It is a truism that it costs businesses far more to acquire new customers than to retain existing customers. And yet, according to a report published in Harvard Business Review, most companies still use the customer acquisition rate as a primary metric of marketing performance. As the report points out, “focusing on raising rates ever higher encourages marketers to overlook the law of diminishing returns”. Instead, businesses need to be focusing on customer retention.
Rather than over-investing in the acquisition of new customers who may or may not repay the cost of attracting their business, businesses need to focus on retaining the customers they already have by meeting their needs and improving customer experience. Unsurprisingly, a study conducted by Bain & Company (the inventor of the NPS) demonstrated that something as small as a 5% increase in customer retention can increase profits by more than 25%! And in a marketplace that is growing more digital, the best way to improve customer retention and loyalty is through providing digital customer service.
The benefits of digital customer service for retention
The most important factor in customer loyalty is the reduction of customer effort. Good customer service will only take you so far if your customer still must expend effort to engage with your company to resolve issues. In an era where customers value ease of experience over brand and brand loyalty is all but dead, companies need to compete on experience. Consumers want a frictionless customer experience, and as consumer preferences around digital messaging continue to shift, ‘frictionless’ will be increasingly synonymous with ‘digital’. Already, 9 out of 10 people would prefer to message your business digitally, because it is convenient and can be done on their time.
Beyond simple retention, companies who have empowered customers to contact them over digital channels have seen real benefits:
- Companies who have implemented digital customer service channels realize NPS 2.9 times greater than other companies (12.3% as compared to 4.3%).
- Brands that use digital messaging for customer service are seeing 25% more growth in annual revenue as compared to competitors who do not use messaging.
It’s important to note that one reason digital messaging has such dramatic impact on customer retention rates, besides honoring your customer’s communication preferences for channel and timing, is the fact that the rates of first-contact resolution for digital customer service is very high.
Additionally, in examining the issue of declining customer loyalty, Accenture has found that poor first-contact resolution has consistently remained the top frustration for the past five years of their annual survey of banking consumer experience.
Digital customer service and retention, summarized
Want to learn more about how ITC can help deliver superior first contact resolution and increase customer retention? Download our whitepaper: Digital Desktop for Omnichannel Customer Service, or contact us to book a demo today.