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9 best practices for customer retention

In this guide, we'll discuss what it customer retention is and share 9 best practices to keep customers coming back

Chloe Lloyd · November 12, 2020
9 best practices for customer retention

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“One new sale.”

When you see that notification come through, don’t assume it has to be a brand new customer—one that’s never heard of you before and is trying your product or service for the very first time.

In fact, the same notification from a person who’s already purchased before could be the fuel you need to generate more revenue and reach profitability faster. It proves you’re retaining customers and encouraging them to make repeat orders.

In this guide, we’ll share what customer retention is, alongside nine strategies to retain your existing customers.

What is customer retention?

Before we get to the strategies, let’s take a look at what customer retention actually means.

Customer retention is the process of trying to keep as many customers around for the long-run. Retained customers are those that continue to purchase from you—hence why it’s an important thing to focus on if you want loyal customers.

How to calculate your customer retention rate

You calculate your customer retention rate by seeing how many people you’ve retained over a certain period of time. Most often, that’s per month, quarter, or year.

Here’s a simple formula to calculate your customer retention rate:

As an example, let's say you've got 1,350 customers at the end of a given month. You acquired 50 customers throughout, and you had 1,600 at the start. Your customer retention rate would be 81.25%.

Why is customer retention important?

There are tons of metrics you’re keeping an eye on—conversion rate being one of the most important.

Let’s dive into two big reasons why customer retention rate is so important to keep track of, too.

Boost brand loyalty

Customer retention proves that customers enjoy your product or service enough to purchase repeatedly. Those people are ideal brand ambassadors.

Company ambassadors are people who praise your brand to their own network. They’ll refer to you wherever possible. In fact, 66% of marketers say this type of referral is responsible for the most B2B marketing leads.

The best part? You don’t need hundreds of customers, each making repeat purchases over years, to develop brand ambassadors. Some 37% of customers consider themselves to be loyal to a brand after five purchases. Most of the time, that’s the holy grail number you’ll need to reach to create an army of loyal brand ambassadors (who are generous with word-of-mouth referrals.)

It’s no surprise why 43% of consumers spend more money at businesses they’re loyal to.

Reduce costs (and increase profitability)

Speaking of extra revenue, research shows that it’s 7-13% cheaper to retain an existing customer than to acquire a new one. You don’t have to go out and find a brand new target customer group to market your products to.

You’ve already got a pool of loyal customers who know, like, and trust your brand—three things that make them much easier to sell to than a cold lead.

Not only that but squeezing more value from each customer helps drive up the return you’re getting from your Customer Acquisition Costs (CAC).

Let’s say your CAC is $50, for example—that’s how much it costs to acquire a brand new customer, on average. Having no repeat customers with an Average Order Value (AOV) of $80 means you’re only making $30 on each sale. But if you retain each customer and they pay the $80 AOV every month, you have a much higher customer lifetime value from the same CAC.

It’s why increasing customer retention rates by 5% increases profits by at least 25%.

9 customer retention strategies to try

Ready to improve your customer retention rate? Here are nine customer retention best practices that’ll help you keep even more loyal customers.

1. Start early with strong onboarding

It might seem counterintuitive to think about a customer leaving as soon as they make their first order. But as soon as they're a customer, they also have the possibility to be an ex-customer.

Make sure that a first-time customer has everything they need to be set-up for success when using your product in the early stages. A strong onboarding sequence can deliver this to them. It’s a chain of emails that explains how they can use your product—and get in contact with a customer support team, should they need any extra assistance.

A good onboarding sequence that introduces them to your brand will teach them how to use it properly. Once that learning curve is over, there’s a much higher chance of them sticking around. It’s easier for them to use your product than starting from scratch to learn another.

2. Prioritize support to deliver a great customer experience

It’s no secret that customer expectations are at an all-time high. We live in a world where products can be delivered to your door within hours of ordering them online. That fast-paced demand doesn’t stop there, though.

Demand is high for customer support responses: 26% expect responses to their queries within two hours. That’s poles apart from the actual average response time of 7 hours and 4 minutes.

The bottom line is that customer support needs to be front and center of your business if you want to retain customers. Why? Because more than half of potential customers have canceled a purchase due to poor customer service.

If they can’t get a response from you that answers questions or it takes too long to receive it, they’ll head to the door.

3. Proactively ask for customer feedback

It’s not uncommon to fall into the trap of only asking for feedback once a customer has churned. Understanding why people churn is the key to keeping future users around, right? Not necessarily.

