By Oluwasekemi Akinbo
In this article, Oluwasekemi Akinbo emphasizes the importance of customer retention over mere customer acquisition. She highlights how businesses, particularly fintechs, should focus on building long-term relationships with customers to drive repeat engagement. The piece explores strategies such as understanding consumer psychology, personalizing services, and addressing local financial needs to enhance retention.
The first click. That’s where the magic happens. Having users trust your product enough to buy, click, or request, is usually always mesmerising for businessmen and women. But what happens when customers only make one-time purchases? What happens when they never come back? You got the click, but you missed the multiple clicks.
Today, I’ll show you why your customers only make one-time purchases, and how you can channel your marketing strategies towards addressing this issue.
How Important Is Customer Retention?
Startups and other organisations tend to focus more on getting new customers than retaining the ones they have. But retaining customers is usually more beneficial than finding new ones. Long-term customers tend to make more frequent purchases and spend more over time, thereby increasing their lifetime value to the business. They increase profits for the brand, refer customers, and pass down their belief in the brand to other generations.
If you grew up using a particular brand of butter, or detergent, or milk, or any other item, you’d realise that it would be hard to deviate from it when you’re independent and start raising your own family because it has become somewhat of a family tradition. This is especially true in Nigeria. Most times, we Nigerians get so used to a brand that we even swap the general name for the brand name.
Startups and other organisations tend to focus more on getting new customers than retaining the ones they have. But retaining customers is usually more beneficial than finding new ones.
Indomie is a good example. It was such a popular brand of noodles while I was growing up, that most people began to term noodles as Indomie. To date, it’s hard for some people to even believe that other brands of noodles exist. They grew up with Indomie, and now they only know Indomie. When they go to small shops, they say, “I want to buy Indomie.” This is because in their mind, it’s the only noodles that exist.
See how important customer retention is? Indomie was able to win the hearts of their customers- the ‘80s and ‘90s parents. They created strategies to ensure that their customers kept coming back, and to date, their brand is imprinted in the minds of several generations.
Customer retention is a transgenerational, long-lasting strategy. No wonder research by Frederick Reichheld showed that increasing customer retention rates by as little as 5% can lead to profit increases ranging from 25% to a whopping 95%.
Giving attention to customer retention also helps businesses know the mistakes they might be making in their business, and address them, thereby giving a better impression to potential customers. If, for instance, your customer churn rate is going up, you’d want to find out why people are leaving and address the root cause.
But if you’re so focused on getting new customers that you don’t even notice that the old ones are leaving, you may be ignoring critical issues in your company. An aspect of your business may be dying, and you won’t even notice because you haven’t sat down to calculate your customer churn rate vis-a-vis customer retention rate.
Giving attention to customer retention also helps businesses know the mistakes they might be making in their business, and address them, thereby giving a better impression to potential customers.
Retaining existing customers is also often cost-effective, compared to acquiring new customers. Maintaining relationships with existing customers reduces the need for extensive marketing efforts aimed at new customer acquisition, leading to lower marketing expenditures. As a matter of fact, satisfied, loyal customers are more likely to recommend a company’s products or services to others, serving as unpaid brand influencers.
Understanding The User’s Psyche Vis-a-vis Your Business Offering
Understanding consumer psychology is essential for aligning your business offerings with customer needs, thereby enhancing satisfaction, loyalty, and profitability. A 2021 study in international business and finance, focused on mobile fintech adoption in Sub-Saharan Africa, revealed that trust, perceived usefulness, and ease of use were paramount in influencing user decisions.
So, if you’re looking to retain users, you have to consider and understand what drives a returning customer. How do they think? How do they view your business? What has worked in the past, and what hasn’t? Contemplating on these would help you adopt strategies that work, not just stuck in trial and error.
The Delta Model for business operations emphasises focusing on customer bonding rather than solely competing with rivals. You can learn from your competitors, quite alright, but don’t let competition overpower your drive to understand and satisfy your customers. Consumers’ perceptions, influenced by their thoughts, emotions, beliefs, and social factors, significantly affect their purchasing decisions.
One of the most important things to consider when branding is how your products are viewed by your target customer base. If, for instance, you sell socks for school children, you want to make sure that you give the perception that your socks are comfortable, easy-to-wear, and suitable for school. You might even want to demonstrate how they fit into various types of school shoes. You don’t want to go creating adverts that only show the socks on adults and sports men/women.
As a matter of fact, satisfied, loyal customers are more likely to recommend a company’s products or services to others, serving as unpaid brand influencers.
This would give the wrong perception of your brand; you’ll give the impression that your socks are not suitable for school children. But if you create the right perception, your target audience will immediately know that this is a brand for my kids’ socks, and they will have that impression etched in their minds. The same goes for fintechs- each fintech is unique, with its own special offering. They must create the approach perception to their target audiences.
