. The premise is simple: Go above and beyond for customers and get rewarded with repeat business. The execution, however, can be trickier, so below is a compilation of interesting research on how to improve reciprocity with your customers.

6. Realize that budget is negligible.

Giving back to customers can appear incredibly costly, but it doesn't have to be. Instead, embrace the art of the frugal wow by understanding that reciprocity is built even with small gestures. In fact, psychologist Norbert Schwarz found that as little as 10 cents can create reciprocity between two individuals (it really is the thought that counts!).

7. Utilize surprise reciprocity.

Although reciprocity works incredibly well on it's own, research shows that it is even *more* powerful when started by surprise. For a simple example, recall a time that someone did something nice for you unexpectedly; the gesture probably wasn't all that unusual, but the fact that it came out of nowhere left a strong impression on you.

8. Make it personal.

In a study from the Journal of Applied Social Psychology, researchers found that waiters could increase their tips by 23 percent by the simple act of returning to tables with a second set of mints. So do mints have magic powers? Apparently not: The researchers concluded that the mints created the feeling of a personalized experience among the customers who received them. So it was the personalized service received that made them enjoy their experience so much more.