How to Maximise Customer Retention: An Essential Guide to Keeping Your Customers Coming Back
Read time: 5 minutes
With so much choice and competition, the battle for customer retention has never been fiercer. For your customers, your competitors are only a click away, so inspiring loyalty and nurturing retention are increasingly difficult.
This puts pressure on brands to offer discounts and other incentives — not only to attract new customers but also to win repeat business.
However, expensive campaigns to acquire or re-acquire customers are unsustainable. Retention that comes as a result of high levels of brand engagement and satisfaction is the only long-term way to grow your business.
Holding on to customers for longer by winning their trust and loyalty is a challenging but crucial part of any brand’s growth strategy.
Why is customer retention important?
To achieve sustainable profitability, you need a customer base that returns again and again without you having to expend large sums on advertising and marketing.
A sustainable customer retention strategy can also play a crucial role in acquiring high-quality new customers. The more your customers love and engage with your brand, the more likely they are to tell their friends about you. Get customer retention right, and you will create a virtuous circle where you retain the right kind of customers, who in turn help you find similarly valuable new ones (more on this below).
So customer retention is more than a metric (although we’ve got that covered too). It’s a measure of the overall health of your business and, with the right data and know-how, can tell you a lot about how much your customers value, repent and identify with your brand.
Why data and relationship building are key
The way to win your customers’ loyalty is by providing a better overall experience than your competitors. A winning product and outstanding CX, customer service and personalisation demonstrate to your customers you understand their needs.
But how do you put this in place? If it was a matter of good intentions we’d all be retaining our customers forever!
The truth is, you need information and the ability to act on it if you want to make any genuine headway. High-quality data — on purchasing behaviour and activity and sentiment in between buying decisions — allows you to:
- Build strong relationships with your customers, instead of having to start from scratch each time.
- Achieve sustainable growth without costly advertising campaigns eating into your margins.
- Find similar customers more easily. The better you know your existing customers and their habits, the sharper your senses will be in seeking out and winning others like them.
Customer retention tactics for beginners
If you’re just getting started and wondering how to improve customer retention, there are some simple things you can do to get the ball rolling straight away while you work on putting a long-term strategy in place.
Email is a great way to keep in touch with your customers. It’s often the main way brands execute their retention strategy. As your retention gets more advanced you’ll need tools to help you run personalised and automated email campaigns, but even the most basic CRM allows you to send email campaigns encouraging customers to engage with your brand and make repeat purchases.
Excellent customer service
Ensure that your customer service is responsive, helpful, friendly, and joined up to the rest of your business. Customers are more likely to stay loyal to a business that treats them well.
Feedback and improvement
Even if you can’t implement some of the more involved feedback mechanisms we suggest in this post, you can still Regularly ask for feedback and act on it. Showing customers that you value their opinions and are willing to make changes doesn’t have to be hi-tech.
Share valuable information related to your products or services. Educational content can help customers get more value from what they’ve purchased and keep them engaged.
Customer retention metrics
Before you can do the exciting work of building a winning customer retention strategy that will propel your business to the next level, you need to get to grips with the technical details.
What is customer retention?
What customer retention means to you will depend on what industry you’re in. For B2B and SaaS companies, retention means holding on to subscribers or clients over a given period.
For businesses that work largely on a non-subscription model, retention means getting customers to make another purchase within a given period.
So for many B2C ecommerce brands, increasing customer retention is all about driving customers to take specific actions.
Ideally, this means buying and buying again, but there are other actions that customers can take — like referring a friend or sharing your name on social media — that mean they’re still engaging with your brand.
How do you calculate your customer retention rate?
You go into any given period with a certain number of customers. During that period, you acquire a certain number more. And you also lose some too.
Your customer retention rate (CRR) shows you the net effect of customers moving in and out of your customer base.
To work out your customer retention rate, you need to know three things:
- How many customers you had at the start of the period (S)
- How many new customers you acquire during the period (N)
- The total number of customers at the end of the period (E)
Put these figures into this formula:
- (E-N)/S x 100 = customer retention rate
So, imagine your business had 200 customers at the start of the month, acquired 50 new customers during the month and, by the end of the month, you had 230 customers in total.
You’d work out your retention rate by subtracting the new customers from your closing total:
230 - 50 = 180
Then, divide this number by the total number of customers at the start of the period:
180/200 = 0.9
Finally, multiply the result by 100 to convert it into a percentage:
0.9 x 100 = 90%
For retailers or others who rely on repeat purchases rather than subscriptions, the calculation is a little different:
- Identify the cohort: A cohort is a group of customers who made their first purchase during a specific time frame.
