Customer Retention Programs: Common Pitfalls vs Best Practices

Successful businesses have one common practice that makes them grow bigger and better. It capitalizes on a very common resource called “customers”. But it isn’t about the number of new customers coming in but how many of them do some repeat purchases and eventually become loyal to the brand.

But how does customer retention work and how do you make sure that your business’s retention rate remains high? Just like any other marketing strategy, there are pitfalls and best practices that you need to be aware of if your customers are to remain loyal to your brand.

In this article, we’re going to discuss 3 common dangers that you need to avoid and provide best practices that can counter each one but before getting into the deeper details, let’s first do some math and find out what your shop’s customer retention rate actually is.

Finding Out Your Customer Retention Rate

Isn’t it nice to know the exact value of your business’s customer retention rate? It won’t only be encouraging but also comforting especially if it’s on the higher side. But even if it’s low, you should feel sad either but instead; consider it a motivation to do even better.

There are varied formulas for calculating customer retention rate but the standard one which most businesses use looks like the one below:

RETENTION RATE = ((CE-CN)/CS)) x 100

Before you think that CE is “Conformitè Europëenne”, CN is “China” and CS is “Customer Support”, let’s learn what each variable stands for and here they are:

- CE stands for the number of customers when the specified period ends

- CN is the total number of new customers your business was able to acquire during the specified period

- CS is the total number of customers at the start of the period

Filling the formula with real number values would look like the sample computation below:

2000 – 400 = 1600 → 1600/1800 = .88 x 100 = 88 percent

But is a retention rate as high as 88 percent actually good and should you settle with it in case it’s your shop’s customer retention rating? If you ask us then our answer is it all depends on the industry that your business is in. A rating of 88 percent may be awesome for a particular industry and a partial fail to others. So the next step that you need to take is more on evaluation and analyzing your previous strategies as well as defining the direction that you want your business to take.

So now that you have an idea on how to compute for the retention rate of your business, it is time to look into 3 common pitfalls that you need to avoid and learn how you can counter each one with some best practices that you can adopt.

1. A Complicated Onboarding Process

Common Pitfall:

Your shop might be causing too much confusion which withers away the excitement from the overall journey that your customers take. If this is the case then your customers would surely abandon checkout or simply place a single order and never want to make any transaction with your shop again.

Another customer retention strategy that you can implement is setting up an ambassador program. If it’s an online shop that you seek to improve retention for then you definitely can do this using apps that can integrate smoothly with popular e-commerce platforms such as Shopify for instance.

But one common mistake that spoils your effort in this aspect is making the ambassador onboarding program a complicated one. You would want loyal customers to be joined to your ambassador team as quickly as possible so be sure to make the process a lot like a breeze for them.

Best Practices:

Ensure that your shop encourages fun and excitement from start to finish. This means that you need to layout your shop well so customer flow is smooth. If it’s an online shop then definitely systemize the steps for order placing, processing, and checkout so that customers will get the best experience possible.

On the aspect of ambassador programs, you need to choose one that allows you to design an awesome sign-up page for loyal customers who want to join your core team. There are plenty of apps out there but there’s a select few that can automate every process both for you and your ambassadors. If you need help on this then don’t hesitate to ask us! We’re ready to be of help!

2. A Meager Reward for Loyalty and Ambassadorship

Common Pitfall:

Unnecessary cuts or trying to save by giving meager compensation to your ambassadors would spell disaster for your business. There are some who make the mistake of not offering great rewards, discounts, commissions, and/or compensation to their ambassador and the end result is total failure! Sustaining and rewarding brand ambassadors actually costs less than doing the “spray and pray” advertising and promotion strategy on different channels. Keep them happy!

Best Practices:

Never undercompensate your ambassadors and make them feel special in every way possible. Happy ambassadors bring in more and more customers who produce higher sales and bigger profit. Offer them a variety of rewards in the form of discounts, referral commissions, birthday vouchers, privileged access to upcoming products, free training and exposure, etc.

Always remember that loyal customers are your top contributors of authentic endorsements and they do this for a cheaper cost. Customers nowadays tend to reject public ads and love to listen to honest reviews and testimonies instead so be sure to invest on your brand ambassadors and make sure that they are rewarded well for every good deed that they perform for your business.

3. Taking the Focus Out Of Your Products

Common Pitfall:

It is easy to get so invested in marketing and promotions that you already forget to make improvements and innovation on your product. Even smartphones and cars release a new version each year, why not do the same with your products? Your customers will eventually fall out of love from your brand if it stays the same and never gets updated. Lacking on this aspect would diminish brand relevance and drag down sales.

Best Practices:

Keep your customers focused on your product or brand by regularly updating it and making sure that they are well-informed about the improvements you have made. Keep that passion for your product burning by sending weekly newsletters, setting up games on your social media channels, and producing high-quality content in the form of podcasts, videos, or even resources which customers can download.

You don’t have to do all of these by yourself because you simply can’t. What you can do is delegate tasks to your brand ambassadors and let them generate those beautiful User Generated Content that will drive prospective customers crazy once they see them! You can also partner with some influencers who would love to use your brand to increase brand exposure and spread the word about your product more effectively!

Keep Your Customers, Grow Your Business

This is one important principle that you need to keep in mind as you seek to improve your business’s marketing strategy, don’t be too focused in the olden ways of advertising and promotion because the truth is they all cost higher but produce weak ineffective results. The new norm is now focused on customer retention and finding ways in turning them into your very own brand ambassadors.

If your business is to thrive in our modern world of personalization, it must be able to adapt to these ever changing trends and avoid every danger that lurks around the corner. It sure takes much effort but the end result will surely be a rewarding, and fulfilling one. Start boosting your business’s customer retention today with an efficient and automated ambassador program! We’re always here to ready to help.

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