Raw growth is great for any agency, and there’s nothing like watching a sea of new clients and new work come in. It’s an easy performance metric to appreciate, after all.
However, just as important as seeing more clients stream in, is having your old clients stick around for the long haul. This is where having a good retention rate comes in, and why having a strong client retention strategy is important for your agency.
In today’s entry, we dive deep into retention rate and how important a client retention strategy can be for success.
What is client retention?
It’s intuitive enough to understand that client retention is all about how effective you are at sustaining long-term clients.
Measuring retention rate is just a little more complicated. Retention rate is determined by the proportion of clients who keep doing business with you, relative to those who stop doing business with you, both measured over a certain period.
You may have heard of something similar called churn rate—this is essentially the reverse of retention rate.
How can a client retention strategy save money?
There’s a whole host of data and sources out there that indicates just how important client retention is to any agency.
To illustrate, let’s look at the data for customers in general. Studies show that overall, returning customers are far more valuable than new ones.
1. Returning customers spend more money
If customers have had a positive experience with you and your services, then when they come back, they’ll trust you more and spend more.
Data shows that returning customers spend as much as 67% more money than new customers. As much as 60% of the revenue in top-performing companies may come from these returning customers.
2. Returning customers are more likely to purchase anything at all
Intimately related to the trust you build with your customers, returning customers who re-enter the sales funnel have a likelihood of converting to paying customers of as much as 70% - compared to new customers, who are only 5-20% likely to convert.
This 70% figure isn’t acquired immediately, but the more times a return customer purchases your services, the more likely they are to buy something. Having you in mind as a trusted agency will ensure that your customers will come back to you whenever they need more.
3. New customers are more expensive than return customers
Working that sales funnel, reaching out with social media and paid advertising, providing consultations – getting new clients is hard work. Meanwhile, return clients already know your process and capabilities, and are going to be more likely to stay onboard or return.
This applies to nearly every business, and as a result, it costs as much as five times more to acquire a new customer, as it does to sell to a return customer.
4. Improving retention results in improved profits
A client retention strategy will yield amazing results even for small improvements. Combining the savings associated with return customers, and the increased value of their business with you, and you get a stunning figure: A mere 5% improvement in retention rate can result in anywhere between 25 and 95% greater profits.
5. Repeat customers help you promote your business
Clients whose trust you’ve earned, through reliability and quality of output, will eventually become free marketing themselves, providing referrals via word-of-mouth. You may expect a happy, retained client to provide much more value than their own worth, in the form of new business.
Building a client retention strategy
All these figures make it clear that client retention is an important component of business! Which is not at all to say that you should double down on your spend and effort in client retention at the expense of client acquisition. Rather, both should work together as part of a cohesive strategy in building your business – marketing to new customers and appealing to old ones go hand in hand.
You may well have thought out your client acquisition by now, or else you probably wouldn’t be reading this quite yet. Now, check out our tips for helping design an appropriate client retention strategy to ensure that you have a steady influx of clients who keep coming back for more.
(Check out our sister post on client retention to better understand your own client retention rate.)
1. Be transparent and honest
If you want your clients to trust you, you’re going to have to trust them as well. Build a relationship with your client centered on a free exchange of information, ensuring that everyone is on the same page. This transparency not only builds that trust but also improves decision-making, since everyone involved gets to see the big picture.
2. Treat clients like people
Behind every email and phone conversation with your client is a human being. Treat them as such, not just as listings on your financial report. Set up a conference call as part of onboarding, and make sure that everyone on both teams gets to know each other. This is both an important part of relationship building, and a way of ensuring that problems can be solved promptly because the right people can get in touch with one another when something arises.
3. Act like a partner, not simply a doer
When your client hired your agency, you were almost certainly provided with extensive briefings on their culture, direction, mission and vision. This isn’t just a means to an end for staying on-brand with your output. You should take the opportunity to build a relationship with your client as a partner in delivering their brand to the world, and not just a tool to implement their every whim.
Rather than just going for every deliverable according to their will, use your expansive experience with marketing and the industry to provide solutions and alternatives whenever possible. Show them their areas of improvement, and give advice as to how they can improve their branding.
Through your research, you may also uncover new niches and opportunities for your clients. Use this information to their advantage, and demonstrate your willingness to serve as a partner.
4. Get feedback and take it to heart
Your clients obviously want high-quality output just as much as you do – if not more, in fact; after all, it’s their brand on the line! This means that any complaints they provide must be taken as their desire to improve themselves, not as criticism for criticism’s sake. Use their criticism to improve your work with them, and learn from it as well.
On top of that, go out of your way to ask for feedback, whether positive or negative. This will show your client that you’re willing to do whatever it takes to provide quality work.
5. Pick the right clients in the first place
Every agency will have their share of amazing clients, who are such a good match for their values and work, that everything from creation and output to revisions and feedback are handled with grace. Of course, hand in hand with the great clients are the toxic clients, who never seem to be satisfied and just aren’t a good fit.
It will take some time in the business to figure out what makes a great client and a terrible client, but over time you’ll find out what the common factors are. Research clients you’ve lost, just as well as clients with whom you’re having a great relationship, and use the information from here to determine your selection process for future clients.
None of our advice will work well if you have difficulty building a relationship with your client in the first place!
(Featured Image Credit: https://www.livechatinc.com/blog/customer-retention/)