Customer growth: what it is, benefits and strategies

Customer growth is not an option for most companies, but a must. Any company with ambitions that extend beyond its immediate environment must expand to survive. Especially in such a competitive industry.

But increasing revenue and developing a user base are not always synonymous, for example in SaaS companies focused on long-term customer growth. These companies are built on systems that rely on the ability to increase sales to existing customers while attracting a steady supply of new customers.

But what does it mean to develop your customer and client base, and how can your company improve its customer service while increasing profits by growing in the right way, at the right time and with the right customers?

What is customer growth?

Customer growth is what happens when customer-centric companies use successful customer retention tactics. It is used to improve customer experience and offer products tailored to consumers' needs and interests.

It's about finding the ideal customers and then developing their commitment to the company and their loyalty to the brand.

The definition of customer growth varies depending on the industry. For a local retail store, it may mean increasing the number of repeat customers or the type of customers it attracts.

A typical SaaS company tries to retain the first customer. Increase your loyalty to the company. Then send them out into the world as brand ambassadors. Attract new customers. That's a difficult balance in an industrial system that relies on customer loyalty. It's not so much about increasing the number of customers, but rather about increasing their quality and potential.

Benefits of customer growth

For many companies, growth is a sign of success. It opens up new opportunities, attracts more customers and increases profitability. Creating loyal customers through excellent customer service can lead to valuable long-term connections for businesses.

• Customer satisfaction: Satisfied customers will spread the word about the company through word of mouth or social media reviews. This can increase the company's market share. Customers who are satisfied with the service they receive are also less likely to leave a bad review.
• Returning customers: Satisfied customers are more likely to come back to the same company if they need the same product or service in the future. This suggests that the company's customers are loyal to your brand. Customers who regularly purchase from a company can be rewarded with a loyalty program that encourages repeat purchases.
• Advantages for the company: Customers are willing to pay more for a product, and a company with a good reputation can often command higher prices than a company with a bad reputation. This should increase the company's profitability.

Strategies for customer growth

Companies can expand their operations with the help of a growth plan. Adding more locations, investing in new customers, and expanding a product line are all strategies for expanding a business and successfully growing customers. A company's business and target market influence the growth tactics it uses.

Once you have consumers on board, you need to engage with them to find out what motivates them. But how can you tell if your customer base is growing? Here are some of the most common customer growth metrics.

1. Customer churn rate

Churn rate is the percentage of customers who leave your company or end their business relationship with you. It is determined over a certain period of time. Customer churn rate can be calculated on a monthly, annual or quarterly basis. You can easily calculate churn rate using the following formula:

Churn rate = (number of customers unsubscribed) / (total number of customers at the beginning of the period) x 100.

A low churn rate is desirable. A higher churn rate indicates that your service or product is not enabling customers to achieve the results they want. Companies should aim for a low or negative churn rate.

2. Monthly Recurring Revenue (MRR)

This is a useful metric that allows companies offering subscriptions to see how much their customers have spent since purchasing from them. Monthly recurring revenue is the number of funds that customers spend on your company's products and services each month. This value can be compared over time to see the trend of your overall recurring revenue and how quickly it is changing.

You can also calculate monthly sales growth to track sales growth among existing customers. This is simply the new money earned this month compared to the previous month, but excluding the monthly income from new customers. Existing customers can easily bring additional money into the company through rewards programs, upselling, and cross-selling.

3. Net Promoter Score (NPS)

The Net Promoter Score (NPS) shows the overall performance of your service and your company. To calculate NPS, ask consumers if they would recommend your company (or service) to a friend.

Respondents are asked to rate the likelihood of them recommending a product on a scale of 0 to 10, with 0 being “not at all likely” and 10 being “not at all likely.” The likelihood that someone will recommend your company is the most important indicator of customer development.

Customers who give you a score of 0 to 6 are considered rejecters, those who give you a score of 7 or 8 are considered passive, and those who give you a score of 9 or 10 are considered true promoters. You can then use the following formula to determine the NPS.

NPS = Promoter Rate – Detractor Rate

In general, the higher the Net Promoter Score (NPS), the better. If you research online, you'll find different views on NPS criteria depending on your industry. The most important thing is to track this indicator daily and see how it changes in your business from month to month. This will help you determine whether your efforts are having a good impact on overall customer satisfaction.

4. Lifetime value of the customer

The estimated customer lifetime value (CLV) for your business represents the total revenue that a single customer is expected to bring in over the course of their relationship with your business. Simply put, customer lifetime value is a metric that evaluates the value of a customer. Knowing how your customers respond to your goods or services allows your business to focus on improving the customer experience.

If the value increases over time, it means that your product or brand is having a significant impact on customer satisfaction. If there is a decline, the company should reevaluate its operations and make efforts to identify and resolve customer satisfaction issues.

5. Cost of customer retention

The cost of retaining existing customers is called customer retention costs. In other words, it is the spending on various customer success initiatives.

Tracking customer retention costs allows companies to make more informed decisions about spending on their programs. By making smart investment decisions, it is possible to increase sales while reducing costs.

To determine a company's average annual cost per end user, divide the total by the number of customers.

6. customer retention

Does your service or product resonate with your customers? While there are a number of ways to test and quantify customer engagement, some of the most basic include time spent on site, repeat visits, or social media reactions (likes, shares, and comments), which can all be measured. The higher these values ​​are, the more engaged your users are.

As a result, you need to increase active user rates to increase customer retention rates (which are typically more sophisticated metrics tailored to your company's specifications).

If you want to measure user engagement, e.g. For example, as a subscription-based service, you can calculate the ratio of daily active users to monthly active users. This tells you the percentage of monthly active users using your product on a given day.

Conclusion

Customer growth is an essential factor for the success of your company. It will thrive as long as your customers see value in your product. And the customer success team must ensure that this is the case.

In addition, the entire company must adopt a customer-oriented attitude so that this is also visible to the outside world. Every customer encounter contributes to your brand's reputation as a customer-centric company. It is important to attract new customers, but also to retain existing customers. This is the nature of multinational companies that have evolved into global brands.

QuestionPro believes that consumers thrive when they achieve the desired result from using our products and services.

QuestionPro offers a variety of services to obtain customer data in various formats such as Excel, PDF, Word and others so that you can compare and edit your products.

Try ours Survey software and other specialized products and start collecting data to make better decisions and achieve expected customer growth. Get started by creating your free account or requesting a demo of our platform.

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KEYWORDS OF THIS BLOG POST

Customer growth | customers  | growth