Customer retention strategies: 10 Best strategies to drive customer retention
Secrets to creating customer loyalty and encouraging customers to buy from you again and again.
Reaching a new customer feels great. But there’s something even better: customers who return to buy your products or services over and over again.
Why? Because although customer acquisition is the fastest way to grow your business, customer retention is the secret to long-term success.
What is customer retention?
Customer retention is the practice of nurturing and growing customer relationships to turn customers into loyal advocates for your business.
Why focus on customer retention?
Put simply, retention strategies pay off. “There are a range of studies that have demonstrated that it is cheaper to keep an existing customer than acquire a new customer,” says Philip Shelper, CEO and founder of Loyalty & Reward Co.
"It is cheaper to keep an existing customer than acquire a new customer."
In addition, focusing on retention can lead to acquisition. One KPMG study found that 86 percent of happy, loyal customers will recommend a brand to friends and family. In other words, loyalty breeds advocacy and word-of-mouth marketing.
Getting started with customer retention strategies
Before you start creating a customer retention strategy, it’s important to get the basics right. “The obvious route to customer retention boils down to great product and great service,” says Ian Rhodes, founder of ECommerce Growth. “You’re destined to fail without those two primary ingredients.”
"Customer retention boils down to great product and great service.”
Next, look at your existing retention rates and decide what metrics you will use to track the success of your customer retention strategies.
Customer retention metrics to track
- Customer retention rate
The percentage of customers who remain with you after a certain period of time. A high customer retention rate is a sign your business is doing well.
- Customer churn rate
The percentage of customers who purchase and then leave within a certain time period. A low churn (or attrition) rate indicates you have plenty of loyal customers
- Customer lifetime value
This is the worth of the customer during the entire period of their relationship with you.
Now, you’re ready to start implementing customer retention strategies.
1. Customer accounts
Creating a customer account not only helps businesses track purchasing behavior, it helps customers, too. Allowing them to easily access past order information, track current orders and pre-fill their personal and payment details makes repurchasing faster and more convenient.
Tip: Creating a customer account can seem like a commitment for a first-time buyer, so ensure that you offer them the option to check out as a guest – otherwise you might lose the sale. One approach is to allow them to check out as a guest but then suggest creating an account in a post-purchase email.
2. An onboarding journey
Creating an emotional connection early on will help build loyalty. Think through your customers’ initial contact with your brand, and consider how to create an automated email funnel that could include:
A welcome
- An introduction to your brand or founders, and explanation of why you started the business
- An opportunity to provide feedback after the first brand interaction
- An opportunity to capture more data – such as date of birth or communication preferences – to serve them relevant content
Tip: Ask your customers how and where they want to communicate. “The best channel [to focus on] is the one your customers tell you to engage with them on,” advises Toolin. This not only sets you up for successful communication but also makes customers feel heard and valued – as though they are, in fact, in a two-way relationship.
3. Digital receipts
Are you a brick-and-mortar business? One way to capture customer data is to offer to send customers their invoice via email rather than printing it out. Not only does this allow customers to choose how they would prefer to receive their invoice, it is a simple way to add customers to your email database and track spending in-store.
4. Loyalty programs
“Loyalty programs are the ultimate retention strategy,” emphasizes Shelper. “They provide a formal structure to recognize higher-value customers, reward them for repeat transactions, and capture data that can be used to personalize experiences and interactions.”
“Loyalty programs are the ultimate retention strategy."
There are many different types of loyalty programs:
Points: where customers receive points for every dollar they spend. These can then be redeemed for vouchers, discounts or products.
Tiered: where shoppers are categorised into different tiers or groups – such as gold, silver and bronze – according to how much they spend. Each tier receives different perks.
Value: where shoppers can "earn" points and redistribute them to a charity of their choice.
Learn more about loyalty programs here.
5. Segmentation
For customer retention strategies to be successful – and profitable – it’s important to identify customer audiences that hold sales opportunities. These might be lapsed customers or formerly high-spending customers who are purchasing less frequently.
To do this, you’ll need to segment your customer base. It is possible to do this yourself using what’s known as an “RFM framework," which identifies how recently, how frequently and how much customers have purchased.
You can then identify four key customer groups:
· Your best and most loyal customers who deserve the most of your attention
· Your high-potential customers who you could nurture to become loyal customers
· Your at-risk customers who you need to re-activate as soon as possible or they’ll churn
· Your lost customers who will help you identify behavior patterns that you can prevent
An alternative to running these analytics yourself is to use a data tool such as Klavyio or LoyPal.
