Attracting and maintaining a loyal, repeat customer base is a central goal for most local businesses. But, with two-thirds of consumers willing to switch brands for a better deal and 44% for simple convenience, keeping a solid base of regular clientele is becoming increasingly difficult.
To remain competitive, modern local businesses must utilize savvy customer retention strategies to optimize their customer retention rates. Customer retention measures how many of your clients remain with your company throughout the course of a given period—whether it’s a quarter, year, or decade.
Knowing and understanding your retention rate can provide actionable insight into your day-to-day operations, as local businesses with higher customer retention rates are usually more commercially successful. These strategies are often closely tied to improving customer satisfaction, as satisfied customers are more likely to stay loyal. To that end, let’s dive into the world of customer retention rates and explore how to calculate, utilize, and optimize them for your local small business’s benefit.
Understanding Customer Retention Rate
As mentioned, customer retention rate tracks how many clients stick with your brand over a certain time period—but it’s also much more than that. Ultimately, it’s a measure of customer loyalty.
For this reason, improving your retention rate can lead to increased:
Revenue stability
A retained customer is generally a loyal customer who returns to buy again and again. Depending on the specifics of your local business, they may even have recurring subscriptions or make regular, routine purchases.
Hence, a high customer retention rate bolsters your revenue predictability by creating stable, recurring revenue streams you can count on.
Cost efficiency
It costs far less to keep existing customers than it does to draw in new ones. In fact, it can be anywhere from five to seven times as much to attract new clients—making a user retention strategy far more cost-efficient than customer acquisition.
Customer Lifetime Value (CLV)
CLV measures how much a singular customer spends with you over the course of your local small business’s existence. Because loyal customers will purchase from you multiple times over the years, their CLV is far higher than a one-off walk-in.
Brand advocacy
Retained customers don’t keep coming back because they're dissatisfied with your products and services. Rather, it’s because they’re big fans of your brand, and you consistently deliver the positive experiences they desire.
In fact, 77% of consumers will recommend a company after having a positive customer experience. So, the more you impress your recurring clientele, the more likely they are to spread the word about your business for you.
Key metrics for measuring customer retention
To find out how many clients stick with your local business over the course of a certain period, use this simple customer retention rate formula:
- Customer Retention Rate = [(Customers at the end of the period) - (New customers)] / (Customers at the start of the period)
In this customer retention rate formula:
- Customers at the end of the period means the total number of clients you have on the final day of the period you’re calculating for.
- New customers refers to the total amount of customers you acquired over the course of the period.
- Customers at the start of the period is the number of customers you had on the first day you’re measuring from.
Customer retention rates vary widely across different industries. However, there are common strategies you can use to optimize yours, no matter what sector you operate in.
Strategies to improve your Customer Retention Rate
To entice more customers to return to your local small business and increase your average retention rate, try implementing a customer retention strategy that includes:
Enhancing customer support
Treating your active customers with respect and courtesy goes a long way toward bolstering retention. In fact, 86% of consumers will cut ties with a brand after just a couple of negative experiences. For this reason, it’s important to ensure your customer service representatives always provide unwavering support and are quick to rectify any issues your clients may have.
Los Angeles-based realtor Clinton Brown improved his customer support by turning to Nextdoor. There, he noticed his neighbors posting about their real estate needs and quickly swooped in to provide assistance. Clinton appreciates Nextdoor’s open, honest nature as it allows him to forge strong connections with his clientele that facilitate excellent customer service.
Creating a customer community
If you have a loyal base of recurring clientele, creating a space, forum, or community page for them to interact can drive interest in your brand and strengthen customer relationships.
That’s what Mike’s Diner Bar, a community hangout spot, did with Nextdoor. When the Palo Alto eatery faced eviction from its historic location, the community rallied together on Nextdoor to support the struggling local business. Over 1,500 locals flocked to the platform to sign a petition asking for the building’s owner to reconsider
Regular updates and innovations
You don’t need to reinvent the wheel every year, but offering new products or enhancing your services gives your regular customers a reason to get excited. From tech keystones to auto shows and more, revealing new products carries an allure of optimism and intrigue that can captivate your customers and prevent them from getting bored with your brand.
Rewarding loyalty
As per Forbes, 77% of consumers are more likely to stick with brands that have a customer loyalty program. So, consider rewarding your regulars by offering discounts, freebies, and special offers as they rack up more and more purchases.
Leverage Nextdoor Ads Manager to better serve your customers and boost your retention rate
Retaining as many long-term customers as possible is critical to the success of most modern local businesses. Higher customer retention rates can lead to increased revenue as loyal customers spend more over their lifetimes. Selling to recurring clients is far less costly than attracting new ones. To boost your retention rate, try improving your customer support, offering innovative new products and designs, and rewarding your base for their loyalty.
To better serve your customers and reach more of the neighbors in your immediate area, promote your local small business with Nextdoor Ads Manager. When partnering with Nextdoor, you’re joining a community where 1 in 3 U.S. households are active, meaning you can easily develop the strong bonds necessary to turn a one-time purchase into lifelong customer loyalty.
Sign up for Nextdoor Ads Manager today to reach and retain more clientele.
Sources:
- Statista. Top Reasons for Switching Brands Worldwide. https://www.statista.com/
- Forbes. Customer Retention Versus Customer Acquisition. https://www.forbes.com/
- Forbes. The Value Of Investing In Loyal Customers. https://www.forbes.com/
- HubSpot. 10 Customer Retention Metrics & How to Measure Them. https://blog.hubspot.com/
