How does Haidilao improve its user retention rate?

The 2019 performance report of catering industry giant Haidilao showed that Haidilao achieved operating income of 26.556 billion yuan and net profit of 2.345 billion yuan in 2019. Among them, customers who visit the store once a month account for about 40.59% , and customers who visit the store once a week account for more than 16% . Over 30 million members, a huge number of returning customers, and an extremely high customer retention rate have brought huge profits to the company and consolidated Haidilao's position as a giant. In an environment where competition in the consumer market is so fierce, Haidilao's report card is enough to highlight the importance of "retaining customers".

Frequency of customers visiting Haidilao stores

Rather than investing a lot of money and energy in acquiring customers, it is more important to retain old customers and maintain relationships with old customers. At this time, companies will also consider how many customers my products and services have retained? There is an indicator to measure how many customers are retained, and that is the customer retention rate. Next, we will take a brief look at what customer retention rate is.

1. What is Customer Retention Rate?

CRR (Customer Retention Rate) is used to measure the percentage of customers that a company can retain over a certain period of time, helping companies understand what percentage of existing customers continue to repurchase the company's products or services. Customer retention rate is not just a matter of high or low, it also requires precise calculation. At present, the more popular methods for calculating customer retention rate are:

Customer Retention Rate Formula

In most cases, customer retention rate requires regular data collection. Sampling market surveys can be conducted on certain customer groups and combined with CRM user data profiling to extract and analyze the data. However, if traditional market research methods are used, such as field surveys, interviews, or large-scale distribution of paper questionnaires, the cost will be very high and the data will not be accurate enough.

Here is an example: A world-leading telecommunications company wanted to use customer retention as a key indicator in its corporate dashboard and calculate the percentage of old customers who renew their mobile phone contracts. Assuming that there are an average of 200,000 mobile phone contracts that need to be renewed each month, and the company renewed 130,000 contracts in a single month, the customer retention rate for that month would be:

The telecom company's monthly retention rate

The data of 65% is true and reliable. It is a ratio based on the number of people who have signed the contract, without any water or impurity. The customer churn rate always incorrectly takes into account some special circumstances, such as customers changing their mobile phone numbers, changing contracts, or simply forgetting to pay their phone bills and temporarily suspending their service. Therefore, when considering customer experience indicators, pay attention to the accuracy of the data.

Why is customer retention so important?

According to Gartner's research, 80% of a company's revenue comes from 20% of its existing customers. Maintaining relationships with old customers is extremely important. Only when customers are willing to "pay" for a long time can the company achieve sustainable development.

Experience Home helps you understand why customer retention is so important from the following three perspectives:

1. Help enterprises reduce costs and increase profits

From the perspective of customer acquisition costs, the cost of attracting a new customer is 5-10 times the cost of maintaining an old customer. Compared with winning new customers, it is more cost-effective for companies to maintain relationships with old customers and improve customer retention rates.

Therefore, most businesses want to convert their first-time buyers into loyal fans. At the same time, survey data analysis shows that the amount of money that customers who stay will spend on subsequent purchases of the brand will increase, even increasing by 200% in the following year. Therefore, improving customer retention rate can not only reduce the company's customer acquisition costs, but also increase corporate profits.

2. Help companies increase product repurchases and gain more favorability

From the perspective of repurchase and brand reputation, when new customers become repeat customers, the higher their trust and affinity for the brand, the more likely they are to be attracted to the company and stay. Analysis reports show that the number of repurchasers in this group is 4.2 times that of the general group. At the same time, their purchasing behavior will influence the people around them to follow suit and become high-quality "live" advertisements for the company, thereby helping the company gain more brand favorability and word-of-mouth recommendations.

For example, a well-known real estate developer in the United States found that more than 60% of the company's sales were the result of referrals. These cost savings and additional revenue combine to produce a steadily increasing profit stream in the customer's relationship with the company. Although there are differences between industries, the profit flows generated are different. But the end result is that old customers generate more and more profits.

3. Help companies reduce customer churn and improve their positive image

From the perspective of customer churn, if customers churn, it means that customers may have a bad experience or the product does not "hit their hearts". Customers may complain or even turn to competing products, which will have a negative effect on the company exponentially. Therefore, whether it is reducing marketing customer acquisition costs or increasing product repurchase rates and new product unit price, being able to retain customers will bring huge benefits and value to companies.

Customer retention rate is an important indicator for improving corporate profits. As Fred Reichfeld points out in his book The Loyalty Effect: " A 5% increase in customer retention can increase corporate profits by 20% to 100% ." ​​However, it is important to note that companies do not necessarily have to retain all of their customers. Some services may not be profitable or may cost more compared to other services. Therefore, combining other metrics can help companies gain a more complete understanding of why customer retention is high or low.

3. How to improve customer retention rate

There are many ways to improve a company's customer retention rate, but if you really want to succeed, you must combine the actual situation of the industry and the company and analyze specific issues specifically. Experience Home is a SaaS industry solution focused on customer experience management. We can help you from the perspective of "customer experience":

1. Deeply understand the real thoughts of customers and get closer to them “a little bit”

Collecting customer experience satisfaction questionnaires through multiple channels in real time and fully understanding customers' real thoughts, consumption motivations, and experience feelings is a good way for companies to obtain feedback from customers. By analyzing the collected customer comments and ratings, companies can drive reasonable improvements in products and services, and even provide customers with more personalized and memorable service experiences that keep customers coming back.

2. Instill a “customer-centric” corporate culture through information structure

"Customer-centric" has never been just a slogan. Experience experts believe that the most effective way to establish a "customer-centric" corporate culture is to ensure that every position and staff member can promptly understand the customer's experience feedback at every stage of the entire process. Therefore, companies need to build a neural network-like information structure and organizational structure to help customers achieve high psychological and spiritual satisfaction throughout the entire consumption process, and arouse customers' resonance and strong recognition of the corporate brand.

3. Solve customer problems as soon as possible to prevent the spread of bad experiences

When customers have a bad experience, it is both a crisis and an opportunity for the business. Timely apologies, inquiries, and comfort can upgrade a simple "transactional relationship" to a deeper level of interaction, reflecting the company's care, respect, commitment, and determination to provide long-term service to customers. No one will reject another person's sincere kindness to him. Empathy will also increase customers' favorability, recognition and loyalty towards the company. And they are willing to tell their friends about this personalized and differentiated experience. Once a customer has a negative review, the Experience Home Customer Experience Management System will automatically send and notify the relevant responsible person to effectively solve the customer problem as soon as possible, prevent the spread of bad experience, and help the company retain customers in a timely manner.

Author: Experiencer XMPlus

Source: Experience Home XMPlus