Top 12 Customer Retention Strategies to Earn Loyalty & Save Money
Depending on your industry, acquiring a new customer can cost anywhere from 5 to 25 times the cost of retaining an existing customer.
This is really at the heart of why customer retention is so important to all businesses. In this post, we’ll take a closer look at this effective marketing strategy, including:
- What is customer retention and why does it matter.
- How to calculate customer retention rates.
- 13 customer retention strategies to earn loyalty and save money.
What is customer retention?
Customer retention is the ability of a brand to keep customers subscribed or returned to its products and services. It also prevents customers from switching to competitors, says David Morneau, CEO of search engine optimization firm Breeze. co.
Why is customer retention important?
Sherry Morgan, the founder of pet site Petsolino, said repeat customers help ensure a steady stream of revenue and keep the business stable. And, in a perfect world, they also help grow their business through aggressive word-of-mouth marketing.
“Customer retention is one of the best ways to improve profitability,” adds consultant Luisa Zhou. “Many studies and surveys have pointed out that retaining customers is much cheaper than constantly trying to find new ones.
This is because marketing is expensive, and if you can attract existing customers to spend more on you, your profitability will increase. “
What is the customer retention rate?
Customer retention rate (CRR) is a marketing metric that determines how many customers a company retains over a given period.
“It’s one of the most important indicators of consumer loyalty,” says Jay Bats, developer of ContentBase, a social media template company. “For example, if a company has 10 customers at the beginning of the year and loses 2 customers by the end of the year, its customer retention rate is 80%.”
How do you calculate customer retention rate?
The most common formula for calculating customer retention rate is: CRR = ((E-N)/S) x 100.
According to Geoff Cudd, owner of the car-buying website FindTheBestCarPrice.com, E is the total number of customers you have at the end of a certain period, N is the number of new customers you acquired during that period, and S is the number of new customers you have during that period The number of customers you have at the start. The result is the percentage of customers who stayed with you during that time.
13 Effective Customer Retention Strategies
Whether you’re a B2C business or an agency looking to improve client retention, here are 13 effective strategies from the experts.
Provide a solid customer experience
It all starts with a great customer experience.
“In today’s competitive marketplace, exceeding expectations, exceeding customer needs, and establishing your value are key components of success,” said Matt Weidle, business development manager at Buyer’s Guide, a product comparison website.
“It’s critical that your organization maintains customer satisfaction across all channels, both in-person and online.”
Take Jeff Neal, founder of Critter Depot, who ships live insects to pet stores, zoos, and reptile owners. Customer retention is important due to the inherent limitations of its audience size. That’s why Critter Depot ships quickly, for example.
“The biggest factor is providing good service,” he added. “Sometimes crickets or cockroaches die on the way. We have to re-ship new orders for free. That deal could be a losing proposition for us.
However, the long-term potential to retain the customer greatly recovered the loss of the order. ”
“That deal could have been a losing proposition for us. However, the long-term potential to retain that customer greatly recouped the loss on that order.” – Jeff Neal, Critter Depot
Under-promise and over-delivery
Related to this, it’s wise to set customer expectations early and consistently exceed them.
“In terms of what you’re able to deliver to your customers, you’re a little more conservative with your estimates. Then, deliver on your promises,” Zhou said.
“Always deliver value that exceeds customer expectations. That way, your service/product is a no-brainer for your customers, no matter what your price is.”
Ray Blakney, CEO of online language school Live Lingua, agrees that even in a competitive market, customers are more likely to return if they have an exceptional experience.
One of the other most obvious customer retention strategies is to reward shoppers for their loyalty, such as through loyalty programs.
Rewards can include discounts, gifts, exclusive events, sneak peeks, and more.
“You’re free to innovate in the loyalty program you build and the incentives you offer,” says Dustin Porreca, SEO manager at marketing agency Elevate Demand.
“Most importantly, you want to make returning customers feel like VIPs every time they visit your establishment. Let them know they are valued and demonstrate that value through your actions so they will continue to have reason to return.”
It also paves the way for brands to cross-sell and up-sell, said Joanne King, director of online music platform ICMP.
“Make your repeat customers feel like VIPs every time they visit your establishment, so they’ll continue to have a reason to return.” -Dustin Porreca, Elevating Demand
Use your data to personalize the experience
Another way to improve customer retention is to personalize the shopping experience. But to do that, you need data.
You can gather customer insights through surveys, reviews, buying behavior, and more, then create profiles to execute these personalized experiences through transactions or messaging.
Per Tyler Martin, business coach at ThinkTyler, the Customer Intelligence Platform (CIP) helps businesses collect, analyze and act on customer data to develop customized products.
“The more you know about your customers, the better you can improve their experience with your company,” adds Jamie Opalchuk, CEO of web hosting platform HostPapa.
“When you know who your consumers are and what they need what and what their pain points are, you can better provide them with what they need to earn their loyalty and be rewarded for doing more deals with your company.”
Use live engagement tools
An easy way to improve customer experience (and thus customer retention) is to respond quickly to customer feedback, questions, and requests.
Per David Wurst, CEO of marketing and development agency Webcitz, long response times are one of the main reasons customers complain about a poor experience.
“Implementing live chat can be one of the most effective customer retention strategies,” he said. “Customers are 59% more likely to buy if brands answer their questions within a minute.”
Additionally, Morgan recommends sending automated texts or emails to let customers know the average response time.
Alternatively, Sep Niakan, an executive broker at condo website Condoblackbook, points out that brands can implement real-time engagement tools, such as video chat, so customer service teams can provide solutions on first contact.
“Real-time interaction technology reduces customer touchpoints and provides immediate and effective responses,” he said.
Ask for feedback
Instead of waiting for customers to ask questions, comments, or concerns, you can proactively solicit their input through feedback mechanisms like customer surveys.
