In the world of business, it’s easy to get caught up in the excitement of acquiring new customers. After all, new customers mean new revenue, and revenue is the lifeblood of any successful business. However, there is a growing realization that customer retention is even more important than customer acquisition.
When I talk to business owners in the sports industry, whether swim schools or martial arts businesses it’s always clear that the best-performing operators have a greater focus on customer retention.
For businesses to focus more on customer retention they first need to understand why it’s important and what’s in it for them.
Sometimes we do workshops with people in the industry, and I always find when we look at a case study and carefully look at the numbers that come from improving customer retention and it’s like something unlocks where the business owner can suddenly see just how important customer retention is.
Let’s look at some reasons why focusing on customer retention is more beneficial than customer acquisition.
Higher profitability
Studies have shown that it costs anywhere from five to twenty-five times more to acquire a new customer than to retain an existing one. By focusing on retaining your existing customers, you can improve your profitability and reduce your marketing costs.
Greater customer lifetime value
The lifetime value of a customer is the amount of revenue they generate for your business over the course of their relationship with you. Retaining customers over a longer period of time means that their lifetime value is higher, and therefore more valuable to your business. Longer term customers are also more likely to refer others and become brand ambassadors.
Improved customer experience
Retaining customers requires a focus on delivering a great customer experience. This means providing excellent customer service, personalized interactions, and a seamless process. By improving the overall customer experience, you can increase customer loyalty and satisfaction.
Competitive advantage
In today's crowded marketplaces, businesses need every advantage they can get. Focusing on customer retention can give you a competitive advantage by providing a more personalized experience for your customers, and building a strong brand reputation.
Reduced risk
Acquiring new customers is always a risk, as there is no guarantee that they will become loyal customers. By focusing on retaining your existing customers, you reduce the risk of losing revenue from customer churn.
Small change, big improvement
A very small improvement in customer retention can have a massive impact in the long run on revenue and profitability. We like to recommend maintaining a monthly attrition rate of 2%. If your current attrition rate per month is 3% and you improve to 2% this may seem small however this will result in a total transformation of your business.
So now we have established the importance of customer retention let’s look at how you can pro-actively improve this metric in your business.
We believe there are 3 main pillars of customer retention.
Value
Are you getting results/seeing progress towards the desired result
Relationship
Are your customers connected with your business
Experience
Do your customers have a nice experience when interactive with your business
Our software program First Class is what we call retention focused.
This means it has been designed with tools to help you proactively improve customer retention.
Let me explain some of the ways First Class can improve customer retention.
Measure
First Class lets you measure your retention performance so you’re not in the dark. You can actually see your attrition performance last month and compare this against previous months to see how you are performing. Its hard to improve customer retention if you do not already know how you’re doing.
Onboarding
Onboarding new customers is a foundation of building relationships and good customer retention. First Class lets you set up an automated onboarding sequence with media like email, SMS and video content to help educate and connect with new customers.
Progression
First Class is packed with tools to help you provide parents with feedback about their child’s lessons and progress. Parents that do not receive feedback are in the dark. If there child has not progressed a level for some time their frustration may build and this increases their chances of drop out. By keeping the parent informed about the skill progress the child is making between levels you can lower their risk of drop out.
Identifying high drop out risk students
First Class has reporting that highlights students who are a higher risk of drop out. For example, if a student has been in the same level for a long time (30 weeks for example), they have an increase risk of drop out. First Class has a report called the non-progression report that provides you with a list of students who may need greater support and attention so you can proactively prevent drop out.
Monitor teacher performance
Your teachers are responsible for delivering your product. A good teacher can have a much better retention performance than an average teacher. By monitoring teacher performance you can identify teachers with poor retention performance and provide them with coaching and training to improve their performance.
While customer acquisition is important, customer retention should be the top priority for any business looking to succeed in the long term.
If you decide to make retention a focus for your sports business then having the right tools and technology in place can amplify your results and make your life easier.
If you’d like to learn more about First Class software check out a short video demo here – www.firstclassretention.com.