Want to Improve Customer Retention? Check These 8 Strategies for Long-term Success
While it’s a myth that retention is five times cheaper than customer acquisition, it’s still a key part of your business success. Today, we discuss the “latter part of your sales funnel.”
You already know that customers have high expectations. Great product, fast customer support, intuitive onboarding—those are table stakes. You need something more than that.
That’s why we prepared strategies that go beyond the basics. They’ll help you build a solid program that turns one-time buyers into regular users. Users that feel valued stick around for longer, and are easier to upsell to (without any shady tactics.)
Let’s dive in and explore eight ways to boost your customer retention.
What Is Customer Retention: The Only Definition You Need
It's a long-term game built on strong customer relationships, a high-quality product that gives users value, and increasing customer lifetime value. When thinking about churn, customer retention is strongly related: the simplest way to calculate it is to extract the churn rate from one.
Importance of Customer Retention: Why You Should Care
There are a ton of sources online that say “Hey, retention is your key strategy to grow a profitable business! As the Pareto rule applies, 80 percent of business revenue comes from 20 percent of customers.”
Well, it isn’t entirely true.
According to Byron Sharp and “How brands grow,” light buyers (that buy once or twice) account for 50 percent of the customer base. And as you already guessed, the other half comes from repeatable sales.
Yeah, this means that retention is equally important to acquisition.
We wanted to clarify this so you take care of the whole sales funnel.
Why? Let’s put it like this; without a solid acquisition, you’ll have a smaller sample of customers to retain. And without good strategies for retaining existing customers, you’ll have to work harder to increase new customers.
You got the point.
The last thing is, those long-term customers who already like you and are likely to buy more often or recommend your product to their network or work colleagues.
What Teams Should Work on Improving Customer Retention?
It’s a tricky question because, theoretically, sales and support, right?
But considering that all teams contribute to your business success (either directly or indirectly), every team should work on retention.
Yeah, this means that the product team is also pretty active in driving customer retention. They do it by:
- Building a product customers find useful
- Providing value before asking to commit
- Making payment easy within your product
- Talking with users about their needs
Another team—marketing. As they create targeted campaigns to engage leads and re-engage website visitors, they contribute to “increasing” the sample of customer base you can later on retain.
Even folks from finance won’t go here unnoticed. After all, they receive payments for invoices and make it smooth for customers to pay on time. It’s on them to see how customers want to be contacted and how they want to pay.
Now, let’s tackle the benefits of customer retention.
The Value of Customer Retention: 5 Benefits to Keep in Mind
Now you know that retaining customers is equally important as acquiring new ones. Let's delve into the key advantages of implementing a customer retention strategy:
1. Better Customer Loyalty
Thanks to customer retention, your business promotes customer brand loyalty. Meet their needs and give them a product that solves real problems, and you’re building trust and bond.
This, in turn, will translate (even partially) into repeated purchases and higher customer lifetime value (which we’ll talk about soon.)
2. Higher Revenue and Profitability
Let's be honest: the more customers you retain, the better it is for your bottom line. Thanks to keeping your current customer base as is, you reduce the need to look for new ones constantly. So yes, acquisition is important, but it won't do the heavy lifting alone.
3. More Referrals and Positive Word-of-Mouth
Do you know what a dark funnel is? Most online users, including your customers, talk with their networks on social media, listen to podcasts, and learn from others what brands are worth the effort.
Since your business can’t influence those peer-to-peer conversations, provide great experience and value to your customers so they leave you great testimonials.
4. Build Your Business Moat
Deliver a great customer experience and unique selling propositions for every key buyer persona, and you’ll keep your competitive advantage.
Instead of building a product for too many personas, focus on the niche you know.
At Close, we take this seriously, and we build a CRM tool that’s from sales folks for sales folks. We don’t go into marketing or other fields—our moat is the niche where we have the best know-how.
5. More Options for Customer Feedback
Those who stick around long and know how your product is changing are those who are happy to share feedback. So you just have to listen actively, get all those insights, and analyze them.
