By Morayo Koku
Customer retention is essentially when a customer buys a product and continues to come back within a period of time. It is the ability of a brand to keep the same customers that acquire a product or service and consistently purchase.
They are usually referred to as the “regular customer”. Regular customers help create a steady flow of income and build customer loyalty. The Customer Retention Rate (CCR) allows business owners to measure this. As stated in Forbes, increasing the CCR can lead to an increase in profits.
Customer retention is an area that is not too cumbersome for a student entrepreneur to handle. How well the student entrepreneurs’ brand can retain its customers shouldn’t be assumed. There is a simple formular to know how well the brand is doing at customer retention.
Why is Customer Retention important?
It cost more getting new customers. So, the formula lets you know how many people are staying in your business within a period of time. This could be monthly, quarterly, yearly and so on.
CCR is calculated as (E – N)/S multiplied by 100.
“E” stands for the number of clients at the end of your chosen period (this could be a month, a year, etc)
“N” stands for total of new customers you got within that period.
“S” stands for the number of customers you recorded at the very beginning of that month.
For example, take Richard who is a student entrepreneur that sells shoes. He wants to know how well he is keeping his regular customers or if most of his customers are leaving. Based on the nature of his business, he decides to monitor monthly. He wants to know how well he retained customers in the month of September.
At the very beginning start of September he recorded the total number of customers as 30.
As the days went in September, he tracked the number of new clients. Eventually, he had at the end of the month he recorded, the total number of new customers as 6.
At the end of the month, he recorded the number of each customer he had for September as 20.
This means that E = 20, N = 6 and S = 30
CCR = (E-N)/s multiplied by 100
E – N = (20-6)/ 14 x 100 = 46.7%
This essentially means that Richard was only able to retain 46.7% of his customers out of a 100.
Now he knows how well he is doing at retaining customers and can discern the next right step to take. There are also online CCR calculators available.
What are some ways to retain customers?
1. Reward the customers loyalty: This simply involves awarding customers who have shown consistency in transacting with the brand. The reward given is subjective.
2. Quick and easy Feedback: This involves responding to complaints, compliments and criticism promptly and efficiently. Recent trends show that ChatGPT, an AI chatbot, can be a tool to assist in this area.
3. Use a Customer Relationship Management Software (CRM): A CRM is a unified platform that enables a business record, store and manage its data. There a CRMs with free plans students can start of with.
4. Enhance the customer experience: This involves making customers feel good at every interaction with the brand. From polite customer service to good delivery and packaging and the likes.