6 simple customer retention strategies
Customer retention makes good business sense, but it can be tricky as markets and customer experience management continue to evolve. Maybe your churn rate is rising and you need to improve customer retention immediately. Or maybe new accounts aren’t closing like they used to, and you want to fill that gap.
Since the probability of selling to an existing customer is as much as 50% more likely than selling to a new one, customer retention strategies are a must. The good news is brands have the power to increase customer retention with the right approach. In this article, we’ve compiled a list of proven strategies to increase customer retention for 2023.
What is customer retention?
Customer retention is a measure of how well a company keeps existing customers over a certain period of time. It’s a valuable metric that tells businesses how many customers they keep for the long term, and how long they can expect customers to pay for their service.
Every business has churn, which is what happens when a customer stops buying from you. The goal of customer retention is to reduce churn as much as possible and keep existing customers loyal to your business.
Whether it’s through a loyalty program, content personalization, or customer feedback, there are many ways brands can increase customer retention. However, every business is different — so if you’re new to customer retention, this might require some trial and error to see what works best for your brand and customers.
Six strategies to increase customer retention
Which strategies actually keep customers around? While every business is different, these six strategies can improve customer retention:
- Measure and monitor churn metrics
- Create a tight customer feedback loop
- Build trust with your customers
- Take advantage of personalization opportunities
- Surprise and delight
- Establish and reward loyalty
1. Measure and monitor churn metrics
Before you make any changes to the customer experience, you need an accurate picture of retention as it is today. You should establish metrics for measuring success from the start, and that means calculating churn.
Churn is a percentage that measures how many customers you lose over a period of time. While nobody likes losing customers, churn is a normal part of doing business. Even so, you should monitor your churn rate and optimize it as much as possible so you retain more of your hard-won customers.
For starters, determine your current churn rate with this formula:
According to Recurly, the average business churn rate is 5.57%. So if churn is 20%, you’ve got a problem on your hands. The average B2B churn rate is slightly lower at 4.91%, but it’s as high as 7.55% for retail, so churn rates will differ based on your industry.
Be sure to calculate your churn rates on a regular basis. By tracking churn over time, you’ll be able to pinpoint whether your customer retention strategies are actually working. Create a monthly calendar reminder to check last month’s churn rates, or use a platform like Adobe Campaign to calculate it automatically.
2. Create a tight customer feedback loop
Your business exists to serve a need. If you lose sight of your customers’ needs, you’ll see a marked increase in churn. That’s why a tight customer feedback loop is so important.
This is a solid customer retention strategy where brands actively source feedback from customers to improve their product or service. Instead of cranking out services that don’t solve a real pain point, you can use customer feedback to create relevant, helpful features that will persuade customers to stick with you.
The problem is that just 1 in 26 customers will tell a business about a negative experience. Most customers will either leave a negative review or quietly stop buying from you. It’s up to you to proactively facilitate dialogue with customers and solve their biggest problems before they jump ship.
To close the customer feedback loop, brands can:
- Look at reviews. You can learn a lot about your customers just by examining your online reviews. Look at Google, Yelp, and any industry-specific review sites to see where you stand.
- Collect surveys. If you don’t have online reviews, you can email feedback surveys to your customers. You may not get a lot of responses, so offer incentives like free gift cards or make it a contest. It should take customers less than five minutes to complete the survey, so keep it simple with frameworks like Net Promoter Score (NPS).
- Schedule one-on-one interviews. This is ideal if you do account-based marketing (ABM) or offer specialized B2B services. With one-on-one interviews, you can do a deep dive with either current or former customers about their pain points. Be sure to compensate them for their time in the form of a nice discount or gift card.
3. Build trust with your customers
If customers don’t trust your brand, they certainly aren’t going to trust you with their money. A loss of trust equates to lost customers and lost business, which you definitely don’t want. In fact, 55% of consumers say they will never buy from a brand that breaks their trust. The good news is that when you build trust with customers, you’ll see an increase in customer retention too. According to Marketing Charts, 82% of customers will be loyal to brands they trust.
The issue, however, is that 75% of executives say the pandemic made it harder to build customer trust. So how can you show you’re trustworthy? These strategies can help you build trust and increase customer retention as a result:
- Be transparent. Trust starts with honesty. You don’t have to reveal all of your inner workings to the public, but your brand should be as transparent as possible. That means pulling back the curtain on your product ingredients, labor practices, and more.
