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What is Customer Retention?

  Recipes for growth most often focus on acquisition. If you stuff the top of the marketing funnel, they say, revenue is sure to come out the bottom. Maybe — but this is far from the most effective way to achieve sustainable profitability. To grow and stay growing, businesses must be able to acquire, but […]

  Recipes for growth most often focus on acquisition. If you stuff the top of the marketing funnel, they say, revenue is sure to come out the bottom. Maybe — but this is far from the most effective way to achieve sustainable profitability. To grow and stay growing, businesses must be able to acquire, but also retain their customers for as long as possible.

What is customer retention?

Customer retention refers to efforts by a business to keep customers from defecting. Numbers show that the more loyal a customer is, the higher value they are to the business. This metric is known as customer lifetime value. A basic example: If you’re a SaaS solution which costs $100 per year to subscribe to, and the average customer subscribes for a year, your average customer lifetime value is $100. If the average customer subscribes for two years, your average customer lifetime value is $200.

Why focus on customer retention?

Traditional models of the customer journey have changed a lot since the marketing funnel of the early 1900s, which introduced the AIDA concept:
customer retention AIDA model

The AIDA concept

  • Attention: Prospect discovers your class of solution and its alternatives. For example, if a prospect wanted to wash his car, he might research car washes in the area, but also DIY cleaners he could use at home.
  • Interest: Lead begins to narrow down options to your class. Here, a prospect would choose DIY car wax over car washes, and begin evaluating different types.
  • Desire: Lead narrows options down further to your product and a few others. Here, your USP and ability to overcome buyer objections are what get your product purchased.
  • Action: Lead purchases your product and becomes a customer.
The problem with this model, however, is it puts total emphasis on customer acquisition and none whatsoever on retention. “Once you have your customer’s money,” it says, “the transaction is over and your relationship ends.” But today, we know that to be false. Consider research results from Frederick F. Reichheld and W. Earl Sasser Jr., boldly announced in a 1990 issue of the Harvard Business Review: As a customer’s relationship with the company lengthens, profits rise. And not just a little. Companies can boost profits by almost 100% by retaining just 5% more of their customers. At first, the numbers seem unbelievable: That much profit for that little retention? But, when you reconsider the earlier hypothetical, it’s easy to see how retention can make a big impact: If a SaaS solution with an average subscription length of one year can keep a customer just two more years, that customer is now worth three new 1-year customers. Additionally, Reichheld and Sasser found that the more satisfied a customer was with a service provider…
  • the more they trusted them
  • the more they invested in that service
  • the more likely they were to recommend that service provider to a friend
The study determined this to be the case across all examined industries. The more satisfied customers were with the service, the more they contributed to its bottom line. Recent statistics make the case for retention too: The numbers add up to one conclusion: Marketing doesn’t end at the sale, and today’s evolved depictions of the customer experience show it. John Jantsch’s “Marketing Hourglass” is a great summation of the entire journey in 7 stages:
customer retention marketing hourglass

The marketing hourglass approach

“By taking the marketing hourglass approach and giving equal attention to building trust and delivering a remarkable experience, you set your business up to create the kind of momentum that comes from an end to end customer journey,” says Jantsch. At Instapage, Dave McClure’s AARRR model loosely guides our retention activities. It picks up at acquisition, where most traditional funnels leave off: customer retention AARRR framework
  • Acquisition: Customer purchases your product or service.
  • Activation: You compel your customer to use your product or service to its fullest extent.
  • Retention: You retain the customer for as long as possible.
  • Referral: With greater retention comes loyalty and the willingness to refer others to the product or service.
  • Revenue: Higher revenus is the product of greater retention, loyalty, and more referrals.
While it’s easy to visualize how you get referrals and revenue from activation and retention, it’s not as clear how to bridge the gap from acquisition. As in, how do you activate then retain to produce as much revenue as possible?

Customer retention strategies

There’s no one way to customer retention. It’s a result of many strategies and tactics. Below, we outline some of our own, and some that have, over the years, become so prevalent and powerful that they’re nearly marketing law.

