As coaches, knowing how to market and self-promote leads to gaining new customers, growing our practices, and helping more clients achieve their dreams. But equally important (and perhaps less widely discussed) is our ability to retain clients.
After our first session with new clients, we have the opportunity to form deep connections, improve their customer experience, and retain their business. Plus, our new clients can become advocates for our practices.
We’ll explain everything you need to know about client and customer retention, improving your client loyalty, growing your practice, and keeping your clients happy.
What is client retention?
Client (or customer) retention is a crucial part of growing a sustainable business and involves keeping existing customers long-term, turning them into loyal clients. The ultimate goal of customer retention techniques is to maximize the lifetime value of first-time customers by transforming them into repeat customers.
According to Harvard Business School research, a customer retention rate increase of 5% translates to a 25%-95% increase in total company profits. Acquiring new customers costs less than keeping existing ones, and long-time customers are more likely to spend more money as time goes on. These clients may even become brand ambassadors when they share their positive experiences and recommend our businesses to their family and friends.
What is customer lifetime value?
Customer lifetime value (CLV) is a business metric that measures expected earnings from a client. We can measure CLV through the length of the customer-business relationship and the different volumes, frequencies, and costs of products purchased. This metric also calculates the total average revenue generated by a customer.
Calculating CLV estimates how profitable a customer may be and our businesses' potential for long-term growth. We can then quantify the benefit of focusing our efforts on customer retention techniques instead of acquiring new clients.
To calculate our CLV, we need three input metrics:
- Average order value (value of the average sale)
- Average number of transactions per period (frequency of customer visits)
- Retention period (how long the average customer stays with our businesses)
With these values, we can use the following formula to calculate CLV:
CLV = average order value x average number of transactions x retention period
We can increase each of these numbers to boost the total CLV. But as business owners, we should carefully weigh the pros and cons of changing each metric to ensure our businesses aren’t negatively affected. Increasing our order value (or prices) leads to a greater profit from each transaction and raises the overall CLV. But this could discourage clients from returning, lowering the number of average transactions and potentially driving clients to look for more affordable alternatives.
It’s important to be aware of how our CLV fluctuates to keep our CLV high when trying to raise client retention levels. The smallest changes in our business practices or customer satisfaction can impact our CLV and growth.
Customer retention versus customer acquisition
Customer retention is much cheaper than customer acquisition since marketing and promotion cost more than keeping existing clients. Sale profits from our current customer base are higher than those from new customers.
We’re 60% more likely to sell to a current customer than a new one. This is because we’ve already made the first point of contact and developed a client-business relationship. We just need to continue strengthening our client relationships and ensuring customer satisfaction.
Another benefit of leveraging customer loyalty is gaining brand ambassadors and advocates. If a client developed a strong relationship with our businesses over a long time and they’re satisfied with the service, they may start making customer acquisitions for us through referrals.
A brand advocate, or ambassador, is someone who helps market our brand through word of mouth. For coaching businesses, these are likely loyal customers who’ve been with us for a while and had positive customer experiences. They may have made repeat purchases, left positive reviews about our services on social media, and refer us to potential new clients.
Besides satisfied clients, brand advocates could include employees, business partners, and influencers. Using brand advocates to market our brand comes across as more genuine and human.
Non-employee brand advocates are a sign of great customer retention techniques and show that excellent customer support leads to improved client experience and brand loyalty. These organic brand advocates can help drive profits by:
- Recommending our services to friends and family. Brand advocates can bring in large numbers of customers in an extremely cost-effective way, requiring little marketing expense from our businesses.
- Generating trust in our business. Nowadays, many customers seek recommendations before buying and find “regular people” more trustworthy than businesses and companies.
- Influence a purchase up to 50%. Brand advocates drive first purchases from new customers by boosting brand awareness and reaching out to new audiences.
Why is customer retention important?
We can interpret customer retention metrics as the percentage of our customers who continue to purchase from us, use our services over an extended period, and show brand loyalty. This shows us that we’re maintaining good customer relationships and fantastic customer service.
Here’s how to calculate customer retention:
Customer retention rate = ((Customers at the end of period - new customer during this period) / Total customers at the start of the period) x 100
Customer churn is the opposite of customer retention and represents the percentage of customers a business loses over a specific period. A low churn rate suggests our clients are happy with our products and services, reassuring potential clients and building confidence in our existing customer base.
5 client retention techniques
The importance of customer retention involves increased profits from lower marketing and promotion costs, and organic brand advocates who positively reflect our brand and influence their communities.
But how do you retain clients? Here are five customer retention techniques to boost our customer relationships:
- Stay in touch with your customers. Constant communication with our clients shows we value our client relationships. Plus, by keeping in touch, we remind them of our amazing businesses, services, and products. Regularly communicating with clients makes the customer experience more genuine and memorable.
- Personalize customer experiences. It’s our job to treat people as individuals and help them feel heard. We should extend the same personal touch outside of our sessions and create meaningful customer-business relationships. Creating personalized experiences can start with clients creating an account and filling out personal details or recommending products based on past behavior. Using a CRM can help us do both as it allows customers to enter their personal information and helps us track individuals’ engagement with our business.
- Support your brand advocates. Whenever possible, we should engage our biggest fans on social media and reward them for brand loyalty. Some examples of this may include donations to their favorite charities, offering gifts or prizes, and introducing exclusive offers and special events.
- Create customer loyalty programs. Repeat customers spend more money more often, and we can encourage this by automating rewards for them.
- Track customer data. We can collect and leverage data such as transaction histories, buying habits, and feedback from customer surveys with CRM software to better understand our customers’ needs and work toward fulfilling them.
Retain clients and maintain customer relationships with Practice
Maintaining excellent long-term client relationships can be difficult, but it’s well worth the effort. At Practice, we understand how to ensure successful client retention and the difficulties coaches face, so we’ve built an all-in-one tool to help your business succeed. Try Practice today.