May 13, 2024

Beyond Acquisition: Winning with Customer Retention Strategies

What is the customer retention strategy?

Customer retention is a metric that reflects how well a company manages to keep existing customers over time. It also implies or demonstrates engagement, repeat purchase behavior and customer satisfaction.

Customer retention goes hand-in-hand with customer acquisition, which helps your business grow recurring revenue.

While customer acquisition is aimed at getting new customers to expand your business, customer retention is aimed at keeping existing customers and converting them into repeat customers. Thus, both customer retention and acquisition are crucial to the long-term success of your business.

Customer retention is the preservation of a steady consumer audience. In the realm of commerce and services, this entails a customer making repeat purchases over a certain period of time. Each company may have its own criteria for loyalty. For example, in real estate, repeat contact may already be considered significant, whereas in the home goods sector, it may only become important after 10-20 purchases.

Customer retention refers to a business’s ability to encourage new purchases from customers who have already bought from it. Often, companies focus solely on attracting new leads, losing a significant portion of their profits as a result. However, selling to an existing customer is easier for a small business than selling to someone who has never ordered from you. However, repeat sales are only possible if the buyer is satisfied with the service and has high brand loyalty.

To increase loyalty, a retention strategy is needed that can evoke sympathy specifically for your company. If a customer like the service they receive from you, there’s a greater chance that they’ll turn to you rather than a competitor the next time they make a purchase. If a person trusts the brand, they will not only repeat their purchase but also recommend your company to others.

Customer retention in the SaaS field

In the Software as a Service (SaaS) sector, customer retention means maintaining a subscription in the current period and extending it to the next. A customer is considered loyal as long as they are using the paid version of the product and do not plan to cancel it.

For a complete understanding of customer retention, it is also important to consider the customer churn rate. This indicates the number of customers that a company has lost over a certain period. The lower the churn rate, the higher the retention rate, and vice versa.

Main indicators to measure customer retention effectiveness

Let’s find out what are the two main indicators used to measure customer retention effectiveness: Lifetime Value and Customer Retention Rate.

Lifetime Value (LTV) shows how much money a customer brings to a business over the entire duration of their interaction. If you effectively retain customers, this metric will grow as the relationship between the buyer and the store develops. Several formulas are used to calculate Lifetime Value. Let’s consider the simplest one, which allows for quick analysis:

LTV = (Customer Revenue) – (Company Costs to Acquire and Retain the Customer).

It’s logical that the higher the LTV, the better.

Customer Retention Rate (CRR) shows whether you can build long-term relationships with customers so that they return to you again and again. If a company forgets about a customer after closing a deal and does nothing to retain them, the CRR will be low. The retention rate is calculated by the formula:

CRR = (E-N)/S x 100%,

where E is the total number of customers at the end of a certain period (month/quarter/year),

N is the number of new customers acquired during this period,

and S is the number of old customers who already existed at the beginning of the selected period.

Sales Funnel

First, let’s break down the entire process of a company’s interaction with a user into steps. This will make it easier for us to identify important moments for each period. Later on, it will be easier to choose ways to use in your own strategies for customer retention.

1. Awareness

At this stage, a person is just considering the need for a product or service and actively researching information online. For example, they need to buy a new washing machine to replace a broken one. The problem of unwashed clothes has already arisen, but they do not yet know which brand of household appliances to choose. At this point, they are reading as much information as possible in blogs and websites, reviewing products, studying reviews, and comparing products. This is the first touchpoint and acquaintance with the company/product. Ensure that your website has enough materials, your YouTube channel contains interesting reviews, and information about your company is found on thematic forums and review pages.

2. Interest

Now the user probably knows about you and your competitors. It is very important to demonstrate your advantages better than other companies in the market. At this stage, the customer may make a call/visit/subscribe to the newsletter or ask questions on the social media pages of your project. Provide a quality level of service for such leads, as now is the right time to warm up for future purchases. However, it is not worth abusing aggressive sales tactics – a non-intrusive presentation of the offer and consultation on any questions will work much better.