Such feedback will fuel your sales, customer success, and product teams. Say, you can update the product roadmap, experiment with improvements or find new ways to meet your customer expectations.
8 Ways to Crush Customer Retention and Win Loyal Customers (with Examples)
In this section, you’ll explore several strategies that can help you improve customer retention and foster brand loyalty.
1. Get a Solid Customer Relationship Management (CRM) Tool
A reliable CRM system brings together information about current customers, occasional buyers, and churned customers. You can easily nurture customer relationships, and track sales progress and all the interactions.
With an automatic follow-up option that a CRM should have, you can save tons of time on outreach campaigns.
Or say you’re selling a product that allows your customer to use the option “pay-as-you-go” with a minimum payment of $50.
You can filter in your CRM those customers that still have credits and make an email sequence to nudge them to use it. This could be one of the quick retention wins that also keeps your customers engaged.
Customer Retention Case Study: Hygge
Hygge offers coworking space in Charlotte. Thanks to using Close CRM, they retain more members than ever before. With one central space for managing relationships with customers, they keep in touch with them regularly which improves customer engagement over time.
2. Develop an Omnichannel Sales & Service Strategy
In a multichannel strategy, your customers interact with you via different channels like email, SMS, and chatbot but those channels aren’t synchronized.
Say your customer had an issue and tried contacting you via two different channels. Here, there will be two different people responding to the query (as it’s not synced) which may lead to customer confusion.
Omnichannel, on the other hand, guarantees the synchronization between channels. In the same example, your customer would get a cohesive answer as the query from a chatbot would be automatically connected with the support email.
There are many ways to align sales and customer service teams over an omnichannel strategy.
For example, your sales team shares insights on customer preferences with support. Later, the support delivers a more personalized experience to customers.
Since the support team learns about common customer issues, they can share them with sales. It can improve sales pitches and calls, increasing customer satisfaction.
Customer Retention Case Study: IKEA
The Swedish furniture provider is great at synchronizing multiple channels like online, offline, mobile, and in-store digital experiences.
They give their customers personalized recommendations, a coherent shopping experience, and great customer service and support. All this contributes to a seamless customer journey and support across various channels.
3. Know What Your Customers Expect of You
If you want to go down the path of trust and customer brand loyalty, you have to understand customers' expectations (yeah, there is no other way.)
Delivering on your promises, blowing them out of the water, and saying sorry when you make a mistake are just a couple of examples of how to foster long-term relationships with your paying base.
When you consistently exceed your customer expectations, you create a positive image for your brand. This in turn increases customer loyalty. Think about it this way; customers that have peace of mind because of your product won’t churn.
Here’s how to elevate customer perception of your brand:
- Do regular feedback like customer surveys, social listening, and tracking customer interactions
- Do customer feedback with churned users to see where you can improve and what to change
- Be transparent about key points of your product roadmap and don’t over-promise on features you’ll deliver
- Analyze customer data that will give you insights into their preferences, pain points, and challenges. You’ll also be able to segment customers and know who’s a light buyer and who’s a power user
Customer Retention Case Study: Amazon
Amazon is famous for its customer-centricity. They understand and meet customer expectations because they know customers inside out.
They always go the extra mile and give a wide range of products, great support, fast shipping, and competitive prices. Based on customer feedback, they craft new offerings.
4. Enhance Customer Service
Responsiveness, readiness to help, and availability make great customer support. This turns into a positive impression on your customers.
Of course, the level of your support will depend on various factors. Say a product for small businesses will have a different support strategy than Enterprise one but the quality should always be there.
Use these tactics to improve your customer support:
- Resolve issues faster by asking your customers for a short video of the issue they faced. By this, you’ll see at a glance what went wrong. Otherwise, it can take ages to get to the gist of the problem
- Check what cases appear frequently and what edge cases are. Prepare SOPs for the team so they can resolve issues faster. And if there is a technical problem, redirect this to another team e.g., devs
- Invest in training your customer support team. It means improving both internal and external communication skills so they are better at their jobs
Customer Retention Case Study: Ahrefs
Ahrefs have an unusual way to onboard new marketing hires. They have to work for a while in customer support.
