Customer retention in retail businesses

Customer retention is the ability of a store to make a customer buy over a period.

Or, in a simple way, to make customers come back again and again for a long period.

A retailer, client of mine, once asked me for help.

“So, what’s the problem?”, I asked.

“People seem to love our store. They come in, buy, but then, they don’t come back again”

“You seem to have the typical customer retention problem. It’s very common, people love the products, the salespeople, and the store, but then, they won’t come back. They return to other retailers they’ve been buying from.”, I told her.

“But why won’t they return, if they like it?” she asked me.

“First, people have habits. They like to try new things, but they automatically return to their previous habits. And secondly, there are other important things, apart from products and customer service, that make people come back again.”

“What can we do?” she asked.

“First, we are going to find how much they love your products and customer service compared to your competitors. Then, we are going to work on customer retention”.

And that’s what we did. And, by the way, with great results – because she is a great retailer!

Why you need to focus on customer retention.

Imagine you have an empty swimming pool. And you want to fill it with water.

You open the tap and you wait.

Three hours later you return and you see the pool is still empty. You search for the problem, and find a leak. You’re filling the pool with water, but but the same water is disappearing into the hole.

Same problem in a store. On one side you have new customers. And on the other side you have customers leaving (not buying from you anymore). The customers who stay with you, are retained. That’s customer retention.

You won’t be able to retain every customer.

And, let me tell you, it’s bad to try to retain all customers. Some customers are not suitable for your store. And that’s fine.

But you have to convince the other customers to stay with you.

There are very few businesses that can survive with customers buying once, and never returning. If your clients are tourists, maybe that is possible. But in the majority of cases, you need to retain your customers.

But how to measure the customer retention?

If you have an online store, it’s quite easy to measure the customer retention. You can measure the frequency of purchases. A good metric is: how many times, on average, a customer buys from you in a year.

But if you have a brick and mortar store, the measurement is quite difficult, unless you have data driven by a loyalty card. But not every customers use loyalty cards.

You could make a survey, asking your customers how many times they bought last month, or week. Or ask if they intend to buy from you again.

The problem with surveys is people don’t always know the answer and sometimes don’t tell the truth. So, I think you should focus on what you see and on what your employees tell about customers purchasing habits.

So, how can we improve customer retention?

Or in other words, how can we make customers come back again and again.

There are two ways, that I found, to be most effective.

Customer experience

This fancy word is nothing more than giving our customers a memorable experience when they visit our store (and even after).

Customer experience is a vast subject. And it is impossible to explain it all in one post. But here are the main ideas:

  • You have to imagine every problem that can exist in a visit to your store, and remove that problem.
  • You have to find something that delights your customer. Something memorable for a long time.
  • A customer must always remember your store in a positive way. Feelings are important: happiness, security, excitement, motivation, etc.

Loyalty programs

The main way to increase customer retention should always be the customer experience. But you can increase your chances by implementing a loyalty program.

A loyalty program is a reward you give to your customers to make them come again, sooner, and spend more.

There are several types of loyalty programs, but all of them share this:

  • a way to contact customers
  • conditions to have access to the reward
  • the reward

In the story of the carrot and the stick, the loyalty programs are the carrot. And the customer experience is the motivation to go forward, with no need of carrot or stick.

About the stick. Well, don’t use punishment to make your customers buy again.

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Customer retention in retail businesses
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