- Track repeat customers: Over a defined period, track how many customers from the cohort make another purchase. For example, out of 100 new customers in January, you might find that 30 made another purchase within the year.
This will give you your customer retention rate:
- CRR = Number of repeat customers / total number of customers in the cohort
- So, if 30 out of 100 customers made another purchase, your retention rate for that cohort is 30%
This measure of CRR is sometimes referred to as repeat purchase rate or repeat customer rate.
What’s a good retention rate?
Retention rates differ quite substantially by industry. What’s considered a good retention rate also depends on prevailing economic conditions.
For ecommerce, retention rates are much lower than their brick-and-mortar equivalents.
If you’re an online brand with a CRR of around 30% that’s generally considered to be doing ok.
Helpful retention metrics for ecommerce
CRR is very useful as a base measure of how well you’re doing at holding on to customers. And other helpful metrics sit alongside CRR to give you a more complete picture of the health of your customer base.
Customer Lifetime Value (CLTV)
This measures how much a customer spends over their entire relationship with your brand (or over a given period). Brands often look at CLTV over the first 30 days, 180 days, etc, to see how valuable a customer is and if that value goes up or down over time.
Net Promoter Score (NPS)
This measures how likely your customers are to recommend you. Ask each of your customers “On a scale of 1-10, how likely are you to recommend us to a friend?”
- Promoters (9 or 10 score): highly satisfied customers who are likely to recommend the product or service
- Passives (7 or 8 score): neutral customers
- Detractors (6 or below): dissatisfied customers
The NPS score is then calculated by subtracting the percentage of detractors from the percentage of promoters.
This is an important metric as it helps you understand how your customers feel about your brand. If you can deliver products, customer service and CX that results in a large proportion of highly satisfied customers, you will undoubtedly be able to retain more of them and their value to your brand will go up over time.
Customer advocacy metrics
Calculating how many customers have made another purchase is important, but it’s not the only way to measure retention. Just because someone hasn’t bought anything from you in a while doesn’t mean they’re not still engaged with your brand.
Measuring the actions your customers take to advocate for your brand: promoting you on social media, leaving a great review or referring their friends to you gives you a fuller picture of who’s still actively engaged over a given period.
Some of the things you can look at are:
- Referral rate: How often your customers are referring their friends to your brand.
- Extended customer revenue (ECR): This measures the total value of a customer’s purchases and referrals to your business. You can segment customers into high and low ECR groups to better target your retention messages.
- Propensity to refer: This tells you how likely customers are to refer someone to you. You can create engaging and nurturing campaigns that seek to increase this propensity and maximise customer value.
Gathering customer feedback
To really get to grips with retention, you need to go deeper than surface-level interactions with your brand and understand what’s driving them.
The only way to do that is to understand how your customers feel. Gathering customer feedback provides you with a way of doing this. Aside from collecting NPS scores, there are other things you can do to gather feedback:
- Surveys: Send out surveys to your customers to gather qualitative feedback about how well you did with them, rather than relying on quantitative scores and metrics alone.
- Sentiment Analysis: Analyse the qualitative and quantitative feedback you get to understand how your customers feel about your brand. New, powerful AI tools can do the hard yards for you and offer predictions about how likely you are to retain customers based on sentiment analysis.
- Loyalty point redemption: Offer loyalty points as rewards for customers who take actions that build retention and then monitor the uptake of these loyalty points to see how engaged customers are with your brand.
How to build a winning customer retention strategy
Once you’ve got your head around these metrics, you’re ready to strengthen your relationship with customers across touchpoints.
This involves making sure every part of your business that touches the customer is putting the customer first, so it’s better to think of excellent retention as an ongoing process rather than a project to be accomplished.
To start moving things forward there are two key areas to look at:
Customer loyalty covers a much broader area than loyalty programmes alone. A loyalty programme is a great first step, but it’s not the end of the road.
Loyalty programmes work best when they’re part of building a community around your brand, so think creatively about how you can get customers to engage. Include things like:
- Early access to sales
- Exclusive event invites
- Member-only competitions
Essentially, anything that makes your loyal customers feel special and included is a great way to build loyalty.
Once you have a loyalty scheme up and running, you can extract data to identify correlations between customer loyalty and retention. You can combine this with data from elsewhere — your CRM for example — to craft more relevant, compelling messaging and incentives.
