Retention is something we all strive for as business owners. There’s nothing like an old customer endorsing your business or buying again. However, too many businesses focus on getting new customers (customer acquisition) at the expense of losing old ones. But, if you want to succeed, you need loyal existing customers. How can you keep them coming back? Which customer retention tactics are right for your business?
In this post, we will share with you the 15 best customer retention tactics your business can use!
What Is Customer Retention?
In a nutshell, customer retention is exactly what it sounds like: keeping customers.
It’s the process of increasing repeat purchases and keeping customers from switching to competitors. It may involve reducing churn or customers who stop buying or using services.
Customer retention also acts as a metric to measure how successful the business is over time. Many big companies use several customer retention tactics to keep customers happy and returning.
How Do You Measure Customer Retention?
The customer retention rate measures the percentage of people who continue to use your product or service.
Here is a simple formula to compute your retention rate:
(CE – CA) / CS x 100)
- CE – Total number of customers at the end of that period.
- CA – New customers acquired at the end of that period.
- CS – Customers at the start of that period.
While not listed in the graphic, customer retention also depends on knowing your customer churn. Customer churn is the percentage of customers who stop using your product or service in a given period.
You can calculate it by dividing the number of customers you lost during the period by the number you had at the start.
For example, if you start the quarter with 600 customers and end with 580, your churn rate is 5% because you lost 5% of your customers.
Your business should, of course, try to get a churn rate as low as possible.
Why Is Retaining Customers Important for Businesses?
Customer retention is the goal of most marketing efforts and is a sign of a healthy business.
One study found that repeat customers spend 67% more than new ones. It’s better to have consistent profits than sudden spikes that could lead to crashes.
It also costs about five times higher to bring in a new customer than to keep an existing one. You could have spent that additional cost on keeping your existing ones loyal. Returning customers provide free word-of-mouth advertising. Customers who come back to you will tell others about your business. That said, they can become your product marketers.Lastly, businesses can collect data from their returning customers which will help make critical business decisions!
15 Best Practices For Customer Retention
The best customer retention strategies are simple but effective. Quality service, feedback, and rewards are vital to keeping customers happy.
Let’s dig deeper into each of these customer retention tactics below.
Improve Your Customer Service
One study shows that 96% of customers are ready to leave a brand or company if the customer service is terrible. It shows how important it is for businesses to offer great support.
One tried-and-true way is to answer customer complaints fast. It’s also essential to build trust with a personalized response.
Connect with customers on a human level. Taking this extra step can help make sure the customer stays.
You can also assign a support desk crew solely to handle customer queries. This team should be highly skilled at identifying customer needs and giving solutions.
Engage Customers on a Personal Level
A one-size-fits-all approach is hardly the recipe for inspiring brand loyalty. At best, it makes your business come off as robotic and, at worst, insincere.
Spotify is a great example of a brand that uses personalization as a customer retention strategy.
Their song recommendation uses machine learning to create a playlist based on the user’s listening habits. It is why their playlists are always spot-on.
Starbucks is another brand that does this. The baristas are friendly and engaging. They also make drink suggestions based on your preferences. It’s a simple detail, but it makes customers feel special.
When you ditch the generic route, customers will appreciate you more. It shows that you value each customer, creating a unique experience. It can be as simple as sending out birthday cards or rewarding them with discounts for being a long-time customer.
Deliver on Promises
Since growth depends on keeping customers for a long time, any business that wants to succeed must keep its promises.
You must know how to rectify mishaps and offer compensation if needed. Uphold your promises and let customers know by giving updates and responses.
It turns a negative experience into a positive one and encourages repeat business. It also ensures customers get what they paid for.
Maintaining integrity in the customer service process reinforces a company’s trustworthiness. It shows that customer satisfaction is a top priority.
Set Up a Rewards Program
A rewards program is a low-cost way to retain customers and encourage them to spend more.
It sends a message to the customer that you’re grateful for their continued patronage. It can consist of price discounts and other benefits.
Take Sephora’s Beauty Insider Program. For every dollar you spend, you get one beauty insider point. You can exchange those points for a reward. They also have membership tiers where benefits and perks increase each tier.
Even Starbucks has a rewards program where customers earn a star for each drink. They get a free drink if they’ve accumulated a certain number of stars.
Reward programs like these keep customers engaged because they desire the reward. Giving customers value for their money also fosters loyalty.
Create an Onboarding Process
A customer onboarding process involves introducing the customers to your product or service. For example, showing a customer how a device works or how to navigate the app.
Businesses can reduce customer confusion and frustration by creating an efficient onboarding process. It’s one of the easiest customer retention tactics that most businesses use.
Begin with clear, honest communication about what customers can expect. After customers know what’s available and what to do, provide tutorials. Support materials and user guides are also good resources.
Apple uses this customer retention tactic.
They provide training services to help users get acquainted with their products. Apple also has a large community where users can ask for help with their devices.
Conduct After-Sales Service
Customer service ends after a transaction or service, right? Wrong. After-sales service is one of the best customer retention tactics to use.
It could be as simple as checking in with the customer after a few days to ask how they like the item they bought. If you’re providing a service, ask them if they had difficulty navigating your program or app.
