Retention: Understanding Each Metric and Their Importance
Cohort Retention Analysis is a vital technique that every business owner should know and use because it reflects the business’s health through specific measurements used. Furthermore, customer retention refers to the company’s ability to turn customers into repeat buyers and prevent them from switching to competitors. This metric indicates whether the quality of your product or service pleases your existing customers. This is an important technique to know, understand and use primarily for subscription-based companies and service providers.
Customer retention rate, customer churn rate, and customer lifetime value are a few customer retention metrics business owners can use to measure and find the percentage of their customer retention. Customer retention rate is the percentage of previous customers who remained loyal to your business over a period of time, while churn rate is the percentage of customers lost during a period of time.
Churn rate is a key metric companies should use and understand because businesses that struggle with customer retention usually have a high churn rate. However, low retention rates or high churn rates are both bad signs and should be a matter of concern because they signal your customer experience isn’t going well. However, this could also be a helping tool for struggling companies because now they can make several changes to improve their customer experience and improve their churn rate, ultimately elevating the company.
Customer lifetime value measures the total revenue you can expect from a customer during their lifetime. It helps a business discover its most loyal customers.
Customer Retention is essential because of the benefits it offers the company. These benefits include cost savings because customer retention is more cost-effective than acquiring first-time customers. Another benefit is positive word-of-mouth marketing, where your loyal customers tell their friends and family about your company’s product or service. Customer retention is beneficial, and if a company can increase its retention rate, it can increase its revenue.
If your company is struggling to retain customers or doesn’t know how to maintain them, businesses can use a few methods to improve their customer retention. Before listing what to do to increase your company’s retention rate, they must first understand that improving customer retention means improving the customer experience. So to enhance customer experience, increase customer retention and generate positive revenue, a business should deliver fast support, have personal interactions, invest in employees, meet their customers where they are, gather customer feedback, and incentivize loyalty.
Chick-Fil-A is the epitome of having all these factors and incorporating these methods into every one of their establishments. As a franchise, they understood early that customer retention means customer experience. Chick-Fil-A provides its customers with quality products and services in a respectful manner. Their service is fast even though they’re always packed. Chick-Fil-A has a high customer retention rate because they rely heavily on their interaction between customers and staff. Chick-Fil-A meets their customers where they are and offers us as customers a warm and welcoming atmosphere, with their contagious smiles, respectful manner, and memorable line “my pleasure” after every serving or order taken. Chick-Fil-A invests in their employees through good pay, training, working conditions, and every member’s day off on Sunday.
Chick-Fil-A already has a high customer retention rate. Still, to maintain or continue to improve it, they started incentivizing why we as customers should be loyal through their app loyalty and rewarding free food from time to time to customers who use the app or just created an account by just providing their email address. They also ask for feedback from their customers, whether they’re new or loyal. Because Chick-Fil-A understood that customers are essential, they utilized the factors to improve a company’s retention rate to help themselves maintain their high rate or elevate it some more. And because their retention rate is high, they are able to reap the benefits of having such a high retention rate by being able to stay in business by increasing profits and welcoming new customers.