By doing this, every marketer has direct contact with customers and knows their problems. This supports user retention and increases empathy toward the customer base.
5. Implement a Customer Loyalty Program
If you want to boost your customers' loyalty, craft a program offering them rewards and incentives. Thanks to such “bonuses,” you encourage repeat business and cultivate a sense of exclusivity among your loyal customers.
Many tools help you build your loyalty programs. The program itself can be in various forms:
- Point system
- Tiered rewards
- Cashback offers
- Exclusive perks
It depends on your business model, objectives, target market, and what type of loyalty program would work for you.
The loyalty programs should help you increase customer lifetime value and foster a sense of belonging and appreciation among your customers.
Company Example: Lenovo
Usually, the best loyalty programs come from the B2C sector.
But there are e-commerce companies in B2B that also use this as a great retention strategy.
Leap by Lenovo targets business partner resellers that get LEAP points on Lenovo sales and selected promotions.
They can redeem rewards or get points that translate into money on a prepaid card. This nudges resellers to promote Lenovo computers and contributes to loyalty towards this brand and lower churn rates.
6. Personalize the Customer Experience
Personalization can take different forms, but we don’t just mean using your customer’s name.
Real personalization goes beyond that and is key to improving customer satisfaction and retention. By tailoring your offer and communication to meet individual customer needs, you help them reach the “AHA” moment faster and stick around longer.
Here’s the trick: show instant value to your customer and that you get their unique preferences.
This will make them feel understood and appreciated. As they get those “mental shortcuts,” they feel more excited about your product.
Use customer data, location, and segmentation to make the communication individual and according to preferences.
Customer Retention Case Study: Airbnb (How They Could Personalize the Experience)
This time, we’ll show a missed opportunity for personalization.
According to Growth.Design, Airbnb could use the chance to personalize the search bar considering the author of the case study was currently in Lisbon (as Kuala Lumpur seems to be a bit too far away.)
7. Build a World-class Onboarding Process
An engaging onboarding process sets the stage for a successful customer relationship.
Some great tips for a great experience for onboarding:
- Design an onboarding flow that shows value first and later offers commitment or advanced options
- Include contextual onboarding that suits users, not a rigid plan that’s not useful
- Let users decide whether they want to continue or skip onboarding
- Automate your onboarding email sequence
- Let self-service users onboard without additional support from you (besides the help center, for example)
The faster your customers get to the “AHA” moment when using your product, the more solid the foundation for long-term retention.
Customer Retention Case Study: Slack
Slack is a great example of a great onboarding experience. Thanks to gamification, contextual windows, and friendly UI, it’s easy to dive into using the tool.
They are great at expanding the user base and keeping retention high too. It’s very quick to add new users and get them on board.
8. Build a Community & Ambassador Program
A solid community and a group of ambassadors is great for two reasons.
First, you have folks that already love your product and share its value with others.
Second, in case a user has a problem, they don’t need to get in touch with your support or read help center. There are already folks out there ready to lend a hand.
Customer Retention Case Study: Notion
Notion is an excellent example of both a great community that drives growth and an ambassador program that supports retention.
Notion power users share their templates, support, and inspiration, making other users excited about their options. This turns basic users into promoters fast.
For retention, this is great because the community and its ambassadors (who do the job for free) create a snowball effect.
More positive experience with the tool drives more people to use it. Ultimately, it drives a strong brand image and develops more regular users.
Get Those Customer Retention Metrics to Know How Your Strategies Are Working
Tracking retention metrics is key for your business if you want to improve long-term. You’ll get insights into customer behaviors, make informed decisions, and see the weaker spots for improvements.
Let’s jump to them now.
Customer Retention Rate
Customer retention rate is the percentage of customers who continue to use your product over a specific period of time.
It measures your ability to keep customers and reflects their satisfaction and loyalty. To calculate the customer retention rate, divide the number of customers at the end of a period by the number of customers at the start, then multiply by 100.