3. Decision

The customer has thoroughly researched their problem and the market offerings and is ready to make a choice. Help them make it in your favor. Free shipping, warranty service, or a useful gift can be the decisive factor. Your offer should be the best, but it doesn’t have to be the cheapest. Attract with your originality and thoughtfulness down to the smallest detail.

4. Action

This is the moment of actual purchase, and it should be made as convenient as possible. The ability to pay in various ways, fast delivery, and support by a sales manager – these are important details that must be taken care of in ecommerce. At this stage, it is necessary to build trust with the customer and lay a strong foundation for future purchases. Make the buying process unforgettable in the best sense of the word, and they will definitely come back to you.

5. Retention

This is the cherry on top and a serious process that is sometimes forgotten. That is why it is not only an important stage for the business but also a potential growth point for the development of customer retention as a competitive advantage. Develop a customer retention strategy from the very beginning of the sales funnel, remembering to provide service after the purchase. This will help build truly strong relationships with customers, foster their loyalty, and increase customer lifetime value and average check.

The principles of customer retention

The principles of customer retention can be defined based on the following recommendations and examples:

Understanding the customer

By gaining knowledge about your customers, you can create an effective retention strategy. Use Google Analytics to study demographics, buying behavior, and response to marketing activities. Ask for feedback after a purchase or interaction with the service to get up-to-date information.

Improve customer experience

Ensure a perfect customer experience from product selection to operation. Take care of details, such as packaging, that can affect the impression of the product.

Focus on repeat purchases

Forget about a one-time sales strategy. Focus your efforts on creating conditions for repeat purchases. Prepare incentives for regular customers, such as bonuses and discounts.

Referral programs

Introduce referral programs that encourage customers to refer new customers. This will help you find new customers and strengthen relationships with existing ones.

Ways to Retain Customers

Let’s consider the most effective tools for customer loyalty and retention strategy, which will make your buyers come back again and again.

Email Marketing

To effectively retain customers, you need to communicate with them. Email marketing is a convenient tool for this purpose. By using email marketing as part of your retention strategy, you can “tie” a person to your brand, and this attachment will later convert into repeat purchases.

Use email campaigns to reactivate those who have stopped buying your product/service. Offer discounts or remind them of the benefits of your product/company via email. It is important to personalize the emails to meet the customer’s needs. Collect information about product views, past purchases, items added to the wishlist, and use it in your emails. For example, send a selection of similar products to the customer with a note “You may be interested in this.”

Also, give users the opportunity to choose which types of emails and how often to receive them. Your goal is not to annoy the customer with constant messages but to build trust in the brand and establish long-term relationships.

Product Customization

Allow the consumer to adapt your product to their needs. Let them change the widget design, optionally add new features, choose the product packaging, etc. Let the person get a product that meets their requirements, needs, values — then the likelihood that they will turn to you again will significantly increase. For example, offer a choice between plastic and eco-friendly packaging — customers who care about the environment will appreciate this option.

Gift Surprises

Give customers small gifts to evoke positive emotions and earn extra loyalty points. Unexpected gifts from the company usually evoke feelings of surprise and delight in most people. The person is more likely to want to experience such feelings again and return for another purchase.

At the same time, it is important to strike a balance: the gifts should be part of your communication with the customer, but still remain an unexpected bonus, not a mandatory part of every order. To prevent disappointment, continue giving gifts, but not with every purchase, for example, only during holidays. To make the gift more personal, try to personalize it. For example, add a hand-signed card or analyze the customer’s order history and choose something that aligns with their interests and tastes.

In addition to personalized gifts, you can give branded souvenirs — stickers, pens, notebooks with the brand logo. These little things are always useful and, at the same time, help increase customer loyalty and attract the attention of new buyers. Fruit baskets, sweets, or gift certificates will also be a nice gesture.