The bottom line is that once you’ve made a sale, don’t abandon your customer. The customer must know they can contact you if something goes wrong with their product or they encounter a problem.
For customers, a brand with nonexistent after-sales service is a massive turnoff as it gives the impression that their needs don’t matter. So, don’t hesitate to reach out to them via message, call, or email.
Do Surveys and Collect Feedback
No product or service is perfect. You should ask customers for feedback on areas that need improvement.
Customers remember setbacks like shipment delays, mishandled merchandise, and delayed responses to questions. Asking for feedback helps address criticisms and improve their experience.
Even if you can’t offer a full refund or product replacement, if the customer feels validated, it is enough for them.
Surveys are a great way to collect customer feedback. But there are other customer rating tools available. It’s crucial to review these surveys and other customer input.
Take it from Uber. They provide real-time driver ratings on the app that let users rate their driver’s service. Drivers may even get penalized if they get poor ratings.
Send Out Newsletters and Post on Social Media
Digital marketing lets you inform customers across channels. You could also post articles from other bloggers’ blogs alongside your own.
Another way to keep customers coming back is to send them newsletters. A fun way to thank customers who come back is to send them one with deals or rewards.
It lets you create personalized content for specific groups of people based on where they are or what they do.
You can even get new customers to sign up for your newsletter to get coupons or information about a big sale the next time they shop.
When done right, both strategies work.
Offer Incentives for Making Connections
Offering incentives is one of the best ways to keep your customers returning. Some incentives include:
- Rewarding customers for referrals. If a customer recommends you or brings in new customers, offer them a free product or service in return!
- Reward customers for writing reviews. Many companies reward their reviewers with discounted products and services or even cash. It can work even better if you give them rewards based on how many reviews they write.
- Reward customers who share your social media post. You can give them discounts or special deals when they do so again.
Customers love to support brands that align with their values. It builds trust, primarily if the brand supports a good cause.
For example, customers are more likely to support a brand with ethical practices like going green—a case in point is the sneaker brand Veja.
They use recycled plastic bottles, polyester, and sustainably sourced cotton and rubber. The Veja Project shows customers how sneaker production reduces carbon emissions.
You don’t need to change your entire brand image. Still, it helps to show a bit of transparency and corporate social responsibility. It shows you’re not just in it for the money.
Surprise Customers with a Freebie or Two
Customers respond to how you treat them. They’ll return the favor by patronizing your business if you go above and beyond their needs.
You don’t need grand gestures. Even a thank-you message or greeting can brighten their day.
On a similar note, offering freebies endears you to them and encourages their buying habits. It can be as simple as giving away product samples, a free meal, or a discounted membership fee.
Freebies are a subtler way of making you stand out among your competitors.
Aim for Speedy Delivery
In the eCommerce industry, customers will base their brand loyalty on how fast you ship their orders. Slow shipment can turn off even unique product buyers.
It is especially true now that many shipping options are available. Partnering with logistics improves efficiency, especially for big shipments or orders in distant states.
You can offer same-day delivery and charge a premium. Some customers won’t mind paying extra if it means they can receive the product immediately.
Automate Customer Follow-Ups
Sending a “welcome” email or requesting feedback after a sale can make customers feel important.
They’re likely to feel more satisfied and impressed with your service. A follow-up might impress them if the initial service didn’t.
You can also set up automated follow-ups to contact customers again at a specific time. It will help them remember your business and ensure they return to you when needed.
Automated notifications like shopping cart reminders can resolve unfinished transactions. You can also use tools like an auto-generated email or SMS to send offers and ask for reviews.
Make the Checkout Process Quick and Painless
A seamless checkout experience keeps customers happy and loyal by expediting their transactions.
For example, many e-commerce shops don’t allow guest checkout. It complicates checkout, so three out of 10 customers abandon their carts.
That said, include a guest checkout to make things easier instead of having them sign up. Having payment options for debit and credit cards, e-wallets, and pay later also ups the customer’s convenience.
Even if you don’t plan to keep every customer forever, that’s unreasonable. You want them to return, so invest in these solutions.
Make Returns and Refunds Hassle-Free
Product returns and refunds are inevitable. In 2021, the National Retail Foundation projected a return of 13.3% on merchandise.
Common reasons include:
- A customer bought the wrong size.
- A customer did not feel satisfied with the product or service.
- A customer received the incorrect item.
- Unforgiving returns and refunds policies.
For example, customers would be upset if they had to pay for the return shipping. A short period of refund policy can also make them never buy from you again.
Having a generous return and refund policy can help nudge them to repurchase.
For example, extend the return period. Add a 90-day money-back guarantee for electronics or services. You can also include free shipping for product returns.
Businesses usually accept returns within 15–30 days. Refund options include shop points, a full refund, or a product exchange.
The Bottom Line
The customer retention tactics listed above should help you get started. In the end, the only way to keep customers returning is to give them better service and treat them with respect. And all of this can be done only if your prior customers are aware of your continued existence – that’s why you need to have a solid marketing & conversion funnel optimization plan in place.
It’s a challenge, but it pays off in a big way when you always meet your customers’ needs. If you do it right, customer retention can supercharge your business!