How to increase your retention rate and decrease your support expenses ?

Whatever your business is, your priority is to find new ways to increase your turnover. But many companies focus on new customers without efficiently taking care about existing ones even if it’s less expensive. Why are we focusing more about getting new customers?

Ironically, the tendency is going toward an increase of investments for generating new customers and a decrease of the budget allocated to customer loyalty.

It is normal to think that with a good product or service, customer loyalty will happen naturally. Even though it is true in some cases, it remains a short term strategy. Sooner or later, your customers will have the feeling that you don’t care about them and might leave.

Developing an efficient customer loyalty program will help you to identify, to follow-up and to sell more to these clients that are most probable to be your source of income on a long term basis.

In this article we will explain your why and how customer loyalty is crucial for the growth of your company. We will also provide you with advices and practical examples about how a CRM software can help you to increase your loyalty rate.

Measuring tools

 Implementing strategies to increase your customer loyalty theoretically isn’t enough: you need a wide range of data about your clients in order to measure and analyze their comportment.

The CRM (Customer Relationship Management) is designed to help you to better manage your client relationship remotely: implement customer relationship actions while measuring their impact, their efficiency and their profitability. To improve your client relationship, you have to follow a ROI based approach. It implies to generate a CRM reporting by using key performance indicators, so called “KPI”.

These KPIs are crucial management tools and must be integrated to your dashboard. We are presenting them all, though you must be careful to choose the one that are relevant according to your priorities and the use you make of the CRM.

KPIs to manage your client database

 Prospect and client databases are the raw material of your relationship program. The following indicators will help you to know more about the amount of your active customers, the amount of active ones that are lost or won, or the number of prospects activated and turned into clients during the time span.

– Number of active clients: the ones that recently interacted with you, in opposite of inactive clients whom last order was long time ago, according to your specific business cycle. Look at how this indicator evolves with time.

– Attrition rate: the amount of active clients lost during a time span (number of active clients lost / total number of clients). This rate is essential to measure the level of retention of your clients, which means the capacity you have to retain clients.

– Net result: helps you to know if you have won or list active clients during a specific time span (new active clients during the time span – clients that became passive). A positive result means that your have won more active clients.

– Activation rate: refers to the change of a prospect into an active client through a first purchase. It’s a very useful indicator in order to measure the performance of your “lead nurturing” actions (emailing, phone calls, prospect dunning, etc.). It is specially used in a B2B context.

Here is its formula: prospects that activated / total number of prospects.

KPIs to follow the quality of your client database

 The quality of a client database can be measure with the richness and the filling of information fields, more than the quantity of clients. The quality of your client database has a direct impact on your CRM performance.

– The completeness rate: your client database includes many fields that your have defined upstream and that match each with a precise type of information: name, first name, address, e-mail, phone, gender, age, etc. Their are also called “attributes” or “variables”.

The completeness rate enable you to calculate, on key variables, the filling rate of fields (number of clients for which the field has been filled / total number of clients of the database.

It is vital to complete all the key fields of your CRM in order to make it easier to operate. By requesting information directly from your clients or by buying data externally.

KPIs to measure the efficiency of your messages

 The client data of your CRM help to improve your client relationship and the relevancy of your sales and marketing messages. Above the richness of your data, the efficiency of your CRM can be measured with the efficiency of the messages your have sent to your clients.

– Net incorporated responsiveness rate: to evaluate the performance of your message on an incorporated manner, i.e. by comparing the total number of solicitation during a specific time plan to they net return (number of agreements / number of active clients contacted).

Example: if, during all your campaigns, you have solicited 10 000 contacts from which 2 000 have answered positively (by buying something or registering to your program), your net responsiveness rate is 20%.

– Net responsiveness rate by media: to measure the efficiency of your messages channel by channel (phone, mail, e-mail, etc.). It’s the number of active clients you have contacted on a channel that have “converted” / number of active clients contacted on a channel (during all campaigns).

An active customer has “converted” as soon as he has done the action you wanted him to do by contacting him: subscribe to the newsletter, answer to the satisfaction survey, click on the link towards the landing page included in the e-mail, etc.

KPIs to regulate the commercial pressure

The commercial solicitation will help to develop the interest of your clients toward your brand and boost your sales. But too much of solicitation can lead to the opposite effect and make you loose clients. Below are three indicators to measure and regulate the commercial pressure.

– The number of cross canal solicitation during a time span: to assess the commercial pressure on a global point of view, because too many solicitations can affect your performance. Find the right amount and send enough solicitation in order to maintain and develop the interest of your active clients toward your brand, without being too intrusive or aggressive.

– Responsiveness rate during a time span: it’s the most relevant indicator to measure the interest your messages are generating. Responsiveness can happen in different manner depending on the channel being used. During emailings, the responsiveness rate is the number of contacts that have clicked on a link in the e-mail / number of contact that have open the e-mail during the time span.

