You Only Need These 4 Customer Retention Strategies

A customer retention strategy is an approach to keep your customers interested, engaged, and loyal to your brand. Its aim is to maximize the lifetime value of each customer and keep as many repeat customers as possible.

It’s no surprise that having such a strategy is vital for any successful business. In fact, even a 5% increase in retention can boost profits by 25-95%, according to a Gitnux report.

However, many CMOs focus more on acquisition than retention despite repeat customers spending 67% more than new ones. To enhance retention, we’ve highlighted four approaches marketers could take, including examples of how brands implemented these approaches, to help build lasting relationships, driving both repeat business and long-term success.

1. Research your customers to find out what they need most.

According to a Hubspot article, companies that prioritize their customers are 60% more profitable than those that don’t.

(Image source)

A G2 article states that 60% of customers report good customer service is the key to brand loyalty. Two ways marketers improve customer service and retention are through various marketing strategies, predominantly email marketing (89%) and social media engagement (83%).  

So, what kind of marketing data should you analyze if you want to improve customer retention?

• UX data. If the shopping experience is full of friction, why would anyone return?
• Email performance. What happens (or doesn’t happen) in post-purchase emails to convert first-time buyers into repeat buyers? (Email testing can help determine what works and what doesn’t, but should be about far more than opens and clicks.)
• Customer service. Although 81% would make a repeat purchase after a good shopping experience, 61% would take their business to a competitor after just one bad experience.  – so perhaps looking at customer service scores might be where you start?

(Image source)

Improving each of these areas might boost your customer retention. But only scrutinizing your customer-facing metrics and direct customer feedback will provide you with your top priorities.

Of course, you could always work backward to find the source(s) of the problem, too.

Do you understand why your customers are leaving?

Some 68% of customers stop doing business with a company due to feeling that the company was indifferent toward them:

(Image source)

Forget about your company for a second and think about the companies you do business with:

• How many do you feel actually care about you?
• What attempts do they make to collect your feedback or offer incentives for you to come back.
• Do you think they even notice when you leave?

Alex Turnbull of GrooveHQ shares the simple three-line email they ask newly lost customers: “Why did you cancel?”

“As a founder, one of the most painful things in the world to hear is criticism of your baby. Especially sharp, stinging criticism from a customer that you’ve now let down […]

There’s no way around it, it still sucks […] But actively collecting and leveraging that feedback has become one of the most important drivers for continuous improvement at Groove.”

As much as it sets you up for negative feedback, including an exit survey can provide you with extra insight into how to improve your product, service, or overall offer.

Groove’s open-ended survey provided insight into:

• Specific issues active customers weren’t telling them about;
• Hangups in the user experience;
• Workflow inefficiencies for use cases they hadn’t considered.

What’s more, an A/B test of the message—changing “Why did you cancel?” to “What made you cancel?”—provided a near 19% response rate.

“Since we’ve started doing open-ended exit surveys eight months ago, we’ve been able to make a lot of positive changes and fixes to Groove. Retention, along with many of our usage metrics, have improved as a result of some of these changes.

We’ve even started testing recovery campaigns for former customers whose issues we’ve fixed; I’ll write about that in a future post, but the early results are very promising.”

This is just one of the many reasons we’ve emphasized creating feedback loops. A system that provides insight automatically can help prioritize major issues to reduce churn, increase customer lifetime value, and support customer retention.

Canceling customers, of course, are far from the only group that will provide insight. 

How to conduct customer research

Here are some effective ways to determine what your customers’ needs are and foster long-term loyalty and satisfaction.

• Conduct surveys: Create online surveys using tools like Google Forms or SurveyMonkey to gather feedback on customer preferences, pain points, and expectations.
• Customer interviews: Engage in one-on-one conversations with your most loyal or recent customers. Ask open-ended questions to uncover deeper insights into their challenges and needs.
• Analyze customer support data: Review customer service tickets, emails, and chat logs to identify common issues or requests. This can reveal recurring pain points that require attention.
• Leverage social listening: Monitor social media mentions and online reviews to track customer sentiment and emerging trends. Pay attention to complaints or product suggestions.
• Use analytics: Analyze website traffic, user behavior, and purchase patterns to see which products or services customers are most interested in.
• Create customer personas: Based on your findings, build detailed customer personas that represent your key customer segments, focusing on their pain points, desires, and decision-making factors.
• Competitor analysis: Study your competitors’ customer feedback to identify gaps in their offerings that you can capitalize on.
• Test assumptions: Use A/B testing or pilot programs to validate your findings and see which solutions resonate best with your audience.

2. Develop the product, site, and offers based on existing customer feedback.

Your existing customer base will tell you a lot about what they need and want to keep coming back.

For instance, HubSpot Ideas is a forum for feature requests. Users can submit and upvote ideas, helping HubSpot understand which development projects may have the highest existing demand.

Without these methods of collecting feedback, future improvements would be mostly guesswork, severely reducing the chances of actually solving critical problems that keep users engaged or coming back (not to mention that forums like HubSpot’s yield qualitative insights for free).