Say you had 100 customers in July, you added 10 new, and seven companies churned.
Retention rate = (103 - 10 / 100 ) X 100 = 93 percent
Churn Rate
Churn is the rate at which your customers stop paying for your product. It’s key to understand this metric as it impacts your bottom line.
If your churn is higher than, say, 60 percent, it may be a sign that the customer base is changing too often. As we said before, churn is tied to retention; when churn goes up, retention goes down.
To calculate it, divide the number of lost customers during a specific period by the number of customers at the beginning, then multiply by 100.
Say you’d like to calculate the monthly churn rate for July. You had 100 customers at the beginning of July and lost 8 customers till the end of July.
Your churn rate is 8 / 100 X 100 = 8 percent.
You can calculate the churn rate monthly, quarterly, or annually.
Customer Lifetime Value
Customer Lifetime Value (CLV) is a metric that estimates the total revenue your business generates from a customer over the entire duration of their relationship.
Understanding CLV helps you determine the profitability of each customer and guides your marketing strategy and approach to retention.
Say your average purchase value is $150, and your customers make an average of two purchases per year while the average lifespan of your customer is two years.
Your CLV is $150 X 2 X 2 = $600
This means, on average, you can expect each customer to generate $600 in revenue over the entire period they’re buying from you.
Net Revenue Retention
Net Revenue Retention (NRR) assesses the growth or decline of your revenue from existing customers over a specific period. This metric takes into account upsells, cross-sells, and customer churn.
Thanks to this metric, you can understand how effectively your business retains and expands revenue from your existing customer base.
Say your company started with $500,000 in revenue, lost $40,000 (because of downgrades and churn), gained $20,000 from upsells, and ended with $480,000.
The NRR equals ($500,000 + $20,000 - $40,000) / $500,000 x 100 = 96 percent (which means your revenue is declining slightly)
With NRR, the goal is to stay at or above 100 percent, which means your existing customers are bringing more revenue to your business than you’re losing.
Repeat Purchase Ratio
Repeat Purchase Ratio measures the percentage of customers who make multiple purchases from your company.
A high repeat purchase ratio indicates satisfied, loyal customers. By tracking this metric, you can evaluate the effectiveness of your retention strategies and identify areas for improvement.
Say, out of 200 customers, 50 made a repeat purchase. The ratio is (50 / 200) x 100 = 25 percent
Net Promoter Score (NPS) & Customer Feedback
The Net Promoter Score (NPS) measures customer satisfaction and loyalty by asking customers how likely they are to recommend your business to others.
- Promoters are those who rate your product between 9-10 on a scale of 0-10
- Passives are those who rate your product between a rating of 7 and 8
- Detractors are those who rate your product between 0 and 6
Say, 70 percent of your respondents are Promoters, 20 percent are Detractors, and 10 percent are Passives. Your NSP = 70 percent - 10 percent = 60 percent.
Additionally, gathering customer feedback provides valuable insights into their experiences and expectations. Keep in mind both NPS and customer feedback—they show you how happy your customers are with what you sell.
Choose the Best Retention Strategies to Build Your Business Moat
That was quite a ride! Now, you have everything to start building your retention strategy. If you want your business to succeed in the long run, remember to choose customer retention programs that are the best fit for your business. Let’s recap all of them:
- Get a Solid Customer Relationship Management (CRM) Tool
- Develop an Omnichannel Sales & Service Strategy
- Know What Your Customers Expect of You
- Enhance Customer Service
- Implement a Customer Loyalty Program
- Personalize the Customer Experience
- Build a World-Class Onboarding Process
- Build a Community & Ambassador Program
By implementing the strategies discussed in this blog post, you can make your customers satisfied and hungry to return for more. Remember, happy customers are also brand advocates that promote your business.
Keep in mind tracking the key metrics that will guide you on when to make changes and how to develop your strategies further.
If you want a solid overview of your customer interactions and the key metrics we mentioned, try Close for 14 days free.
