Customer Retention Strategies: A Definitive Guide

Customers are the lifeblood of any business, which is why companies often focus a lot of their efforts on continuously acquiring new customers. However, they fail to realize that what matters is not so much how many new customers you acquire but how many loyal customers you keep. It is also harder to acquire new customers than to retain old ones, which means that businesses must shift their focus to customer retention instead.

Customer retention refers to activities that a company undertakes in order to keep their customers from deflecting to their competitors. Check out this guide to learn more about the benefits of customer retention and how to apply it in your own business.


Chapter 1: Importance of Customer Retention for Businesses Chapter 2: Strategies to Increase Customer Retention Chapter 3: Customer Retention Tools and Tactics That Work Chapter 4: Customer Retention Success Stories to Inspire You Chapter 5: Recommendations on How to Get Started

Chapter 1: Importance of Customer Retention for Businesses

New companies naturally focus on acquiring as many customers as possible. However, as the business becomes more established, it will be more beneficial to start shifting focus on maintaining loyalty through customer retention efforts instead.

Studies show that customer acquisition costs 7 times more than customer retention and that a 5% increase in the latter can increase profits by 25% to 125%. Aside from the increase in revenues, customer retention also benefits the company in many other ways, such as increased referrals, increased customer lifetime value, lower customer acquisition costs, lower marketing spend, and decreased customer churn among others.

Having loyal customers who keep coming back not only increases your bottom line but also serve as brand ambassadors who help build your brand. Companies who have incorrect perceptions and lack focus and commitment to customer retention stand to lose a lot.

Chapter 2: Strategies to Increase Customer Retention

Failing to attend to customers can cause businesses to lose around 20% of their customers annually. Customers leave a business either because they’re unhappy with the service they receive, unhappy with the product or for some reason, or prefer the competitors. Customer retention strategies are, therefore, necessary to keep customers happy and encourage loyalty. However, to be successful, businesses must take the time to gather and analyze data to better understand their customers and what makes them tick. It is only after they’ve done this that they can develop loyalty or rewards programs that will drive repeat business.

Not all customer retention strategies work for everyone. Businesses must develop strategies and unique programs that make the most sense to them and their customers. In the end, building and sustaining personal relationships, going above and beyond customer expectations, delivering consistent excellent customer service and making customers’ lives easier are what’s most important.

Chapter 3: Customer Retention Tools and Tactics That Work

There are many customer retention tools and tactics that help foster loyalty among customers. The most common include the use of point systems, rewards cards, VIP benefits, discounts, coupons, special privileges, customized services and other offers. However, in this day and age when most customers have already gone digital, online platforms must be taken advantage of too. The use of online portals, websites, content marketing, email marketing, mobile marketing and social media marketing likewise provide businesses with multi-channels to contact and engage their customers.

Businesses need to utilize data systematically gathered and analyzed in order to come up with the right tools that will benefit their customers the most in all points in your marketing life cycle. Customer relationship management (CRM) tools can be used to perform various types of analysis to track customer transactions and behaviors. There are also tools that can be used to track customer retention program results.

Whatever tools you choose though, it all boils down to paying attention to your customers and that begins with training employees and keeping them happy too. Happy employees deliver personal customer experiences that drive loyalty. This must extend to all points of contact too, from the physical store to your online platforms and even to your inbound call center. Businesses who lack the resources to address all points of contact can take advantage of partners who can provide them with such services such as call center outsourcing.

Chapter 4: Customer Retention Success Stories to Inspire You

Many companies have already realized the importance of customer retention and are now reaping the rewards for their efforts. Companies such as Amazon, Trader Joe’s, Netflix, Nordstrom, and Southwest Airlines are all successful in their efforts by providing excellent customer service.