- Improve customer experience. If your checkout process is glitchy and slow, customers are less likely to trust you — or make a purchase. Optimize every facet of the customer experience, from your website to your SaaS dashboard, so people know you’re a reputable brand that takes their experience seriously.
- Be human. Empathy goes a long way in business. During the pandemic, consumers rewarded businesses that operated with compassion and humanity. That meant being honest about supply chain disruptions, but it also meant cutting customers slack with delayed billing, freebies, and steep discounts.
4. Take advantage of personalization opportunities
Nobody wants generic, general marketing in 2023. If you aim to increase customer retention, you need to take full advantage of personalization opportunities.
With personalization, consumers receive content that’s so specific and relevant it seems like brands are reading their minds. Personalization benefits businesses too. Shoppers are 80% more likely to buy when they have a personalized experience, and 72% say they will only engage with personalized messaging, so this strategy is a must for customer retention.
Brands can increase personalization and customer retention by:
- Segmenting their email list by demographic data or shopping history
- Sending personalized shopping cart emails featuring the exact item shoppers left in their cart
- Implementing location tags and sending shoppers SMS messages for their local store
- Using marketing automation software to drop in hyper-personalized content based on shopper data
5. Surprise and delight
Surprise and delight is a customer retention strategy that’s all about exceeding consumers’ expectations. This includes unexpected, fun surprises and “just because” rewards. It’s an approach where you offer gestures of goodwill to your shoppers, no strings attached.
Giving away free stuff might sound crazy, but it’s a customer retention strategy that’s backed by science. This strategy uses the principle of reciprocity, which makes customers feel like they want to do something for your business in return for your kind gesture. Since one-third of recipients say they would give a brand more business after receiving a fun surprise, this is a strategy that can definitely boost retention.
Only you know what will truly surprise and delight your customers, but these tips are a good place to start:
- Invite them to a beta program. Show customers that you value their opinion. This gives value by sharing access to a cool beta program that your customers will love — and helps you collect valuable feedback in the process.
- Celebrate customers. Whether it’s their birthday, their anniversary with you, or even a silly national holiday, mark special occasions by celebrating your customers. Give them a freebie or discount to mark the occasion.
- Contests or giveaways. Nothing gets people more fired up than a giveaway. Offer biannual contests and reserve them only for current customers. Be generous with the rewards so people will participate.
6. Establish and reward loyalty
Loyalty is the hallmark of a solid customer retention strategy. But loyalty is earned, not given. Brands have to thoughtfully establish and reward loyalty to increase customer retention.
Since 75% of consumers favor companies that offer loyalty rewards, your brand can get a leg up on the competition by rewarding shoppers for their loyalty. Forty-three percent of consumers spend more money on the brands they’re loyal to, so this is a solid strategy for boosting customer lifetime value (LTV), as well.
Brands can establish and reward loyalty by:
- Exempting existing clients when you increase your rates
- Offering discounts on subsequent purchases
- Gamifying loyalty with a rewards app
Why customer retention is important
Customer retention is important because it allows brands to boost profits easily at a lower cost.
A high customer retention rate means you have a lot of repeat business, while a low retention rate means customers usually buy from you once and then disappear forever. Brands love high customer retention because it shows that customers love the quality of your product or service and brings in consistent revenue. In fact, according to Bain & Company, a 5% increase in customer retention can increase profits by as much as 95%.
With customer retention, brands don’t need to put in the effort to constantly source new business either. While customer acquisition will always be important, customer retention programs bring in more revenue at a lower cost. Customer retention is five times cheaper than acquisition, so brands should invest in both acquisition and retention to keep their coffers full.
Getting started with a customer retention program
Marketing is only becoming more complex, so brands need every advantage possible to get ahead. A solid customer retention program will help you boost profits, decrease expenses, and build a dedicated following of supportive customers.
To get started, make sure you’re set up to measure and monitor your churn rates. From there, brands should start gathering customer feedback, building trust, personalizing content, offering fun surprises, and rewarding loyalty.
If you want to increase your customer retention, Adobe Campaign makes it easy to visualize and connect personal customer journeys across every channel. With Adobe Campaign, you can control both online and offline customer journeys, delivering tailored experiences to every single customer.
Get a free demo now to see Adobe Campaign in action.