Identify your product’s value triggers

At Instapage, a major contributor to early growth was data collection that drove customer activation. We had gotten people to sign up, but we needed to get them using the product. So, we used a combination of quantitative and qualitative data to discover how. We looked at:
  • Subscription data: With funnel analysis and profile snapshots going back six months, we were able to find which features drove the most engagement.
  • Casual conversations: In casual conversations with customers both in-person and online, we were able to learn more about our their needs. We were also able to validate our quantitative hypotheses.
From our analysis came a major finding: Free trial users who published at least one page on a custom domain and immediately began A/B testing were 15x more likely to, eventually, upgrade to a paid plan. You can imagine how this played into our activation strategy. Once we knew the triggers in our product which led to paid upgrades, we began nudging people toward them. In our email onboarding journey, in chat messaging, push notifications, webinars, we recommended publishing to a custom domain and split testing.

Reward loyalty

This one is perhaps the most straightforward way to build loyalty. Simply, offer rewards for loyal users or buyers. Kohl’s, for example, offers $10 of “Kohl’s cash” for every $50 spent in-store. The cash is redeemable only on products at Kohl’s, so it’s essentially just a discount or store credit. But why go somewhere that doesn’t reward you over somewhere that does? Keep in mind, rewards don’t have to be monetary. Weekly, we reward our most active users with comparative insights (how they stack up to other users) and advice on how to improve their current landing pages. If you want your customers to stay loyal to your brand, rewarding them is a clear and simple way to say, “we value your business.”

Stop marketing for a moment

Throughout this post I’ve referred to people as “users,” “prospects,” “leads,” and “buyers.” It’s just one example of how, too often, we forget these are terms for people. Human beings. An Atlanta branch of Warby Parker never lost sight of this fact. When a customer shared that her car had been stolen that day, the company sent out this hand-written note, along with a gift certificate to a local bar: customer retention Warby Parker It reads “Hey Tess! We were so sorry to hear about your car. Since you probably won’t be the designated driver any time soon, here’s a round on us! Love, your friends at Warby Parker. P.S. your Durand frames look amazing!” Not only did Warby Parker win over this customer, but after Tess shared it to Reddit, the message quickly went viral, resulting in great PR for the brand. Ultimately, people want to be treated like they’re more than a walking, breathing, wallet. And this is a great example of how to do that. But you don’t have to wait around for a customer tragedy to show you care. And while a hand-written letter goes the extra mile, you don’t even have to take it that far. It can be as easy as sending an email. Wish your customers a happy holiday or birthday, and don’t try to sell them anything or incentivize them to buy. Just show your gratitude for them.

Upsell, cross-sell, and continually educate

At some point, we’ve all received a purchase confirmation email that reads: “You might also like…” followed by related items or upgrades to the one purchased. This is cross-selling and upselling. Similar to activation, up-selling and cross-selling can have a major impact on retention. Think of it this way: Activation is about showing your customers what they can do with the product — how they can start using it to its fullest extent. When it comes to retention, upselling, cross-selling, and customer education can be even more powerful.
  • With upselling, you’re offering customers a more powerful version of your product.
  • With cross-selling, you’re offering customers add-ons or similar items to create a better end experience related to the product or service.
  • With continuous product education, you’re ensuring the people who have these upgrades and related products are able to use them to their potential.
When a customer purchases an upsold version or a cross-sold product, they’re investing more in your product to get a better end experience. Product education is key for ensuring that experience is worth the money. With upgrades and related products, you can boost retention by boosting satisfaction. With blog posts, webinars, tutorials, push notifications, and guides, you can better retain customers by showcasing all they can do with the products. All three work together to increase retention.

Make conversion as easy as possible

We’re all hardwired to take the path of least resistance. That couldn’t be more true in marketing… It’s already hard enough to get people to download, sign up, buy, etc, so don’t make it harder by adding friction to your landing pages. The conversion process from beginning to end should be simple and straightforward. If you want to keep your customers, you have to make what’s good for your business easy for them. For example, form fields should be at the intersection of “what does my marketing team need?” and “what are they willing to give?” If you’re offering a tip sheet, don’t require 10 fields of personal information to download it. Perhaps the best example of “easy” is Amazon’s one-click ordering.
customer retention Amazon easy ordering

Amazon 1-Click

If you have a customer’s information, why require them to go through the same laborious checkout process every time they convert?

