Customer Retention Strategies – 5 Proven Techniques

• April 26, 2023

Reading Time: 6 minutes

Customer retention is essential for any company looking to stay competitive and profitable. Keeping customers engaged in your product or services and ensuring they return is essential to the success of any business. Providing quality customer service, clear communication, and ease of use are all critical elements to successful customer retention.

In this article, we will discuss five proven techniques to help you retain customers. From creating an incentive program to providing personalized customer care, these techniques will help you to develop a strategy that will keep customers coming back. Here’s all you need to know.

What is customer retention?

Retention is keeping customers engaged with your product or service — a key component of customer relationship management. As a business owner, expanding your customer base may seem like the most important thing to focus on, but your loyal customers need attention too! 

Research shows that 44% of businesses focus on customer acquisition, while only 18% focus on customer retention. Arguably, your loyal customers are even more important than new customers — and you’ll certainly notice the difference if these buyers start to drop off when their needs aren’t fulfilled.

There are a number of ways to improve customer retention and much of this information can be gathered from retention statistics. For example, how long does it take for a customer to leave? Is there a repeat pattern that could be causing this behavior? Interpret this data correctly and securing repeat customers won’t be half as difficult.

Why is customer retention important?

Customer retention is highly important as it can be used as a measure of profitability in a business. If a business has a high rate of retention, it is likely that the business is profitable. This is because profit comes from repeat customers, whereas costs are incurred by acquiring new customers — it’s said to be up to 5 times more expensive to acquire a new customer than retain an existing one. 

A business with a low customer retention rate will likely incur significant costs that outweigh the profit gained from a small number of customers.

Is customer retention or customer acquisition more important?

Loyalty and growth are two key metrics that businesses use to measure their success. Growth refers to the number of new customers that are added to your product or services, whereas retention refers to the number of customers that remain loyal.

Although these two metrics are often used together, businesses often debate which metric is more important. The truth is that both are equally as valuable and a carefully planned, two-pronged approach will give you the best of both worlds. However, customer retention can save you money and improve the stability of your business so before you put all of your time into attracting new customers, make sure your existing customers are well looked after!

What are the benefits of customer retention? 

There are many things that companies need to do to deliver an outstanding customer experience, and at the top of the list should be a customer-centric strategy. This can introduce a number of potential benefits, which include: 

• Saving money: Attracting new customers can be a very expensive and lengthy process. Of course, this is still an important part of any business; however, customer retention can save you money and provide predictable finances in the long run. Just a small boost in retention rates can increase your profitability in a big way. 

• Acquisition may only boost vanity metrics: While having hundreds of new customers may look good for your vanity metrics, if you aren’t putting the effort into making them stay, other areas of your business may suffer. Imagine how impressive it will look to say you’ve had X number of customers for X number of years!

• Loyal customers are more likely to try new products: Once you’ve proven yourself to your customers, they’ll be more likely to expand their usage of your products and services. Whether that’s a small upgrade or a large add-on, their trust in you can slowly generate new sales.

• Loyal customers will naturally recommend your service: It takes a while for customers to fully get to grips with your service and recognise how it meets their needs, so the time they’re with you truly matters. A happy and loyal customer will often naturally recommend your business to their friends and family, which means free advertising for your products. 

Why do customers stay loyal?

The first step to improving retention is to complete a customer retention analysis to determine why customers are staying loyal to your brand and what you can improve. The first thing to consider is whether or not your product or service is meeting their needs. This is a pretty simple consideration but is often overlooked. 

Other reasons for customer loyalty include:

• Consistently good customer service
• Flexible services
• Loyalty schemes
• Great value
• Feeling personally connected to the business

Think about the brands you’re loyal to and what makes them special. Apart from delivering high-quality products and services, it’s the small things that make a big difference. Positive interactions, discount codes, account support, and more besides all matter. Competitor research can also help you identify areas for improvement: what are your competitors doing well? How are they engaging with their customers?

3 signs that your customer retention strategy isn’t working

Of course, during your retention analysis you may find that your retention strategy is lacking, and your retention metrics are suffering as a result. But how can you recognize why you might be struggling to retain customers? Here are three telltale signs to look for:

You’re only focusing on short-term goals

You have to think about short-term and long-term plans if you want your business to be successful. Unfortunately, many businesses put all of their time into attracting new customers and don’t continue growing the relationship once they’re on board. Customer retention is not something that happens overnight. You have to build trust and deliver what’s expected of you to achieve customer loyalty.

Your customers drop off at the same time

Have you noticed a pattern in the stage at which your customers decide to leave? This needs to be changed! If, for example, it gets to 3 months in and your customers tend to cancel their service or subscription, there’s clearly a reason why — and that’s what you need to find out. Re-evaluating your customer retention strategy can help you break the cycle and keep new customers loyal for longer.

You have the same complaints

Repetitive negative feedback shouldn’t go unaddressed, as before long, it’ll affect your ability to retain customers. Always listen to feedback — your customers are the lifeblood of your businesses, so their needs and experiences matter greatly. You also run the risk of negative feedback affecting future acquisition if word gets out that your product or service doesn’t offer long-term value. 

5 ways of improving customer retention

If you’ve identified a drop in customer loyalty or you want to maintain your current level, there are plenty of ways you can stop people from going elsewhere. Being genuinely passionate about delivering a great service will show your customers that you care about their needs and that’s when you’ll be rewarded with loyalty.

Here are 5 ways of improving your customer retention:

1. Ask for feedback

Instead of guessing what your customers need, ask them outright. Feedback is one of the most valuable ways of keeping your customers happy and loyal. A short customer feedback email can help you understand what they like and dislike about your business; for example, perhaps they enjoy your loyalty scheme but aren’t happy with your customer support team’s slow response times. Using this invaluable feedback, you’ll have actionable ways of improving your business.

2. Offer plan changes

Customers love flexibility. As their needs change, being flexible will prevent customers from going elsewhere where the service might be more adaptable, cheaper, or generally better suited to their needs. If you run a subscription-based business — where retention is especially vital — allowing your customers to make changes to their plans is a great way to retain subscribers before they cancel. Simply deploy a subscription management tool so your customers can upgrade, downgrade, or change the subscription terms without any unnecessary fuss.

3. Improve the customer experience 

One of the best ways to improve customer retention is to improve the customer experience. Clear communication with your customers is essential, whether you are using social media or a live chat function — there are so many ways of talking to your customers, so there are no excuses for poor communication leading to a negative overall user experience. Be sure to deliver high-level customer service training to your employees so they can deliver quick, professional, and attentive solutions to your customer’s needs.

4. Create an incentive program 

An incentive program is a great way to strengthen customer retention. It’s a type of reward system used by retailers to encourage customers to make repeat purchases, offering rewards such such as discounts, free gifts, and other incentives for staying loyal. Incentives can significantly boost customer retention. It shows customers that you appreciate their loyalty and this goes a long way to determining whether someone decides to stick with a particular brand or not.

5. Engage with your customers regularly

If you only communicate with your customers when you have something new to sell, before long they’ll start seeing through your efforts. Studies show that consumers are 131% more likely to buy from a brand immediately after they consume early-stage, educational content.

Maintaining regular contact with them and sharing valuable, personalized content — such as a blog post you think they’ll be interested in or a happy birthday email to make them feel special — will keep your customers engaged in your brand. In the long run, this will build trust and boost your retention numbers. Customer engagement software tools can help you a lot here by enabling you to monitor your interactions with prospects and customers across multiple channels. 

What are you waiting for? With this new knowledge under your belt, it’s time to develop a killer customer retention strategy and hang on to your customers that little bit longer!