What Is The Role Of CRM In Customer Retention?

TAS
21 June 2022 in Sales & CRM

As the name suggests, customer relationship management software (CRM) plays a vital role in effectively managing customer relationships. Marketing, sales, and customer service teams can all benefit greatly from leveraging a CRM solution to generate targeted leads, drive more conversions, and enhance customer experiences. But one area of particular interest is the role of CRM in customer retention to facilitate business growth.

Discover why customer retention is important and how CRM software will help your business improve this key metric in the following article.

What Is Customer Retention?

Customer retention refers to your company’s ability to retain its customers over time. A high customer retention rate indicates that a higher percentage of your customers return to do business with you, which most likely means they’re happy with the product and service you’re offering.

How To Calculate Customer Retention Rate

Calculating your customer retention rate (CRR) is very simple. You just need to know the number of customers you have at the start (S), the number of customers you have at the end (E), and the number of new customers you’ve acquired during the period you’re measuring (A). With this information, you can work out your customer retention rate using the formula below:

CRR = ((E – A)/S) x 100

So in order, you would:

  • Subtract all new customers acquired during the given period from the customers you have at the end
  • Divide the result from step 1 by the number of customers you have at the start
  • Multiply your answer from step 2 by 100 to get the percentage, which is your customer retention rate.

Why Is Customer Retention Important?

Customer retention has a huge impact on your brand perception and profitability. For starters retaining existing customers is much easier and cheaper than new customer acquisition. According to conversion rate optimization consultancy Invesp, it costs five times more to win a new customer than to retain an existing one. Furthermore, increasing retention rates by as little as 5% can increase profits by 25% to 95%.

Retaining customers also increases loyalty among your existing clientele. Happy customers who are loyal to your business typically spread the word to family and friends while also providing valuable social proof via the web to attract even more potential customers to your business. As an added bonus, good customer retention means fewer people are seeking out your competition to fulfil their needs, which translates to a higher market share for your business.

How CRM Helps In Customer Retention

Above and beyond collecting customer data, your CRM analyses the wealth of information available so you can make informed business decisions that help you boost retention. Here are some effective customer retention strategies your CRM platform can help you incorporate for the benefit of your business.

Personalising Communications

Personalisation is one of the more well-known customer retention strategies. With access to detailed customer insights, including products your prospects or existing customers have shown interest in, full purchase histories, and a record of all previous interactions with your business, you can leverage your CRM system to personalise communications.

Not only does personalisation help to foster long-lasting customer relationships, but it also influences purchase decisions. Marketers report increasing revenue by up to 15% by personalising communications, according to Adweek, so it’s a great way to reduce customer churn and simultaneously boost revenue.

Understanding The Reasons Behind Churn

Speaking of customer churn, your business also benefits greatly from understanding the causation. You can use your CRM to trace back all events throughout an individual prospect or customer’s user journey up until the point they “dropped off”. This can help you identify where it went wrong and give you ideas for areas that could use improvement.

To further enhance your evaluation, you can compare churned customer behaviours and your business’ actions against retained customers. This allows you to pinpoint clear success differentiators that your team can replicate to improve end-to-end performance.

Customer Loyalty Programs

Creating customer loyalty programs is a great way to encourage your customers to become repeat buyers, which directly impacts your retention metrics. Your CRM software tells you who your customers are, the frequency of transactions with your business, and the value of their purchases.

Based on this customer data, you can establish strategic ways to reward your loyal customers. For example, you can identify your top customers by average order value or the ones who’ve been with your business for a certain period and offer special discounts, freebies, points, or any other perks that benefit them as loyal customers. Not only do loyalty rewards increase customer satisfaction, but they’re also an excellent incentive to keep them coming back.

Upselling & Cross-Selling

Cross-selling refers to selling additional lateral products that complement a customer’s primary purchase. Upselling involves selling an enhanced or upgraded version of the product a customer initially wants to buy.

The right approach to upselling and cross-selling helps customers find greater value than they were expecting, and your CRM can do the heavy-lifting to help you find these opportunities. Providing extra value via these sales techniques means customers are more likely to stay with your business, which boosts overall lifetime value. And according to McKinsey & Company, cross-selling alone can increase sales by 20% and profits by 30%.

Tailoring Campaigns

CRM software helps you tailor campaigns that can drive more revenue for your business. You can use your CRM to segment customers based on set criteria and then prepare and schedule custom messaging targeting those different groups.

So let’s say one of your segmentation criteria is gender because you have a range of gender-specific products. You can set your CRM to provide alerts for upcoming notable dates throughout the year like International Women’s Day or Father’s Day. This gives you the chance to create tailored campaigns around the relevant occasions, whether that’s giving customers special offers or using other marketing tactics to increase awareness and sales.

Regularly creating these types of tailored campaigns keeps your business front of mind, meaning people are more likely to shop with you if they decide to make a purchase for the appropriate occasion.

Setting Up Email Automation

Email automation complements all the customer retention strategies outlined above. In addition to saving you a significant amount of time preparing email lists or scheduling events manually, email automation through your CRM system allows you to send customers personalised, contextual messaging that is optimised to increase retention.

Most modern CRM software gives you the ability to create detailed workflows, meaning you can outline each trigger as well as the resulting action your tool will take for you. A few examples of automatable actions include:

  • Sending emails
  • Scheduling emails
  • Implementing if/then branching (where different scenarios trigger different workflow paths)
  • Updating and synchronising all email data and contact information with your CRM software

Since CRM automation does all the hard work for you, it’s much easier to keep your customers engaged, which helps boost retention.

Utilising Case Management

Another way CRM and customer retention go hand in hand lies in case management. This simply refers to the way your customer service staff manage any issues that arise and resolve the problems. CRM software provides case management functionality, which allows doing things like:

  • Gathering requests through a ticketing system
  • Tracking issues from first contact until they’re resolved
  • Assigning queries to the appropriate staff members
  • Analysing results such as how quickly you’re resolving an issue

Since case management is automated, it frees up more time for your staff to focus on supporting customers. The additional insights you receive from using this feature give you an opportunity to set goals like reducing the average time to resolve issues. Continuously working to improve your service using this customer retention strategy is another effective way to retain customers.

Leveraging Integrations

CRM provides a range of integration opportunities that benefit your business. Connecting your helpdesk software to your CRM, for example, will streamline your customer support processes. It gives your customer-facing employees access to all the data they need in one centralised place so they can deliver an excellent customer experience. In addition to making life easier for your staff, it also boosts your customer satisfaction rate.

Integrating your CRM system with email systems like Outlook and Gmail or applications like Mailchimp if you’re more comfortable using those tools is another option. You could then automate your email communications as outlined above to reap all the associated benefits, including better customer retention.

Increase Customer Retention To Drive Efficient Growth

To grow your business efficiently, it’s important to retain as many of your existing customers as possible. While acquiring new customers should certainly be part of your strategy, it’s a lot more cost-effective to maximise satisfaction among your current customers and turn them into repeat buyers.

Implement a CRM customer retention strategy which uses the wealth of customer intelligence you have at your disposal to create engagement tactics that delight. With these insights, you can personalise communications, understand the reasons behind churn, establish customer loyalty programs, incorporate upselling and cross-selling, tailor campaigns, set up email automation, utilise case management, and leverage various integrations to enhance the entire customer journey.

These marketing strategies, among many others, are a great way to boost loyalty and improve customer retention, which ultimately helps you drive efficient business growth.

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