Admit your faults and guarantee to right them

Customer service blunders cost more than nearly any other. A staggering 82% of US consumers have abandoned a brand as a result of poor customer service, and almost half say they’ll do it within a day of experiencing a bad interaction. What’s more, the majority won’t keep that interaction to themselves: 95% will share with friends and family. Take Dave Carroll, for example, who performed a song called “United Breaks Guitars” after the airline wouldn’t replace his instrument, which baggage handlers broke during transit. It was only after the video earned millions of views that the company chose to resolve the issue publicly. Some say the delayed response cost United $180 million. The lesson here? If you screw up, admit it and move on. Consider further proof in a hospitality example. customer retention guarantee customers Here, guests were offered a satisfaction guarantee. Those who had a problem and invoked the guarantee were 84% more likely to return. But, those who had a problem and didn’t say anything about it were only 32% more likely to return. After analysis, it was determined in this particular example that the company makes $7 for every $1 paid out to dissatisfied customers. The results were so overwhelmingly in the favor of the business that employees were instructed to seek out dissatisfied customers and force them to accept the guaranteed payout.

Remain top-of-mind

Winning the loyalty of today’s consumers isn’t enough to keep them coming back for more. They’re constantly busy. They’re stressed. They’re distracted. And even when they’re not, there’s little chance they’re thinking of your brand. In the ever-growing ocean of marketing messages, to boost retention you have to stay top-of-mind. Common techniques to keep your business in the conversation include:
  • Email marketing: Sending valuable, gimmick-free content to your subscribers regularly.
  • Social media marketing: Engaging with customers and prospects in a genuine way, as well as amplifying marketing collateral like blog posts, ebooks, tip sheets, and podcasts.
  • Text messaging: It’s not wise to send unsolicited texts. But, texting to a customer who has opted in might be the most effective way to get their attention.
  • Direct mail: Coupons and rewards are still great ways to get your customers buying.
Here’s a great example of a text from a healthcare provider whose customer has opted into receiving messages: customer retention text message It’s short, valuable to the customer, and it offers both a call-to-action and a way to opt out.

Improve cross-channel personalization

Frustrations abound when customers feel like you’re doing a poor job tracking their wants, needs, and information. Why, for example, must they explain themselves to a customer support agent over the phone, when they already did yesterday to an agent via chat? Think of your own experience: Isn’t it annoying to return to the same forms to share the same personal information to the same brands? Isn’t it annoying to start a shopping experience via desktop only to discover the mobile experience is clunky and frustrating? Assembling the right marketing technology stack is key to central to this point. Your tools should not only integrate with each other for the purpose of passing information back to your CRM, but they should also funnel information back out to things like, say, form fields customers have filled out before, or preferences they’ve indicated on another channel or device. In some ways, this ties into the “humanness” in marketing — customers wanting to return to a business they feel understands them. And the best way to show you understand the complexity of your customers is to simply remember what they tell you (in a technology sense) — their behaviors and their own self-reported information — to offer them relevant content and products. This effect on retention here is two-fold. The less obvious is the customer’s feeling that a brand truly understands their desires as they relate to the product or service. The most obvious, simply, is it’s more likely your customers buy something relevant to them than something that isn’t.

Customer retention should be a focus of every business

Customer retention is tricky, sure, but it’s worth the price of getting right. Research proves it. Though, there’s no silver bullet or even slew of them. Retention is a customer-focused way of marketing that operates under two facts:
  • It’s easier and cheaper to sell to a current customer than acquire a new one.
  • Your customers are your best marketers.
How do you strategize customer retention? Let us know in the comments!

Brand Loyalty: How to Convert Your One-Time Shoppers Into Lifelong Customers

Did you know that there is a large chance that someone who has already become your customer will repeat purchase? According to the book “Marketing Metrics” by Paul Farris, there is a 60-70% chance that your repeat customers will convert again! And a study by Adobe found that returning customers can generate three times higher […]

Did you know that there is a large chance that someone who has already become your customer will repeat purchase? According to the book “Marketing Metrics” by Paul Farris, there is a 60-70% chance that your repeat customers will convert again! And a study by Adobe found that returning customers can generate three times higher revenue per visit compared to other shoppers… Your goal should be to ensure that your first-time shoppers become repeat customers and develop a loyalty towards your brand. And building brand loyalty is fairly simple if you know the strategies. If you’re serious about growing your business, you cannot afford to let your one-time shoppers drift away.  But, how do you convert one-time shoppers into lifelong customers? Let’s find out.  

