Last Updated on
According to Emmett C. Murphy, PH.D., author of ‘Leading on the Edge of Chaos: The 10 Critical Elements for Success in Volatile Times’, “Increasing customer retention by 2% has the same results when decreasing costs by 10%.” This statistic shows the immense value that customer retention can bring to any brand. In any industry, particularly in the crowded world of e-commerce, customer retention plays a major role in improving sales.
In this article, we will take a look at some of the best customer retention strategies that brands can use to improve retention and profits.
What is customer retention?
Focusing on customer retention allows businesses to improve the number of repeat buyers and increases the long term profitability of those customers (also known as customer lifetime value).
Customer retention strategies also allow brands to provide more value to their current customer base because they know that long term customers deliver exponentially higher profitability.
The main goal of any customer retention strategy is to keep as many customers as possible. The most famous of all customer retention strategies is a customer loyalty programme.
When should brands focus on customer retention?
Depending on the business performance, brands should be gauge whether it should focus on customer acquisition or retention. New businesses have a fantastic opportunity to lay the foundation of retaining their new customers with a solid retention strategy from day one whilst also launching an effective customer acquisition drive. Whilst this may seem counterintuitive, it can actually make the difference between a startup having moderate or exponential growth. To figure out the best strategic approach, consider this timeline:
1. Just starting – When a brand is just starting out, the store’s main focus should be on gaining customers. Customer acquisition should be a priority at this point with an incredible customer experience that retains customers for the long term. Nothing is worse than a starup acquiring customers that never return. Focus on strategies which will help to improve the customer base.
2. Gaining traction – When the brand already has customers but is experiencing irregular sales. At this point, brands should consider introducing a customer retention programme in order to encourage existing buyers to purchase more. Often, with sporadic sales, there may be an issue with the product, customer service or customer experience so it it worth digging deep to identify any deeper issues here.
3. Consistent – When brands are in operation and have seen a consistent growth in sales. At this stage, it is important to mix retention and acquisition into the marketing approach.
Customer retention by the numbers
To understand the value of customer retention, it’s important to look at the statistics within the marketing industry.
- According to the book, Marketing Metrics: The Definitive Guide to Measuring Marketing Performance, by Paul Farris, “Repeat customers have a 60% chance of making another purchase. Meanwhile, a new lead may only have a 20% chance of becoming a paying customer.”
- According to the 2016 report published by Forbes, Mastering Revenue Lifecycle Management: Customer Engagement Leads to Competitive Advantage, “Despite the importance of applying customer retention, only a third of managers consider it to be a priority.
- Adobe’s The ROI from Marketing to Existing Online Customers in 2012, shares that repeat customers:
- Are nine times more likely to buy than first-time shoppers.
- Are buying 30% more items per order than first-time shoppers.
- Can generate 3-7 times more profit per visit.
- Spend 47% more than first-time shoppers.
- In 2018, Motista released ‘New Report: Leveraging the Value of Emotional Connection for Retailers’, which shares “Customers who claim to have an emotional connection to a brand have a lifetime value four times higher compared to an average customer.”
- InMoment’s 2018 US Retail CX Trends Report shares that, “77% of customers remained loyal to their preferred companies for 10 or more years.”
Strategies to use to boost customer retention
1. Leverage on special experiences – Experiences are known to be more valuable than reduced cost. Brands can use special experiences to reward loyal customers instead of the typical bonuses or discounts. Even low-cost efforts can go a long way to giving customers unique experiences and building loyalty.
2. Create a customer loyalty programme – A loyalty programme works in two ways. First, it gives back something in return; which makes customers feel valued and appreciated. Second, it inspires customers to take more action (higher frequency of purchase, higher value of purchase, referral or advocacy) which will benefit both the brand and the customer. The best loyalty programmes are those which are tailored to the customer’s behaviour and needs. Brands can consider using loyalty software solutions to streamline their programmes. Some of the best recommended tools are, goody, openloyalty, and iVend Retail.
3. Corporate Social Responsibility Programme – A brand should always be more than just its product or service. The customer will sense an inconsistency between a brand’s actions and its messaging. Encourage retention by working with customers beyond just products or services. Consider the brand’s core values and create a Corporate Social Responsibility Program (CSR) which encourages improved morale. For example, Lego invested $150 million in creating environmentally friendly products.
4. Make the checkout process easier – According to The Remarketing Report by SaleCycle in 2018, “The average rate of cart abandonment is 75.6%.” Most of the time, these would be customers who do not complete their purchase because of a complicated checkout process. Amazon.com is the perfect example of a brand providing a quality experience in the checkout process by letting customers conveniently and quickly buy what they want through its one-click option.
5. Over-deliver. Do not overpromise – A lot of brands get carried away when it comes to delivering their value proposition. While this tactic may initially reel in more business, if the product or service doesn’t live up to its expectation, it may cause more problems than sales in the future. In the worst-case scenario, customers may share their negative experience with their network. Always make sure to keep the brand’s promises to a conservative level – and go the extra mile to improve customer experience.
6. Prioritise customer service – According to the 2017 Customer Service Barometer report published by American Express, “1/3 of customers say they are willing to switch companies after just a single instance of bad customer service.” Failing to deliver quality customer care will most likely result in customer churn. Brands can take advantage of customer service software so to help ensure delivery of services 24/7. Consider these tools: Vision Helpdesk, Helpdesk, and Whatfix.
7. Offer limited-time discounts – Limited time discounts promote a sense of FOMO (fear of missing out) which, in turn, encourages sales. Along with discounts, e-commerce brands can also add gift card products which customers can use on their next visit. There are two benefits with limited time offers, they boost conversion rates and bring customers back to the website to buy more. Shopify utilises the power of email by sending out reminders during Black Friday and Cyber Monday. The company found that these emails can yield as much as a 4.21% conversion rate.
8. Engage with customers on social media – Social media plays a crucial role in building a meaningful connection with customers. Creating a community where people can connect to the brand and other brand ambassadors will remind customers that they are not just buying the product but, the entire experience.
9. Onboarding program – This is a strategy that educates new customers on how to use the product or service. Instead of learning on their own, customers are given support by company representatives who will personalise the training that they need. Onboarding programs have multiple benefits, they save time and help customers to become familiar with the product which leads to a higher rate of use. This is one of the best customer retention strategy because it prevents new customer churn.
Global companies are the masters of customer retention
Even the biggest companies in the world spend a lot of effort in making sure their customer retention efforts are effective.
Walmart is the largest company in the world in terms of revenue. Customers keep coming back to Walmart stores not just for its large selection and low prices. The company also features a unique customer experience to improve retention. The brand incorporated enhanced checkout options such as Scan & Go. Scan & Go allows customers more flexibility in the checkout process. It has also improved its mobile tactics by launching Walmart Pay which has driven an 80% in increased transactions.
Apple is one of the best in the globe when it comes to customer loyalty. The brand is known for constantly creating devoted customers who are willing to camp out for days – maybe even longer – to get their hands on the latest gadget featuring its brand name. Apple’s most profitable retention strategies are their centers. All Apple stores are based on creating a fun and enjoyable customer experience. Apple stores are built to create an inviting and friendly atmosphere which aims to educate buyers about their products.
Coca-Cola’s ‘share a coke’ campaign resulted in a 2% increase in sales. The campaign was able to connect with customers on a personal level by putting customer’s names on their product. When customers see something relatable, it makes them feel more connected to the brand.
The perfect customer retention strategies help build happy and loyal customers. A brand’s current customer base is an important asset because these customers already know the product and appreciate the service. Focusing time and energy in improving the customer experience as opposed to finding new customers is a powerful way to supercharge revenues.