What is client retention in business

A small business’s success depends on its customer base. You may want to focus on growing that customer base, but you should also consider your client retention. But what is client retention, and how can you improve it for your business?  

This guide will discuss client retention for small businesses, including:

• What is client retention?
• Why is client retention important?
• How can you improve the client retention of your business?

Client retention is a business’s ability to maintain current customers by transitioning them into repeat buyers. If you satisfy your existing customers, they may return to your business rather than go to competitors. Some businesses may only focus on earning new customers, but prioritising current customers can help you maintain steady profits from them.

With client retention practices, you can sustain your client base rather than just working with one-time customers. A retention strategy can help you build loyal customers who stick with your business for the long term. If these methods are successful, you won’t have to rely on new customers for consistent revenue. 

Studies have shown that it can cost about seven times more to earn a new customer for your business than to retain a current one. Though it’s still important to invest in marketing and advertising, pleasing your existing customers can strengthen your revenue more cost-effectively. 

In fact, business strategist Frederick Reichheld found in his research that a 5% increase in customer retention can lead to 25-90% greater profits. So, if you focus on keeping clients you already have, you won’t have to spend all of your time and money chasing leads and convincing people to choose your business. 

Happy customers can also provide free marketing if they speak highly of your business to others. So, you can increase your earnings by focusing on people who already chose to work with you and offering them the best customer experience. 

Once you understand what client retention is, you may wonder how to improve it for your own business. We’ll cover a few tips on how to do just that.

The first step in improving your retention rate is being aware of it. To this, first compile your customer list from a given period. You’ll need the number of customers you had at the beginning of the period, the number you ended with, and the number of new clients you gained. 

Then calculate the client retention rate, subtracting the new customers you gained over that period from the total customers you had at the end of the period. Divide that number by the customers you had at the beginning of the set period. To find the retention percentage, divide that number by 100. 

Having this percentage at hand will help you measure the progress of your efforts. Consider calculating this percentage each quarter to see if your retention is improving. 

One way to improve your client retention is by focusing on customer service to strengthen personal client relationships and increase loyalty. If you build a rapport with your clients, they can get to know you better. As a result, they’ll feel more attached to your business. 

Great customer service means being friendly and responding to client communications quickly and reliably. If you show that you listen, care, and are thankful for their business, they’ll enjoy working with you and be more likely to return.

Asking for customer feedback can also help you improve your customer service and, in turn, your client retention. Consider contacting your customers to review your business or provide you with detailed feedback on their experience. This feedback can help improve your services while showing customers that you care about what they think. 

Another way to improve client retention is to follow up on first-time customers to thank them for buying from you. Call or email new clients to see what they think of your business and remind them you’re happy to help again. This commitment can help you remain relevant in the mind of customers. If they need similar services or products in the future, they’ll think of you first.    

If your products or services lend themselves to regular purchasing, you may want to provide packages or subscriptions to promote repeat buying. For example, if you have a grocery shop, you could offer a discounted monthly subscription of produce delivered to customers’ doors. Or if you have a yoga studio, you could create a monthly unlimited pass. This tactic can help you retain customers because it simplifies and encourages repeat buying. 

You can also develop loyalty programs for your business to increase client retention. For example, if you run a coffee shop, you may want to create a loyalty card for regular customers that offers their tenth coffee free. With programs like these, customers feel that they get something in return for their repeat business. It provides an incentive for them to return while also thanking them for coming back. 

As you focus on your client retention and increase your revenue, you’ll need to manage your money well for success. Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.