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You’ve likely heard the phrase, “It’s cheaper to keep them than get new ones.” This holds when it comes to customer retention. A study by Markinblog found that businesses can spend up to seven times more money trying to attract and acquire new customers than retaining existing ones. That’s why customer retention is critical to any successful business strategy — after all, customer loyalty helps to ensure that a business will remain profitable. But how can you keep your customers loyal? It starts with understanding strategies for increasing customer retention to ensure that your customers stay loyal to your brand.

This article will discuss the importance of customer retention and provide strategies to help businesses increase customer loyalty. We’ll look at how customer retention impacts a business, why it’s essential, and the strategies that can help create loyal customers.

What is Customer Retention?

Before we look at customer retention strategies, let’s define customer retention. According to Microsoft, customer retention is “a measure of a company’s ability to convince its customers to stay loyal to its brand.” From this definition, we can gather that customer retention is more than just keeping customers — it’s also about convincing them to stay by providing them with great experiences and consistent value.

How to Calculate Customer Retention Rate

The customer retention rate is a metric used to measure a company’s customer loyalty. It reflects the percentage of customers that continue to purchase products or use services from a brand over time.

To calculate the customer retention rate, use the following formula:

Customer Retention Rate = ((E-N)/S) x 100


E = the number of customers at the end of a particular time

N = the number of new customers acquired during that time

S = the number of customers at the start of that time

For example, let’s say your business has 500 customers at the beginning of Quarter 1, gains 100 new customers throughout the quarter, and ends Quarter 1 with 600 customers. To calculate its customer retention rate for the quarter:

((600-100)/500) x 100 = 80% Customer Retention Rate

This means that your business retained 80 percent of its customers over Quarter 1. While the ideal customer retention rate would be 100 percent, this isn’t always achievable. Most businesses aim for retention rates of 80 to 90 percent.

The Importance of Customer Retention

The importance of customer retention for any brand cannot be overstated. Let’s look at some statistics to understand how essential customer retention is. Research carried out by ThinkImpact revealed the following:

  • Retaining customers can increase a business’s profitability by 25 – 95 percent.
  • Nearly 50 percent of a business’s revenue comes from approximately 8 percent of its most loyal customers.
  • A 5 percent increase in customer retention can increase a business’s revenue by 25 – 29 percent.

These figures show the power of customer retention for brands and how it can significantly impact a company’s bottom line over time. Here are some more reasons why your business should focus on customer retention:

  • Retaining existing customers is more cost-effective than trying to acquire new ones.
  • You’re more likely to sell new products to existing customers than new ones.
  • Loyal customers are more likely to recommend your business and products to others.
  • Retaining customers increase customer lifetime value, meaning you can make more money from each customer.
  • Loyal customers are more likely to provide valuable feedback to help your business improve its products and services.
  • When you have a solid customer base, your business is more resilient to changes in the market, such as economic downturns.
  • You can save a lot of marketing time and money since you already have a pool of customers who know your brand.

Customer Retention Strategies for Retaining Your Customer Base

Now that you understand the importance of customer retention, let’s look at some strategies for increasing customer retention for your brand.

1. Understand Your Customers

The first step in any brand’s customer retention strategy is understanding your customers and their needs. Knowing who your customers are, what motivates them, and what they need from you is essential if you want to keep them loyal. You can use surveys, customer feedback forums, and A/B testing to understand your customer base better.

For instance, ask customers what products or services they would like to see in the future or find out which features of your products they value most. This customer retention management strategy can help you determine what your customers are looking for and tailor your products or services to suit their needs.

2. Personalize Your Customer Experiences

Personalization is critical to customer retention — customers want to feel valued and appreciated by the brand they choose. One way to achieve this is by personalizing their experience with your business. You can do this through personalized messaging, offering customized discounts, or using data-driven insights to understand their preferences and offer them the most relevant products.

A report by McKinsey revealed that 71 percent of customers expect businesses to give them a personalized customer experience, and 76 percent become disappointed if this isn’t met. Personalizing customer experience shows them that you value their loyalty, which can help increase customer satisfaction for your company. Moreover, personalizing your customers’ experiences demonstrates that you understand their needs and put their interests first.

3. Offer Relevant Promotions and Discounts to Loyal Customers

Offering relevant discounts and promotions is a great way to show customers that you value their loyalty and make them more likely to continue doing business with your brand. This could mean offering product or credit discounts, free shipping, loyalty points, or other incentives to help customers save money. You can also use marketing strategies such as flash sales or limited-time offers to encourage customers to take advantage of the discounts.

4. Use a Referral Program to Retain Customers

A referral program is a great customer retention management strategy to reward loyal customers while increasing your brand’s customer base. Referral programs allow customers to refer your products or services to family and friends in exchange for rewards like credit or discounts. This customer retention strategy is excellent for spreading the word about your business while rewarding customers for their loyalty. Moreover, it helps to create a sense of community and make customers feel valued increasing customer loyalty. Remember that referral programs work best when they are simple, easy to understand, and offer attractive incentives to customers.