1. Get to Know Your Customers

Once a customer shops with you, that interaction leaves you with a big opportunity to get to know them better. And it is important to do so. You need to know your customers well to deliver the kind of experience they expect. Analyze the demographic data you have on them. And if possible, find out more about their interests, hobbies, and lifestyles. Are they married? Did they buy things that would suggest that they have kids? Can you learn more about their daily habits? Which site did they visit last before landing on your site? Once you know your customers well, it will give you better ideas for creating more touch points with them to build stronger relationships and instill brand loyalty.    

2. Analyze and Optimize Their Sessions

Have the right tools in place to analyze their shopping sessions. Analyze their behavior, and find out the if there are things they looked at but did not buy. Did they have trouble finding a product? Did they have enough information on the things they bought or wanted to buy? Where did they click on your site? It pays to know which products and pages they checked out. Data tracking will tell you if they were indecisive or hesitant at any point. Or if they had any problem with the website at any juncture.

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  Find out the pain points if you can. Did they know the right procedure to purchase any product or service they were interested in? If you pay attention and make an effort, you will be able to learn a lot from a session analysis and then you can work on optimizing the experience.  

3. Treat Your Customers as Your Business Partners

You have to start looking at your customers differently. Treat them as business partners. Try to learn what they think about certain procedures and policies you have built into your business. You can conduct surveys and ask the questions you would like answered from a particular subset of your customers. If there are any changes you are planning to incorporate into your usual business practices, let them know in advance. Are you turning a monthly subscription service into quarterly? Then inform them and try to learn what your customers think about the proposed change. Explain your rationale, and listen to what they have to say. When you go for win-win strategies, you earn the trust of your customers.   There are also training sessions and workshops available that can help you with advanced user acquisition.  

4. Have a Rolling Calendar of Communication

The best way to be in touch with your customers and keep them in the loop is by having a rolling calendar of communication.

It should detail your whole gamut of messaging.

You could send them direct mailers, emails, details of any events you plan to have, phone calls, cards, etc. at defined points in pre-sales, sales, and post-sales processes.

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The picture shown above is Kohl’s gift to their customer for 19 years of opening their charge card with the company. It acknowledges the customer as a valuable part of the organization.

You will be surprised to learn how much your customers appreciate these efforts. It’s an opportunity to acknowledge your customers and make them feel valued. Post sales communication strategies make them feel like part of the organization, which can help make them want to keep in touch with the excitement of the journey ahead.  

5. Segment and Prioritize High-Value Customers

All customers are not the same. There are some who will spend more on your products or services than others. You must be smart enough to recognize these whales. It pays to be more attentive to them because big buyers appreciate the attention. If you are serving your high-value customers, assign your best sales team to attend to them. There are several tools such as Selligent and Zendesk that will help you segment your customers properly to improve their shopping experience in every way you can. They are worth more than the average customers to you, so you should prioritize retaining them.  

6. Ask for Feedback and Act on It

You might think everything is hunky dory with your processes if your customers don’t complain. But they may be experiencing small issues that they don’t find important enough to complain about. Don’t wait for things to escalate and become complaints. You can ask your shoppers for their feedback at an opportune time to see where you can make improvements. Once you get their feedback, make sure you act on it and make changes. If your customers have any questions, respond quickly. Every element of your interactions with your customers must convey to them that they are valuable and their opinion matters. Don’t forget to thank them once they provide their input, like Aaron’s Auto, does in the following screenshot.

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7. Send Them Discounts or Promotional Coupons

It is best to track the behavior of your customers when they shop with you and then stay connected with them through follow up emails. There are various subjects that can be covered in the follow-up emails you send. If you track their behavior, you will know if there were things they passed on.

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If there were things they stopped looked at but didn’t buy, you can cover those products which you think would be of interest to them and notify them when they are on sale. You can also send promotional coupons to them. The idea is to know what interests them, and then to draw them back to your site using those interests.  

8. Cross Sell or Up Sell to Your Customer

Find out the products your customers want to buy, and then implement upselling and cross-selling tactics. Predict the things your customers could return for by analyzing their purchases. For example, you can send them emails suggesting “If you buy this now, you can get this other item at a discount of 20%.” Or, “Instead of opting for B, you can opt for B+ at a 25% discount.” You could even provide product recommendations while they are shopping and display items that would go well with the product they are currently viewing. Turn your customers into loyal shoppers by always provide them with solutions. Don’t ask them, “What can we do for you?” Find out the answer yourself, and proactively tell them, “This is what we can do for you.” This approach generally works as you are helping simplify your customer’s life.    