Rohan Kadam, founder of the blog Biking Know How, recommends online tools like SurveyMonkey to ask customers about their recent engagement with your company. “Since using SurveyMonkey, my retention rate has grown from 3% to 27%,” Kadam noted.
Use these surveys to better understand what’s working and what’s not in the customer experience.
“You can never please every consumer on every issue, but surveys can help you find patterns you might be overlooking,” said Matthew Paxton, founder of game server site Hypernia.
“A good survey should include multiple-choice questions and free-text answer fields to allow customers to express themselves more broadly if necessary.”
Then, use that feedback to improve your product, service, or experience, says Matt Post, co-founder of WCAG Pros, a web development service that specializes in auditing and remediating websites to make them ADA compliant.
“Since using SurveyMonkey, my retention rate has grown from 3% to 27%.” -Rohan Kadam, Cycling Tech
Another way to proactively improve customer retention is through social listening.
Stacey Kane, head of business development for e-commerce site EasyMerchant, said: “Set up and monitor your brand’s Google alerts and social mentions in the digital space [and] conduct A/B tests and surveys…to identify the pain points you need to address. “
Monitor your data retention
Of course, customer retention KPIs can also help businesses proactively improve customer retention rates. Metrics to track here include website traffic, conversion, and cart abandonment rates, as well as your customer retention rate.
The latter metric measures customer loyalty, which is especially important in an increasingly crowded market. The ideal range is 20% to 40%, says Jason Sherman, CEO of e-commerce platform TapRm.
“You can increase your [repeat purchase rate] by optimizing customer retention strategies like customer lifecycles, loyalty programs, retargeting ads, and cart abandonment emails,” he added. “This creates a better after-sale experience, improves customer loyalty, and increases repeat sales.”
Neal noted that his e-commerce site uses Shopify, which provides retention data such as which consumers are returning and how many times those customers have ordered.
“They calculate how many orders we have on a daily/monthly basis from repeat customers, which helps us know our retention rates are growing,” he added.
Watch out for churn
One specific metric to look out for is churn. This includes performance-related measures such as a reduction in repeat sales or purchase frequency, as well as analyzing every touchpoint in the customer journey.
“Customer churn analysis helps stores analyze qualitative and quantitative signals from existing customers [and possibly new customers] to better understand how to make them happy with what you’re doing, making it more likely that other consumers will follow suit,” said Rameez Usmani, CMO of Web Hosting Advices.com.
Greg Gillman, chief revenue officer at performance marketing agency MuteSix, points out that once you have the model, you begin to identify patterns that help predict the probability of churn for each customer.
“But don’t stop there,” he said. “When you find yourself falling behind, adjust your acquisition and retention strategies until you see an improvement in customer lifetime value.”
Make onboarding easy and enjoyable
Part of a good customer experience also requires making the onboarding process as seamless as possible.
“We do this by using automatic login for our member’s area right after purchase,” said Mark Webster, co-founder of website builder Authority Hacker. “Instead of having customers search via email and manually enter their login details, redirect them to a course page that they can use right away.”
Paxton agrees that a good onboarding process can set you up for long-term success because it makes a good first impression.
“It should be personalized [to the greatest extent possible], hands-on, and designed to remove as much friction as possible,” he said.
A solid onboarding or welcome email can make all the difference.
Another way to improve customer retention is through transparency. When brands are transparent with consumers, they have more confidence in future purchases.
“When you do that, customers know they need to know about the brand or the product itself. It makes them feel like the brand isn’t hiding or hiding something,” says Eddie Bye, founder of supplement site Physio Flex Pro. “Overall, this is a solid and fair customer retention strategy that benefits both parties.”
“Transparency is a solid and fair customer retention strategy that benefits both parties.” -Eddie Bye, Physio Flex Pro
Use CRM tools
The good news is that you don’t have to deal with all of these issues alone—the right customer relationship management (CRM) platform can help simplify the process of customer retention.
“Consistent and high-quality conversations with customers are critical,” says Steve Scott, CTO of Spreadsheet Planet, an Excel tips site. “Implementing a CRM system in your business helps you maintain the best record of communication with each customer and use that information to your advantage.”
Vishesh Raisinghani, the financial expert at the personal finance site PiggyBank, agrees that a CRM system can better manage customer interactions and help ensure effective communication, regardless of the channel.
“CRM is more than just an application of technology, it’s a strategy to learn more about customers’ needs and behaviors to build stronger relationships with them,” said Adam Ng, CEO of review site Trusted.
“CRM strategy focuses on putting customer needs first and delivering a superior, more personalized customer experience. Remember, one satisfied customer brings ten new customers, and one unsatisfied customer takes ten away clients.”
“CRM is not just an application of technology, but a strategy to learn more about customers’ needs and behaviors to build stronger relationships with them.” -Adam Ng, Trusted
Automate as much as possible
Another tool to help retain customers is automation. Paxton noted that automated systems can simplify the entire workflow of marketing teams, including re-engaging customers.
“A marketing automation solution that combines AI and machine learning doesn’t require your marketing team to keep track of which customers have expired, but can automatically identify when customers are churning and re-engage them with personally relevant content,” he said.
Not only does this save time and resources, King notes, but “it also allows you to reach multiple clients at the same time while maintaining relevant and tailored contacts.”
13 Best Customer Retention Strategies
To recap, here are 13 of the best customer retention strategies identified by the experts interviewed for this article:
- Provide a reliable customer experience
- Under-promise and over-delivery
- Reward loyalty
- Use your data to personalize experiences
- On-site engagement tools
- Ask for feedback
- Online listening
- Monitor your retained data
- Watch out for churn
- Make onboarding easy
- Use customer relationship management tools
- Automate as much as possible