Benefits of customer retention are not privy to big companies and enterprises though. Even smaller businesses, such as Griff’s Deli in Kentucky, have benefited simply from using email marketing campaigns to educate, identify and track specific customers, as well as to provide customer support. Others leveraged technology to retain customers such as Starbuck’s mobile app and Nuffied Health’s use of data analytics. There are many success stories to inspire you and learn from. However, there is also much to be learned from companies who have unsuccessful retention stories, which will teach you what you should avoid doing.

While these companies employed different retention strategies, one thing is definitely clear: They paid close attention to their customers. They then used their learnings to develop strategies and programs that not only differentiated their business from its competitors but also provided customers with personalized services that target their specific needs.

Chapter 5: Recommendations on How to Get Started

As with any business decision, customer retention efforts must take serious planning. It must begin with clearly defined goals in mind to guide your direction. Strategies must be crafted to help achieve these goals.

1. Create a customer service mindset

While customer retention strategies mainly address how to keep customers, companies must start internally first and create a customer service mindset among all its employees. Since your employees are usually the front liners and serve as representatives of your brand, they need to deliver excellent customer service consistently. Customer service is now the biggest differentiator and providing it excellently all the time will put you ahead of your competitors.

2. Make sure your employees are happy too

Customers need to feel important and see that you are willing to go out of your way to solve their problems. Bad customer service is one of the biggest reasons why customers stop doing business with a company, which is why you must take the necessary efforts to make sure your employees are happy too. Well-trained employees who are happy working for you will be more motivated to make your customers happy as well. Happy employees = happy customers. Remember too, that many customers will be willing to pay a little extra for great service, which will make you earn even more.

3. Have a better understanding of your customers

In terms of choosing which types of retention strategies to utilize, remember that not all of them will work for your business. Start with gathering information about your customers first. It is only through a clear understanding of your customers’ preferences and behaviors that you will be able to develop programs that have a higher likelihood of success. Getting to know your customers involves gathering and analyzing important data so explore ways on how to efficiently accomplish this task.

4. Segregate your customers

Effective data management systems will enable you to identify and target specific groups, such as those who are in danger of deflecting and those who need to be rewarded for loyalty. By segregating your customer base into several groups, you would be able to come up with programs geared towards their specific needs and requirements. Customers, for instance, hate receiving random general purpose emails that are not relevant to them. By customizing your programs and communications, they will more likely become interested and respond well.

5. Always think about convenience

Be careful about choosing loyalty programs. Many businesses fail in their efforts because their loyalty programs do not make sense or it makes it hard for customers to earn and claim rewards. Loyalty programs must first and foremost add value to the customer experience. Customers will only enthusiastically participate in these programs if they see that the potential rewards and incentives will truly benefit them in the end. Making the entire process easy and fast is also essential to the success of your efforts.

6. Make it easy for customers to reach you

Communication is also key because you cannot create loyal customers if you are unable to make them listen to you. Likewise, customers become frustrated whenever they find it hard to reach you too. Make it easy for customers to reach you by providing several points of contact. However, choose communications channels wisely. You will learn which ones are likely to work through your analysis of gathered customer data or simply by paying close attention to how your customers do business with you.

7. Maximize technology

Technology is an easy, efficient and cost-effective way to communicate with customers because almost everyone these days use it. Leveraging technology makes it possible for businesses to send their messages and lend customer support online through their website, social media and email marketing.

8. Study your process and improve it

Lastly, whatever strategies you choose to employ, remember that it is essential to track your progress and evaluate your success. There are many tools available nowadays that will help you do this efficiently. Using these tools will not only help you improve your process more but also improve how you serve your customers too.

All businesses, big or small, can stand to benefit a lot from customer retention as long as it is properly planned and programs are chosen wisely. Your customer retention efforts must focus on building and sustaining relationships and on improving and adding value to the entire customer experience.

Pay attention, listen and make your customers feel that they matter to you.

Because the truth is, it should be all about the customer, not you. Derek Sivers of CD Baby got it right when he said that “The single most important thing is to make people happy. If you are making people happy, as a side effect, they will be happy to open up their wallets and pay you.”

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