9. Personalize Web Pages Based on Past Shopping Lists

Use the previous history of your customer’s purchases to personalize web pages for them. A personalized web page is different from a normal web page. It will have the things a customer would most probably buy again. For example, if they buy dog food, they would probably need another packet of dog food again. If they bought diapers, they would need diapers again soon.

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There are algorithms that can predict the recurring purchases. You can also add your suggestions on the personalized web page for them to explore. In the example shown above, SmartMart takes personalization to a whole new level, complete with the recipient’s name.     

10. Reward Them With Loyalty Programs

To make your one-time shoppers loyal lifetime shoppers, try to enroll them in your loyalty program. A customer loyalty program promises members rewards in the form of discounts or freebies. Loyalty programs help engage, retain, and reward loyal customers. Most programs have the points system where customers earn points for each purchase. Customers can redeem those points for some gifts or a reward or a discount.

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There are non-monetary programs too that engage customers and earn their loyalty. Toms, the footwear brand, donates a pair of footwear to an underprivileged child in South America on behalf of the customer. Many customers like this social cause that Toms supports and this has won their loyalty.    

11. Build Relationship on Social Media

In this age of super connectivity, you need to provide your customers more than one channel to connect with you. You need to have a presence on social media. One of the best ways to gain a customer’s trust and to build a relationship with them is through social media. The main advantage of connecting with your customers on social media is that you can talk to them in real time. You can deal with their issues in real time. Social media works as a customer support channel where the grievances of the customers are heard quickly and are addressed in real time. You can have fun with it like Wendy’s does in the screenshot below.

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12. Share Related Influencer Content, Customer Stories, and User-Generated Content

Customers like to see content from real people, including influencers. Partner with influencers that your target audience looks up to. Let them create content for and about your brand and products, and then share this content with your own audience as well. When they see a reliable influencer vouching for you, this audience is likely to trust your brand more. This trust will act as the foundation for loyalty. It’s crucial that the influencer is highly relevant to your brand. You can look for relevant influencers in your industry using tools like Grin. You can use location, category, and social platform filters to narrow down your search. But it’s not just content from influencers that you should be sharing. Share content created by your regular customers as well (also known as user-generated content). This not only wins the trust of other customers and potential customers but also wins the loyalty of the customers whose stories or content you share. Keep your eye out for valuable customer stories and interesting user-generated content about your products and services. They can be aligned with your content strategy, and used in remarketing strategies to bring back those customers.

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  Using customer stories and user-generated content makes a brand seem friendlier. It increases customer loyalty. As shown in the picture above, Buffer used user-generated content and saw their followers grow by 400%.  

13. Put Out Fires Quickly and Make Amends

A good brand takes care of their customers at all times. Your customers should be satisfied by your offerings, and the customer service that accompanies them. In spite of our best intentions, sometimes things do go wrong. That’s why you need to be armed with a hose at all times to put out any fire you see. Social media fans fires and spread them fast. You need to be seen dousing the flames as soon as they appear.

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  Starbucks has always believed in equality. Recently, an unfortunate incident resulted in the arrest of two of their customers. The incident sent shockwaves everywhere. Starbucks soon posted the statement shown in the picture above on their social media profiles to contain the damage. It certainly helped douse the flames to a significant extent. Customers want to know where you stand when the controversies hit your brand.    

14. Use Effective CRM Tools

There are several tools that can help you manage your customers properly. They can help you turn one-time shoppers into loyal lifetime customers. Pipedrive: Pipedrive is one such tool. It helps you manage the sales pipeline. It organizes and manages your business leads efficiently and it helps you focus on the prospects you want to pay special attention to. They can be your one-time shoppers too. The system is intuitive and develops an individualized approach for each of your prospects. Freshsales: Fresh sales optimize sales. It is a cloud-based CRM system that helps you with email tracking, enables direct calls, lead management, and more. It helps you track the history of the client, discovers what got them interested in your product, and how they are interacting with the product.  

Building Brand Loyalty is Important for Your Business

Your one-time shoppers can very easily drift away to your competition if you are not attentive and smart enough to engage them. You need to gather all of the information you can on your shoppers, understand their interests/pain points and provide solutions, and ultimately make their lives easier. If you can do these things, they will stay with you as loyal customers and some will turn into brand advocates. Any thoughts on these points? Feel free to share them in the comments.