Clicks that Last Beyond The First Transaction
So, if you’re ready to up your game in customer retention for long-term value, here are some strategies for fintechs to keep users beyond the first transaction:
- Thinking Outside The Box
Creativity and design thinking cannot be overemphasised in every business venture, including the Fintech sector. The Fintech market is highly competitive, requiring a lot of strategy and effort to scale. The global fintech space has experienced substantial growth in recent years, with projections indicating continued expansion.
This is driven by increasing consumer demand for digital financial services and technological advancements. The market is projected to reach $644.6 billion by 2029, reflecting a compound annual growth rate (CAGR) of 25.18% (Exploding Topics: Fintech Market Size & Future Growth).
A Publication by BCG—Prudence, Profits, and Growth—also reveals that Fintech revenue has grown from 14% to 21% over the past two years. With these rising numbers, it is important that startups present something unique and valuable to get even the first click, and subsequent retention.
So how do you stand out as a Fintech? Ask yourself critical questions like, what can you do better? How can you provide for your target customer needs without copying the old boring style? What are your competitors doing that attracts attention, and how can you do it better? Analysing these will help you understand how to stand out while providing value for your customers.
Creativity and design thinking cannot be overemphasised in every business venture, including the Fintech sector. The Fintech market is highly competitive, requiring a lot of strategy and effort to scale.
But to get the answers to these, you must first understand your target customers. What are their needs? What would excite them? What are their peculiarities? How do they see the world? Drawing up a customer avatar would help you deeply ponder on these questions. By the time you are done with your avatar, you’ll have a mighty big idea of how your customer sees the world.
Once you can get this, it’ll be easier to develop marketing strategies that leverage their emotions and experiences to get that first click, and subsequent clicks. Everyone likes to feel heard, understood, connected, and when they do, they stick there.
- The Power Of Personalisation
Personalisation in fintech marketing involves tailoring fintech products and marketing strategies to the unique needs, peculiarities, and preferences of each user. Personalisation is key in driving customer retention. It creates a sense of belonging for users. A sense that they’re special and accepted, and unique to other users.
Let’s use Spotify as a case study. Spotify is one app that beautifully leverages the power of personalisation. There’s something every Spotify user looks forward to at the end of each year: Spotify Wrapped. Users are eager to see how many listening hours they had over the past year, their most-played track, etc.
This became a yearly trend among their users, and now it’s become like a Spotify family tradition. If you ask any Spotify user to change their music-listening platform, they’ll hardly succumb, no matter the benefits that another platform might bring. Because they’re family now.
Spotify Wrapped gained so much traction that other music-listening platforms began to take a similar approach. I was pleasantly surprised when I discovered that even Sterling Bank’s mobile app, One Bank, gave me my financial Wrapped last year!
Like Spotify, fintechs can leverage the power of personalisation to boost customer engagement, retention, and financial inclusion. They can use data analytics to understand customer preferences, provide customers with insights into their spending habits, etc., thus supporting better financial management and increasing engagement.
Fintechs like M-Kopa, Jumo, PiggyVest, etc, have demonstrated the potential of personalised fintech solutions to transform the financial landscape in Africa.
Personalisation is key in driving customer retention. It creates a sense of belonging for users. A sense that they’re special and accepted, and unique to other users.
Jumo is a mobile financial services platform that operates in several African countries, including Tanzania, Kenya, Zambia, Rwanda, and Uganda. The platform facilitates digital financial services such as credit and savings by analysing non-traditional data points, including GSM records and mobile wallet transaction data.
This data-driven approach allows Jumo to assess creditworthiness and offer personalised loan products to unbanked merchants and individuals who may lack formal credit histories. By tailoring financial solutions to the unique circumstances of each user, Jumo enhances access to credit and promotes financial inclusion in emerging markets.
In a world where users are bombarded with generic services, personalisation stands out. Fintech companies that harness data analytics to tailor their offerings definitely see higher engagement and retention rates.
- Addressing Local Needs
There’s something about meeting people in their lowest moments—whatever you do for them, no matter how small, they won’t forget. This is what it means when fintechs address local issues, providing financial inclusion for those in hard-to-reach areas. Even when those people grow beyond their local communities, they’ll always remember the fintechs that first taught them how to save, how to track their spendings, or created a local financial community for them.
Thus, understanding and addressing local financial challenges can lead to higher user retention for Fintechs. TymeBank in South Africa adopted this strategy, focusing on providing accessible banking services to underserved populations. This led to their rapid growth.
Conclusion
Fintechs that remain relevant by meeting evolving needs, being strategic and embracing creativity, are more likely to enjoy a high customer retention rate, providing long-term benefits for their companies.
By understanding and addressing the unique needs of their users, fintechs can transform one-time clicks into lifelong clicks. As the fintech landscape continues to evolve, the strategies discussed in this article will be pivotal in boosting user retention rate.
It is also important to remember that trust remains the cornerstone of user engagement. Thus fintechs must prioritise security, transparency, and customer support, to build lasting relationships with their users.