“Many of companies spend a lot of time trying to understand anything and everything about their customer, but then do very little with that information,” says Adam Simms of LoyPal, explaining, “this can lead to analysis paralysis.
"Companies spend a lot of time trying to understand their customer, but then do very little with that information."
Once you have identified and prioritized customer segments, the next step is to create retention strategies that engage with each group of customers differently. For example, lapsed customers could be targeted with discounts to entice them back, while high spenders may appreciate VIP events to keep them engaged.
6. Personalization
In many ways, loyalty is the result of relevancy. Customers will remain with brands that offer products that are relevant to them and their lives, and that speak to them in a way that feels tailored and personal.
So, once you have broken your customer base into segments and identified which groups are most valuable, it’s time to create content that matches their interests, preferred buying or communication channels, as well as past purchasing behavior.
There are a range of customer relationship management (CRM) tools, such as Klaviyo and Emarsys that allow brands to automate this process by sending personalised emails based on this data.
7. Focus on the post-purchase experience
You’ve sold the product, closed the deal and wrapped it all up, right? Wrong. The post-purchase period is a key opportunity to build brand loyalty.
Consider ways in which you can enrich the post-purchase experience, whether that’s an email thanking customers for their business or a note or information pack educating them on how to use a product. It’s a simple and effective strategy.
8. Customer surveys
One of the quickest ways to make customers happy and encourage repeat buying is to remove all the pain points.
“What is it about your business that customers just don’t like? How can those irritants be removed?” asks Rhodes, who notes that you need to identify if there are repetitive or common pain points that multiple customers have experienced, as that signals a process or service fault.
"This is time to ask what it is about your business that customers don't like."
To get to the bottom of any friction points, institute customer surveys, whether that’s a quick "How did we do?" survey at the end of the purchase process or asking customers to review products. Whatever approach you take, make it easy for customers or they won’t do it. You could even consider a "value exchange", and reward customers who provide feedback by sending out a gift or freebie.
9. Surprise and delight tactics
“Cultivate repeat customers into advocates by delighting and rewarding them at each touchpoint,” says Shelper.
Creating "surprise and delight" moments starts with mapping out your entire customer journey, and identifying opportunities to insert unexpected, positive surprises.
"Cultivate repeat customers into advocates."
Here are some examples:
Celebrate customers’ birthdays
What better way to delight your customer and make them feel valued than celebrating their birthday? Why not send an email (email marketing platform Omnisend reports that e-commerce businesses’ birthday emails average a 45% open rate) or offer a gift card or reward.
Celebrate your birthday by rewarding customers
Just as you celebrate your customers’ birthdays, celebrate your own business birthday by rewarding customers with a contest, discount or giveaway.
Personalized notes or news
Including a personalized note from a small-business owner can be a great way to build an emotional connection between customers and brands. You could also strengthen loyalty by keeping customers up to date with your news – whether that’s a new team member or sustainability initiative.
Gamification and mystery offers
Customer engagement should be fun, which is where gamification – turning marketing initiatives or campaigns into games – comes in. Create giveaways or contests, or offer mystery prizes to keep customers engaged.
Add an extra
There’s no better way to surprise and delight customers than including an added extra into their package. Think samples, gift cards, invites to collection previews or other small bonuses customers will love. If you’re considering providing a gift card, don’t forget to add an expirtion date to incentivise customers to purchase again sooner.
10. Product subscriptions
Does your product lend itself to a subscription model? Is it something that customers require every week, month or season? Could you work in an automatic reorder that helps the customer?
“A solid product subscriptions platform can prove to be a great investment if marketed and framed correctly, but ensuring customers have control over the delivery and scheduling to pause or rearrange shipping is critical,” recommends Rhodes.
Product subscriptions are only appropriate for certain products, too, so ensure this is aligned to your brand and purpose.
A final tip for all customer retention strategies:
It’s often said that you can’t manage what you don’t measure, and that’s certainly the case when it comes to customer retention.
Boosting customer loyalty means diving deep into your analytics to identify customer return rates, and then using data to track the success of any new customer retention strategies.
This might mean setting up a weekly, biweekly or monthly reporting dashboard to track customer retention.
"Customer insights are at the foundation of your work in customer retention."
As Rhodes explains, “All the answers to common customer retention questions can be found in analytics and through building out a program to gather customer insight. Whether you’re selling one product or 1,000, whether you have 100 customers or 1,000,000, customer insights are at the foundation of your work in retention.”
All references to any registered trademarks are the property of their respective owners. Afterpay does not endorse or recommend any one particular supplier and the information provided is for educational purposes only.
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