CX matters for retention, and creating outstanding CX means much more than delivering a satisfying onsite experience. Crafting exceptional customer experiences at every touchpoint and building emotional connections can transform satisfied customers into active fans of your brand.
- Segment your customers: Dividing your customers into groups allows you to run personalised retention campaigns. Segmentation allows you to be a lot more targeted with your messaging, which has a big impact on retention. For example, a campaign offering customers a gift with their next purchase might not have much impact on someone who hasn’t bought from you in 12 months. But the same offer, targeted at a segment that’s referred at least 5 friends, and pitched as a thank you gift, can make this group of customers feel valued and respected.
- Create moments of delight: Great CX is an art and a science. Once you have insights from across your martech stack that let you understand your customers better, you can use them to build experiences that exceed your customers’ expectations. Can you send a thank you gift to your most loyal and enthusiastic customers? How about a welcome pack that looks great on social media for customers who take out a subscription?
- Nurture your brand fans across touchpoints: Every interaction with your customers is a chance to enhance your standing in their eyes. Something as simple as receiving an email, if incorporated into a serious customer retention programme, can help turn your customers into brand fans who go on to shop with you again and again. When customers are not just satisfied but feel genuinely valued and understood, they become enthusiastic advocates for your brand. They share positive experiences, recommend your products or services, and help build your reputation.
Customer retention tools
Creating a coherent data gathering and analysis regime across your martech stack is essential to customer retention. Customer insights allow you to hone your messaging, so it’s worth investing in tools and software sophisticated enough to give you the full picture and allow you to stage timely interventions.
We have a detailed breakdown of all the tools you need to put together a winning retention regime. But if you’re in a hurry, here’s a brief rundown of what you need:
You probably already have your CRM set up to organise, track, and manage customer interactions. And if you integrate customer data from elsewhere in your tech stack, you’ll take your engagement and messaging to the next level. First party-data makes your CRM campaigns more relevant, targeted and personalised.
More tightly focused on marketing teams than the CRM, marketing automation software plays a big role in your ability to scale your retention efforts. Tools that understand the history of your customer’s interactions with your brand beyond simple sales allow you to create hyper-personalised experiences that stay with your customers, in turn helping them to stay with you.
Customer advocacy software
Identifying your brand fans and encouraging them to take more actions — like referring friends, social shares, and even writing positive reviews — helps you retain more customers for longer. Creating and nurturing customer advocates and growing networks of referrals bakes loyalty and trust into your customer base, handing you an inbuilt advantage when it comes to retention.
Review sites and social listening platforms
Review sites are crucial in building trust with customers. They’re also great places to check the temperature of your customers, giving you insights into what you’re doing well and what you need to work on to boost retention.
These tools act as your magic wand, enabling you to sprinkle personalised surprises that evoke joy, and giving your customers the power to choose how they would like to be rewarded and incentivised.
In recent years, some brands have moved their customer service teams into their marketing department, underlining the importance of this touchpoint to the overall experience. When customer support issues are resolved swiftly it enhances the customer journey. Customer service isn’t just about solving problems, it also involves nurturing relationships with timely and personalised interactions.
Creating a customer-centric approach for retention
Instead of constantly chasing new customers or attempting to re-engage those who have drifted away through expensive advertising campaigns, focus on nurturing the relationships you already have. By understanding and responding to the needs and preferences of your existing customers, you can transform them into passionate advocates for your brand.
Leveraging high-quality data and personalised engagement strategies are essential in this process.
Retention isn't just about repeat purchases; it's about building a community around your brand where customers feel heard, respected, and valued. This approach not only builds real value by retaining more high-quality customers for longer, but it also lays the foundations for organic, sustainable growth.
The path to long-term success and sustainability in today's competitive market is through the hearts of your customers. By putting your customers centre-stage you're not just retaining their business, you're also empowering them to be the driving force behind your brand for years to come.
Unlock the Potential of Your Customer Relationships
If you’ve already got a lot of the pieces of your martech stack in place and want a way to get the most out of it, translating insights into real-world customer retention strategies, Mention Me’s Customer Advocacy Intelligence Platform gives you the tools you need to push beyond traditional tactics. Identify and retain truly high-value customers, nurture fans into brand advocates and put your business on a path to sustainable growth and profitability.
Request a Demo to transform challenges into triumphs and foster loyalty at every touchpoint. Your blueprint for sustainable growth begins here!