Automation of Purchase Processes

Make the order process as simple and convenient as possible for the customer. Automate the filling of standard forms so that the person does not enter the data repeatedly. Let the consumer have the option to authenticate in a way that is comfortable for them, such as by phone number, through social media, or a mail account. Add an option for automatic order confirmation so that the customer does not have to wait for a manager’s call. Also, take care of automated payment — it will be more comfortable for both the buyer and you. The Tranzzo service offers easy connection of Visa and Mastercard card payments on the website.

Automation can be applied not only to the purchase process but also to connect a Telegram bot that will notify the customer about the status of their order preparation, inform them about discounts, and answer common customer questions. This will be convenient for the customer and positively influence their loyalty to the brand.

Convenient and Secure Payment

If a seller offers only cash on delivery or the option to transfer money to a card, the customer may go to a competitor where payment can be made easily and quickly on the website. Therefore, implementing convenient payment methods can be considered a separate technique for retaining customers. The Tranzzo payment service provides tools for one-click online payments—Apple Pay, Google Pay, Telegram Pay, and more. The buyer needs to perform a minimum of actions to pay for an order, so the likelihood of an abandoned cart drops significantly. To quickly connect your store to the platform, leave a request, and soon your customers will be able to make purchases without unnecessary headaches.

In addition to convenience, security is important for customers. The Tranzzo service provides payment tools for businesses and ensures the protection of your customers’ data. This is confirmed by the PCI DSS Level 1 certificate. Tranzzo also has a convenient funds holding feature—money for a purchase is blocked on the customer’s card immediately upon payment, but debited only after the buyer receives their goods. And if a customer decides to return the item, thanks to the reservation, the money can be refunded to the card quickly.

Quality Support

Customer orientation and a responsive support team are essential components of effective customer retention. These employees are the first to engage in dialogue with the customer if they have any questions or issues. The impression of your brand depends on how this dialogue goes. Therefore, train your employees so that they can answer any questions about the product/service and maintain calm and friendliness in problem situations.

Ensure that customers can easily and quickly contact you. Use not only a corporate phone but also email, social media chats, or messengers. If the support service does not work around the clock, connect a chatbot that will answer users’ popular questions with a predetermined algorithm.

Loyalty Program

Develop a reward system for regular customers. For loyalty to your brand, a person can receive discounts, bonuses, special service conditions, access to exclusive events. This will increase the attractiveness of the company in the eyes of the consumer. They will return to you for purchases if competitors do not have similar programs or if they are less profitable than yours.

Loyalty programs come in different forms—accumulative, discount, in the form of closed clubs. A good option is a referral program, which provides bonuses to customers for attracting new buyers. By using this solution, you win twice: you increase the loyalty of a regular customer and at the same time gain new customers.

High customer retention is one of the key indicators of a successful marketing business strategy. Working with regular customers is the key to increasing sales and reducing costs, which leads to higher profits. Customer retention brings 70% of profits to businesses and saves advertising costs.

With the help of the attraction strategy, businesses acquire new customers, and with the help of retention, they build relationships with existing ones.

For successful business development, it is necessary to constantly increase the number of regular customers using different customer acquisition and retention strategy. This becomes an indispensable success factor, as the cost of attracting new customers is at least 5 times higher than the cost of retaining existing ones.

According to various studies, retaining customers even by 5% can lead to a 25% to 95% increase in profits. It is believed that the probability of conversion from an existing customer is 60% to 70%, while for new customers this probability is only 5% to 20%.

To implement a retention strategy at the start, you can use simple customer retention strategy template using:

  • Existing capabilities in CRM
  • Customer support
  • Loyalty program
  • Email marketing
  • Personalization

Regularly analyzing customer retention using various metrics and using the results to increase brand loyalty will build trusting relationships with the audience, thereby increasing the company’s profits. Of course, for a successful business, you shouldn’t focus all your efforts on retaining old customers. It’s important to find a middle ground: attracting new customers while building long-term relationships with those who already buy from you. Build a strategy, think of hypotheses, test, and get the most out of your business!

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Paspartoo Team

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