It’s not just SaaS sites that can take advantage of customer feedback forums and in-line customer support either.

Case study: How Terminix used customer feedback to recover $20 million in lost revenue

Terminix is the world’s largest pest control company, with more than 2.8 million customers spread across 47 U.S. states and 11 countries.

Over the years, their acquisition campaigns have succeeded by combining humor with a serious tone that demonstrates their seriousness about pest control.

But as successful as their acquisition strategies were, too many customers canceled—they were losing a third of their clients (or approximately $60 million) annually.

They hired Chief Outsiders to analyze exiting customer data along with other customer satisfaction information. They discovered issues stemming from three areas:

• Service quality;
• Communication;
• Customer expectations.

In response, the company initiated a new employee training program focused on retaining customers and overcoming easy objections. They also incorporated a satisfaction survey program to gain a fresh perspective on new customers’ needs and desires.

This also led to a change in Terminix’s product offering—offering quarterly and annual programs instead of their previous “monthly only” service.

The result? Customer turnover dropped by one-third, which translated into approximately $20 million recovered in annual revenue.

How to leverage existing customer feedback

Collect and Organize Feedback

• Surveys and reviews: Regularly gather feedback through surveys, customer reviews, and support tickets.
• Social media monitoring: Monitor comments and mentions on social platforms.
• Feedback categorization: Organize feedback by themes (e.g., product features, user experience, pricing).

Prioritize Key Insights

• Identify patterns: Look for recurring issues or requests across customer feedback.
• Prioritize by impact: Focus on feedback that aligns with business goals (e.g., improving user experience or fixing common pain points).
• Create a feedback matrix: Rank insights by ease of implementation and potential impact.

Plan Product or Site Updates

• Roadmap adjustments: Update your product roadmap with the most relevant feedback.
• Collaborate with teams: Involve your product, design, and development teams to brainstorm solutions based on feedback.
• Prototype solutions: Create mockups or beta features to address top issues or requests for validation.

Test and Validate Changes

• A/B testing: Test new site features or product offers with different segments of users to see what works best.
• Usability testing: Run usability tests with customers to ensure improvements enhance user experience.
• Analyze engagement: Monitor performance metrics (e.g., bounce rate, conversion) after making updates.

Implement Offers Based on Feedback

• Custom offers: Develop offers or promotions tailored to feedback (e.g., bundle pricing, discount preferences).
• Personalized experience: Use customer data to create personalized deals or recommendations based on their previous feedback.
• Communicate value: Clearly communicate how offers or product changes address customer concerns or enhance their experience.

Continuous Improvement Loop

• Regular updates: Frequently update customers on how their feedback has influenced improvements.
• Gather post-update feedback: After making changes, ask customers for additional feedback to refine further.
• Iterate and evolve: Repeat the process to continuously align your product and offerings with customer needs.

3. Evaluate whether a loyalty or rewards program will drive repeat business.

Beyond delivering a better customer experience based on feedback, what are other ways to increase customer retention?

Over 90% of companies have adopted some kind of loyalty program to help build trust, and it’s no surprise why. G2 revealed that 84% of customers are more likely to stay loyal to a brand with a loyalty program. What’s more, 60% of customers in loyalty programs report having improved experiences with the brand, as their relationship goes beyond mere transactions.

(Image source)

For many, the benefits of a loyalty program might include:

• Increased customer spending;
• Higher customer lifetime value;
• greater ability to upsell and cross-sell.

But it’s not as simple as tacking on a loyalty program and expecting customers to start “living” at your store. According to Statista, 58% of U.S. shoppers expect paid loyalty programs to include free shipping with no minimum purchase requirements, 39% expect same-day delivery, and 31% anticipate a wider selection of online products than in-store products. Customers also prefer loyalty programs that are easy to use, provide great discounts, and are simple to understand. 

For industries with thin profit margins, offering an incentive like 2% off isn’t very enticing, and in many verticals such an offer might require a significant lift in sales to break even.

The major issue with many loyalty and rewards programs is that there’s no real differentiation—nothing there to make the customer feel special. As a result, it’s easy to take it or leave it.

Perhaps that’s why Amazon Prime has been so successful.

The benefits to members continue to increase (the image above is ample evidence), and buyers have rewarded Amazon with their loyalty. The gap in spending between a Prime and non-Prime member is remarkable:

Starbucks might also be onto something with Starbucks Rewards. By using their loyalty card to make purchases on their website or at a store, you earn “Star Points.”

The more points you earn, the better perks you get:

From Starbucks’ perspective, I imagine this is a pretty significant win because many of the rewards are being offered after they’ve made a good profit off the customer.

Further, they get tons of data about what you buy and when you buy it. The “custom” offers you get can easily be personalized prompts to encourage you to go back when, algorithmically, your loyalty appears to waver.

If you’re looking to start a loyalty program, you’d better run the numbers—in granular detail— first. Then, when you unroll the program, start by targeting your most frequent buyers first. Listen to their feedback and develop the program based on it their feedback.