You should be proactive in making sure that your customers are happy. It cuts off the chances of them churning, in the first place. Catching them whilst they’re unhappy—but not yet made the decision to leave—gives you the opportunity to turn it around.

The good news is that this is very simple. In touch points you have with customers throughout their entire lifecycle, link to a feedback survey that asks how their experience is going. This could be front and center of your website (using pop-ups) and within onboarding emails.

Keep an eye out for those who indicate they’re not happy with your product, or the service they’re getting. Your customer support team can supply them with all the information they need before it’s too late.

Chances are, you’ll spot that some problems are affecting other existing customers, too—like struggles to add another team member to their account. Fixing it not just for that individual customer, but tweaking your entire onboarding process to ease it, improves the experience for future customers. If there’s no need for them to leave, they won’t.

4. Recognize the signs of customer churn for your product or service

Most customers give indications they’re about to cancel a product.

Some obvious signs of churn include:

5. Don't treat all inactive customers the same

Did you know that the vast majority (95%) of customers expect businesses to communicate proactively, not reactively? Customers want to hear from brands before they have to contact them on their own accord.

However, this doesn’t mean sending them a generic message that encourages them to keep their subscription.

The perfect message—one that stops your customer from churning—depends on that individual person. A wide variety of things influence what they want to hear at that moment, such as their contact preferences, how long they’ve been a customer, and the product or service they’ve purchased.

Let’s say one customer has explicitly stated that they don’t want to receive emails from you. Emails are a hugely popular way to improve customer engagement. But ignoring their contact preferences can make them even more frustrated. That’s a surefire way to push them further towards leaving, not the other way around.

A CRM is the perfect tool for managing this process. You’ll see each customer and their interactions with your brand. If you spot signs of churn, note that in your CRM software and have someone reach out as soon as possible to rectify the problem.

Take some time to get to know each of your customers. (If you have thousands of them, group similar traits, personalities, or qualities together.) That way, you can understand what they really want to hear when they’re thinking of churning. A one-size-fits-all approach isn’t as effective as you’d think.

6. Create a customer loyalty program

Some of the biggest brands in the world have customer loyalty programs. You might even be part of one:

  • Amazon Prime
  • Starbucks Rewards
  • Tesco Clubcard
  • CVS ExtraCare

Customer retention is a huge reason why these brands create loyalty programs. Research shows that members of loyalty programs spend 12-18% more per year than other customers. The more integrated you feel with a brand, the more you’ll be loyal to them.

7. Recognize that some customers will always leave

Unfortunately, it’s not possible to make every customer stick around for the long-haul. Changes in their personal life, or changes to your product, might mean that it’s not a fit anymore. That doesn’t mean you should neglect them entirely.

Always make the cancellation experience as easy as possible. A negative and stressful experience when they’re leaving can make them less likely to return in the future.

Think about it: if it was complicated and expensive to cancel a subscription when you no longer needed it, would you choose to renew that subscription again in the future? You wouldn’t. Neither would your customers.

8. Keep in touch with old customers

It’s not just current customers that you should keep in regular contact with. Marketers falsely assume that their efforts are best spent acquiring new customers. But in reality, keeping track of people who have left could bring them back in the future.

When customers are churning, ask if they’d also like to unsubscribe from your mailing list. Create a new group of those who choose to stick around. Use your emails to let them know you're still there by sharing:

  • Details about new products
  • Coupons or discounts on a future purchase
  • Improvements you’ve made since they left (bonus if it relates to the reason why that individual customer left in the first place)

Regardless of how you’re following up with people, every customer relationship matters. Staying top-of-mind even when they’re not actively looking to buy from you helps build trust. You’ll need that if (or when) they decide to come back.

9. Share your knowledge internally

Now you’re armed with the customer retention practices that’ll help you keep more customers around, make sure your knowledge is shared throughout your organization (if appropriate), and doesn't just sit with one person.

You’ll have different teams that engage with a customer at each stage of their customer journey. Staff who understand churn, and know the importance of retention, can keep these strategies in mind as they work through the lifecycle.

Sales teams, for example, can spend more time guiding customers through the best plan for them if that’s a huge reason why your customers leave. Customer support agents can keep an eye out for people giving negative feedback, and try to get them back on track.

A team-wide approach is the best way to retain customers at scale. The better experience you can give throughout the entire sales journey, the more likely they are to become loyal customers.

Remember: your customer's success is your success

Great customer service underpins brand loyalty. Going above and beyond for your customer will make you memorable. So, be proactive with asking for feedback, and understand the signs of churn so you can nip cancellations in the bud.

There’s no reason why your customer retention program can’t see people loving, engaging with, and purchasing from you for years to come.

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