A weak responsiveness rate shows the little interest of your active clients for your messages and/or a too important commercial pressure.

– Churn rate: to measure the erosion of your relationship and marketing campaign based data base. It’s the number of active customers being being contacted that have unsubscribed / number of active customer being contacted.

An important churn rate is often the result of a too strong commercial pressure, even though it can also come from other causes, like for example a lack of interest for your content and your offers.

CRM KPIs to analyze the commercial efficiency

Here are three indicators to measure the commercial efficiency of your messages for each active customer solicited.

– Turnover during a time span and by active customer: measuring the impact that your actions are generating in term of turnover is one of the way to assess the commercial efficiency of your CRM. In order to be relevant, the measure shall be done for each active customer (and during a given tine span). Here is its formula: turnover done on solicited active clients during a time span / number of active clients solicited during the time span.

– Number of orders during a time span and by active client: to know how many orders made in average by the active clients solicited during a time span. You can do the following calculation: number of orders made by the contacted active clients during the time span / number of active clients being contacted.

KPI to prove the ROI of your CRM

To calculate the economical profitability of your CRM, you have to wonder if the solicited population generate more revenues than the non solicited population (if yes, in what proportion, and for what marginal revenue?), and if the global revenues generated by all the CRM operation done are covering the investments and costs incurred in the CRM?

– Revenue generated on the solicited / non solicited population: to compare the revenue generated on the solicited population on one side, and the one generated on the non solicited population on the other side.

But you have to compare what is comparable, which means that your have to compare the revenue generated by active clients, i.e.:

(1) revenue generated on non solicited population /number of active clients belonging to non solicited populations.

(2) revenue generated on solicited population / number of active clients belonging to solicited populations.

If (2) is not superior to (1), it means that your CRM operation are not efficient commercially wise.

You can also calculate the marginal revenue generated by the solicited active clients, by doing (2) – (1). This result, compare to the CRM expenses incurred by the active clients solicited, will help you to measure the profitability of your operations.

– Global ROI of your CRM: to calculate its profitability by comparing the two aggregates: the global revenues generated by your CRM on one side (1), and the global expenses and investments incurred in the tool, in term of human resources, content, as part of your campaign (2).

You will obtain the ROI of your CRM as a percentage by dividing (1) by (2) and by multiplicating the result by 100.

With this tool you can assess the relevancy of your CRM strategy and the quality of its implementation.

Best practices

Once your start to think about your customer loyalty, it is crucial to consider the reasons and factors that foster repetitive purchase of your product or service.

We are all clients and we want to feel like individuals rather that as targets.

Here are 5 ways on how to use a CRM software to help your to increase your client loyalty rate and generate additional revenues.

Identify and keep your clients

 Do everything to avoid to your client to leave is crucial. Be careful and your will always be able to identify signals showing that your clients are about to leave. Identify the key variable like purchasing, the use of products and the inbound calls to the customer service. Catch these signals and implement specific actions to get back your clients before they leave.

Link the list of all your clients and the list of your sales during a specific period related to the life cycle of your product by using your CRM software to identify the ones that didn’t buy with you since quite a long time. Follow these clients and try to discover why they chose not to buy your brand.

Target client with special offers

By collecting data about your clients you will be able to adapt your approach according to each individual. With your CRM software you will be able to visualize the purchase history of a client in order to propose a type of offer that suit his needs even closer.

You can also follow clients that have shown interest for you product, but didn’t buy it. Identify the ways to turn their interest into buying by proposing special offers or by bringing a specific added value to your product. Do a list of all the commercial activities (emailing or anything else) in order to compare it with a list of the people that subscribe to your newsletter. This results into a list of contacts that are interested by your product but that didn’t purchase any product.

Reward your most profitable clients

Thanks to information received in your CRM software, your will be able to identify your “best” clients, and so to allocated your resources where they will have more impact.

You will then be able to decide to focus your efforts on your most profitable clients in order to increase even more their loyalty. Identification of these clients will also help you to develop cross-selling strategies.

Personalize your follow-up

 With your CRM software you won’t see your client as a number but as a person.

When you will be about to fill in the necessary fields during the registration of a contact, use personal notes and some other elements that will enable you to personalize your approach and to adjust your follow-up strategies accordingly.

Plan to spend time with your client

Planification functionalities of your CRM will enable you to plan follow-up calls or e-mails, or to affect follow-up tasks to your team. You will keep track of your meetings and will keep control over the things your still have to do.

Sébastien
Sébastien
Sébastien’s passion for entrepreneurship led him to launch Solutions Metrix, a firm that specializes in Customer Relationship Management (CRM) software. As of 2008, Solutions Metrix manages hundreds of CRMs in eastern Canada and continues to offer CRM services to numerous Fortune 500 companies. Sébastien maintains a strong growth trend for Solutions Metrix by leading the mission to help Canadian companies be more competitive in data management for sales and marketing.
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