After all, the Starbucks Rewards program came out of the company’s own forum:

Greg Ciotti has created an excellent article on creating sticky loyalty programs, and HubSpot has a great overview of various reward programs.

How to check if a loyalty rewards program is for you

• Analyze customer data: Examine purchase frequency, average order value, and customer lifetime value. Identify if there’s a strong segment of repeat customers who could benefit from incentives.
• Survey customers: Conduct surveys or focus groups to gauge customer interest in a loyalty program. Ask if incentives like discounts or exclusive offers would influence them to return more often.
• Evaluate competitors: Research competitors’ loyalty programs. Determine if they successfully drive repeat business and what unique aspects make them effective.
• Cost-benefit analysis: Calculate the cost of implementing a loyalty program versus potential increased revenue from repeat business. Ensure that rewards don’t negatively impact profit margins.
• Run a pilot program: Test the program with a small group of customers. Track engagement, repeat purchases, and customer satisfaction before scaling up.
• Measure key metrics: Monitor key metrics such as repeat purchase rate, average spend, and customer retention. Compare these metrics before and after introducing the loyalty program.
• Continuous optimization: Gather feedback regularly and adjust the program based on customer preferences, redemption rates, and overall business performance.

4. Make your retention strategy personal.

Appealing to your customers’ emotions and making every customer feel like they truly matter goes a long, long way. According to research by Peppers & Rogers Group, most customer behavior is emotionally based:

• 60% of all customers stop dealing with a company because of what they perceive as indifference on the part of salespeople.
• 70% of customers leave a company because of poor service.
• 80% of defecting customers describe themselves as “satisfied” or “very satisfied” just before they leave. (Surveys alone won’t tell you everything.)

In your retention efforts, focus your communications with existing customers on how they would like to be viewed.

Greg Ciotti (again!) talks about the concept of implicit egoism. As it relates to consumerism, it’s the idea that brand choices are tied to personal identity.

Purchasing a luxury vehicle like a Mercedes-Benz, for example, is a status symbol and makes their customer feel more elite.

Their customers are so elite that if they want to get into a new Mercedes when their lease is expiring, the company will simply waive four payments, and the customer will get the new car right away.

Urban Outfitters, on the other hand, uses typography and design to communicate a real hipster vibe.

Its newsletter doesn’t just deliver sales and promotions but also videos and music from obscure bands.

That level of emotional design aims to build a sense of community, belonging, and attachment to the brand. The emotional connection, in turn, makes it easier and more enjoyable to buy from those stories instead of competitors.

How to personalize your retention strategy

Collect and Analyze Customer Data

• Segment your audience: Use data analytics to categorize customers based on behavior, preferences, and demographics.
• Track purchase history: Monitor what products customers buy and how often they purchase to identify trends and preferences.

Utilize Personalized Communication

• Tailored emails: Send customized email campaigns based on customer segments, including personalized recommendations and exclusive offers.
• Use customer names: Address customers by their names in all communications to create a more personal connection.

Implement Feedback Mechanisms

• Surveys and polls: Regularly gather feedback on customer experiences to understand their needs and preferences. Here you can find out more about how to leverage customer survey feedback to improve conversions.
• Net Promoter Score (NPS): Use NPS to gauge customer satisfaction and gather insights for improvement. 

Create Targeted Loyalty Programs

• Personalized rewards: Develop loyalty programs that offer rewards based on individual purchase behavior and preferences.
• Special offers on birthdays or anniversaries: Send personalized offers to celebrate important dates for customers.

Enhance Customer Support

• Personalized assistance: Train support teams to access customer profiles and history to provide tailored assistance.
• Proactive outreach: Reach out to customers who haven’t engaged recently with personalized messages and offers.

Leverage Technology

• Use CRM tools: Implement customer relationship management (CRM) software to track interactions and personalize communications.
• AI recommendations: Utilize AI algorithms to suggest products based on past purchases and browsing behavior.

Engage Through Social Media

• Personalized interactions: Respond to customer comments and messages in a personalized manner on social media platforms.
• User-generated content: Encourage customers to share their experiences and feature them on your platforms to create community and connection.

Monitor and Adjust Your Strategy

• Analyze retention metrics: Regularly review retention metrics to assess the effectiveness of your personalized strategies.
• A/B testing: Experiment with different personalized approaches to find what resonates best with your audience.

Educate Customers

• Tailored content: Provide personalized educational content, such as tutorials or blog posts, based on customers’ interests and usage.
• Webinars and workshops: Host events that address specific customer needs or challenges.

Build Community

• Create exclusive groups: Establish customer communities where they can interact, share experiences, and receive exclusive content or offers.
• Encourage referrals: Foster a sense of belonging that encourages customers to refer others, enhancing loyalty.

Turn retention into your competitive advantage! Learn proven strategies to keep customers engaged, boost loyalty, and maximize lifetime value with CXL’s comprehensive customer retention course.