Customer retention in marketing has long taken a back seat to acquisition. Now higher customer expectations, changing business objectives, and a fluctuating economy are causing many brands to make it a priority. As marketers place a greater focus on their customer retention strategies, we’re examining which of those strategies are truly effective to cultivate loyal customers.
Customer retention is a measure of customer loyalty and refers to how well a brand or company is able to keep its customers returning over time. High customer retention rates mean that a majority of your customers are repeatedly choosing to purchase your products or services, staying on a circular journey known as the customer loyalty loop.
Retaining customers may mean convincing them not to defect to a competitor, or keeping them engaged with your brand, product or service to prevent lapse and churn. There are a variety of customer retention tactics and strategies that businesses use to encourage customers to return, including customer relationship management, customer loyalty programs, loyalty offers and rewards. Some companies even employ Customer Success teams that align the goals of the business with those of the customer to build mutually beneficial relationships.
Historically speaking, companies have often undervalued customer retention’s importance, instead concentrating on customer acquisition in an effort to demonstrate growth to their stakeholders. Research has shown that 44% of companies make acquisition the priority, while only 18% focus on retention.
However, these numbers may soon change as more brands and marketers recognize how critical customer retention is to both revenue gains and long-term business success. Existing customers have a 70% likelihood of making a purchase (vs. 20% for new customers), they buy as much as 31% more on average, and their customer lifetime value (LTV) is estimated to be 10x that of their first purchase. For online retailers, more than 40% of their revenue is generated by just 8% of their customer base—the customers who are most loyal.
It’s also typically less expensive to retain customers than it is to attract them. In surveys, 82% of companies agreed that retention is far cheaper than acquisition. In fact, according to the Harvard Business Review, it can be anywhere from 5x to 25x more expensive to acquire a new customer than to keep an existing one.
Added to that, COVID-19 has completely changed shopping patterns and customer decision making. Customers who once may have made decisions based on price or quality will now be considering countless factors from personal safety to local regulations. There are tactics that may have This environment makes acquiring new customers even more challenging and retaining existing ones even more critical.
To build a strong retention strategy it is crucial to recognize your brand's strengths and weaknesses. Measuring and setting goals against key metrics gives insight into how well your strategy is working to retain customers. How customer retention is measured will differ from brand to brand. There are over 10 Key Customer Retention Metrics You Should Be Using to Track, here are a few metrics to start a strong customer retention strategy
The best customer retention strategies are built on business goals and insight. After you've created KPI's to work against, set goals to improve customer retention metrics, KPI's are a guide; decisions should keep customers at the front of mind. Do so by gathering customer feedback and using the information to support your strategy further. For example, addressing customer complaints tells consumers that their inquiries and concerns are being heard.
Tackling a new strategy would require time, but you can build on what you already have. Creating a strategy doesn't always mean starting from scratch. Revamping your existing strategy is an opportunity to remain consistent as things change. This also gives customers the chance to grow with the brand because they are a part of the journey. One way to do this is by nurturing the exciting email list and use it to keep your customer informed. This is an excellent method to turn new customers into loyal customers.
Whatever niche you are operating within should reflect your retention strategy. Now let us look at seven effective strategies to increase your retention percentages. Here is a list of seven customer retention strategies you should be using to improve customer retention.
When developing your customer retention plan, focus on these key areas to keep customers coming back.
1. Build customer trust and long-term relationships. Fostering customer trust requires a strategic focus on every aspect of the customer experience. To build lasting relationships, deliver relevance and value at every stage of the customer journey.
Listen & empathize with your customers The practice of listening will increase customer retention. Through listening to customers you will collect customer feedback that will enhance how you deliver customized experiences.
And most importantly:
2. Create a robust customer loyalty program. Maybe your brand already has a loyalty program, but you’d like it to deliver better ROI. Or, perhaps you’re just expanding your retention efforts for the first time. Either way, an effective loyalty program should contain these 3 elements at a minimum:
3. Leverage your customer data. Many lists of customer retention strategies mention the ubiquitous customer feedback survey—but to retain customers successfully, you need to understand their preferences and motivations without always having to ask. Collecting and mapping customer data like transaction histories, customer service interactions and loyalty program data will help you prevent churn and identify where customer wants and your business objectives intersect.
4. Re-engage customers using marketing automation. Today’s marketing automation technologies can take on entire marketing processes to simplify workflows for marketing teams. Re-engaging customers is one of these processes. Instead of your marketing team needing to track which customers have lapsed, a marketing automation solution that uses AI and machine learning (ML) can automatically recognize when customers lapse and re-engage them with personally relevant content.
5. Measure customer lifetime value. Customer lifetime value (LTV) is an estimate of the net profit attributed to your brand’s future interactions with a customer. Understanding LTV can enable you to shift from a short-term business strategy focused on next quarter’s profits to a long-term one that values customer relationships.
The simplest way to calculate customer LTV is to subtract the amount you spent acquiring and retaining a customer from the amount of revenue that a customer generates. You can also use an online calculator, such as this one from WebFX, or this more complex option.
6. Personalize your communications and offers. Use the customer data you’ve collected to make your marketing offers and messages more personally relevant to your customers. There are 3 stages to mastering personalization:
The closer you get to stage 3, the greater relevance and value you will deliver, and the more you will retain customers.
7. Surprise and delight with gamification. “Surprise and delight” has become something of an overused buzzword—but that’s because it works, and nowhere is that more evident than with gamification. Using game design to motivate customers is highly effective because it leverages people’s competitive natures while at the same time lighting up the reward center of the brain.
A few of the game design elements you can use to integrate fun surprises into your customer retention program include Points, badges, leaderboards, progress tracking, and reward tiers. Gamification is also easily tailored to your business goals. You can gamify just about any interaction your customer has with your company, from purchases and reviews to social sharing and trying new products.
By taking a strategic approach to customer retention, you’ll be able to encourage customers to stay loyal for the long haul. To raise the bar on retention even further, read our 5 best practices for building or up-leveling your loyalty program.