How customer satisfaction can impact customer retention
How happy your customers are, i.e. customer satisfaction, should be a primary focus for any business seeking to be more customer-centric. If your customers aren’t happy or are reluctantly purchasing from you, you aren’t building a sustainable business.
You want them to be happy so that they stay and you increase your customer retention. This means you’re able to spend less on acquiring new customers all the time and you can focus on providing a great experience to the ones you have. That will encourage them to stay with you and also to refer their friends and family. Temkin Group found that after having a positive experience with a company, 77% of customers would recommend it to a friend.
Is customer satisfaction a factor for retaining customers?
One strategy for retaining your customers is to increase customer satisfaction because happier customers are more likely to stay with a business. But a lot of businesses are more focused on customer acquisition, which is generally more costly than retention. The good news is that this makes it easier for you to stand out and impress your customers.
What is customer retention? It’s about impressing the customers you already have enough so that they won’t turn to a competitor for their next purchase. By understanding what your customers currently think about your business, what you can do to improve and what other needs they might have, you can easily personalize their experience. And personalization drives loyalty because customers feel that they’re valued in the transaction with you.
When you’re regularly collecting customer feedback you’ll also see areas of your business where you can improve the customer experience and reduce churn. It’s important to seek feedback from customers who are leaving your business so you glean information that can help prevent others from following them out the door.
Reasons why satisfied customers can switch to competitors
There are multiple reasons why satisfied customers can end up unhappy and switch to your competitors. This sort of change causes U.S. companies to lose $136.8 billion per year so it’s important to gain an understanding of the ways you can prevent it.
One common reason for the switch is value. Customers may no longer see the value in what you’re providing. Remember, this doesn’t have to mean lowering your prices to compete. The priority is that the customer feels they’re getting back from you the same or more than what they’re paying for.
Poor customer service can be a huge killer of loyalty. 33% of Americans say they’ll consider switching companies after a single instance of poor service. Ensuring that you’re providing a high standard across all channels (website, social media, phone calls, chatbots, in-store, etc) can help keep your customers happy and shopping with you.
Benefits of monitoring customer satisfaction and customer retention
By monitoring customer satisfaction and retention you can learn the correlation between the two and any gaps. Their satisfaction refers to their intentions - yes, they like your business. But the retention is their behavior - are they going to act on their intention and stay with you?
Monitoring both of these metrics can help you gain insights into customer behavior. Alongside the above changes in customer satisfaction, you also want to be on the lookout for when their intentions don’t align with their actions. Unhappy customers that do leave give you the option of researching the costs of providing what would have made them happy. Happy customers that leave also give you insights.
For example, they may be happy with what you’re providing but still switch brands because the price is an important factor in their decision making. If there is a cheaper competitor, they may still leave. Learning this may lead you to develop a cheaper option for cost-sensitive customers.
Ways to provide better customer satisfaction and retention
McKinsey & Company found that satisfied customers are more likely to upgrade or add services and are less likely to cancel subscriptions or on-going purchases. So what are some of the ways to increase both your customers’ satisfaction and your retention rate?
Providing a great customer experience helps increase your customers’ loyalty to you and your business. Think of each interaction they have with your business and ways that you can make it smoother, easier, more enjoyable or better in some other way. Little interactions that go above and beyond really do make a difference.
Within your business is a wealth of knowledge about why you created your product or service, the best way to use it, surprising uses for it, additional pieces that make it even better… There’s just so much information that you and your team have. Educating your customer can add so much value to their experience. You can do this through a blog or video series, social media posts or online tutorials.
Gathering customer feedback will provide so many insights into how you can increase customer satisfaction. There may be a process that is unknowingly laborious, a slow loading website or a new product that your customer would love. You’ll also find out what you’re doing right, which you can then look to replicate elsewhere in your business. You’ll also hear what your customers love about you, which can be powerful for advertising campaigns.
Tracking all of this customer satisfaction information over time is important. You’ll be able to see areas of your business where you need to improve. This could be times in a customer lifecycle, certain stores, online versus offline or an overall change in results over time. You’ll also be able to see the effects of changes that you put into place based on past surveys. You can test changes and see if customer satisfaction improves. Using a system like Net Promoter Score makes this process simple and easy to compare over time, location or other factors.
Although they are not the same, customer satisfaction and retention are interconnected. Increasing your customers’ happiness will generally lead to a higher retention rate. And because retaining customers is generally cheaper than acquiring new ones, anything that you can do within your business to improve their experience is likely to save you money.
First of all, you need to review your customer retention rates. Then you can start diving in to see what you could have done to keep those that are leaving. Most actions you take to improve customer satisfaction will have a positive flow on effect to customer retention as well. Tracking this over time will show the impact your overall customer experience actions have.