5. Use Customer Accounts

If your business is online-based, having customer accounts can help you keep track of customers’ orders and preferences. A customer account allows customers to review past orders and easily change their profiles. This way, customers don’t have to fill out the same information every time they purchase things from your business, which can increase customer loyalty and satisfaction. Moreover, you can use customer accounts to personalize their experiences with targeted offers, discounts, and other incentives. 

6. Start Customer Loyalty Programs and Memberships

Loyalty programs and memberships allow customers to accumulate points or credit for their purchases, which they can redeem for rewards. These rewards could include discounts, free shipping, exclusive offers, and more. This is because loyalty programs demonstrate to customers that you value their business and reward them for their loyalty, making them more likely to continue doing business with your brand. 

Studies show that customers will most likely sign up for loyalty programs and memberships if they offer great rewards that are easy to understand. For instance, research conducted by Oracle found that a whopping 72 percent of adults in the US belong to a loyalty program. Loyalty programs can increase a business’s average order value because customers are more likely to spend more if they have something in return. These claims have been backed up by research conducted by ThinkImpact which revealed that businesses that used loyalty programs resulted in over 54 percent of their customer base increasing their spending.

7. Improve Your Customer Support and Customer Service Quality

Poor customer service and support can quickly erode loyalty for any company, so it’s essential to ensure that your customer service is top-notch. Customers should feel comfortable and confident when dealing with your business, which means providing them with excellent customer support. You can do this by improving the response time of your customer support team, making sure they are knowledgeable and friendly, and offering multiple channels to contact the customer service department.

8. Increase Engagement with Customers

Engagement between your business and customers is vital to retain customers. You can increase engagement by regularly sending customers emails, newsletters, or social media messages. You can include news about new products, promotions and discounts, exclusive offers, and more in your communications.

Nonetheless, while it’s important to communicate with customers, it’s also important not to overwhelm them with too many messages from your company. Find the right balance, so your customers aren’t bombarded with too many emails or messages but still feel appreciated.

9. Build and Maintain Trust

Trust is essential to customer loyalty. After all, customers who trust your business are more likely to remain loyal and continue referring their friends and family. To build trust and loyalty, you can use your customer service department to promote honesty with customers and communicate clearly. Also, it’s essential to focus on customer privacy and security and protect your customers’ personal and financial information. Finally, offering a satisfaction guarantee or providing refunds can go a long way in establishing trust for your company. 

10. Offer Education and Support

Educational materials such as tutorials, webinars, and blog posts can help customers learn how to use your products or services. Moreover, offering customer service and support resources such as online help centers, FAQ pages, or live chats can help customers understand complex topics and provide the information they need. This demonstrates to customers that you care about their experience, increasing the chances of your company retaining them as customers.

11. Use Buy Now Pay Later Options

Buy now, pay later options such as interest-free payment plans or deferred billing allows customers to purchase a product or service and make payments over time. This can help customers who are short of cash and encourage them to make more purchases. Moreover, these payment options allow customers to purchase more expensive items, which can positively impact your brand’s revenue and help retain customers. 

12. Make Returns and Exchanges Easy

If customers are unsatisfied with a product or service, they should be able to return it easily. Nothing frustrates customers more than jumping through hoops just to return a product. Offering simple and hassle-free returns and exchanges is essential.

This means having a flexible return policy, providing support, free shipping labels for returns, or offering store credit instead of refunds. Making returns and exchanges easy can improve customer satisfaction, increasing the likelihood of customers buying from your business again. Also, providing clear return and exchange policies helps build customer trust and transparency.

Customer Retention Best Practices

While strategies for increasing customer retention for your brand are essential, there are also certain best practices you should follow when implementing customer retention strategies for the best results. Here are some best practices for increasing customer loyalty and ensuring the customer retention management strategies you use to succeed:

  • Use data-driven insights: Gather and analyze data to better understand customer preferences and behavior. This will help you tailor the strategies for increasing customer retention to meet their needs and expectations. You can leverage customer relationship management (CRM) software to track customer activity.
  • Listen to customer feedback: Pay attention to customer feedback and use it to improve your strategies and keep customers engaged. You can collect customer feedback through surveys, online forums, or social media through your customer service department.
  • Be proactive: Don’t wait for customers to contact you. Use your customer service department to reach out to customers proactively through email or social media for marketing, to find out how they feel about a specific product, and to provide personalized offers, discounts, and more.
  • Keep communication lines open: Make sure customers can easily reach out to your customer service and support department if they have any questions or concerns. Offer multiple channels for customers to contact you, such as email, phone, live chat, and social media.
  • Treat customers as humans: Treating customers as more than just a number can help you stand out and build relationships. Show them you value their loyalty by personalizing their experience and rewarding them.
  • Manage your customers’ expectations: Set realistic expectations, so customers aren’t disappointed or frustrated. Offer accurate delivery dates, and if there are delays, inform customers through your customer service department as soon as possible.
  • Monitor and adjust strategies: Pay attention to customer retention strategies and their results. If something isn’t working, make adjustments or try different strategies.
  • Encourage collaboration within your team: Effective customer retention strategies require teamwork. Make sure everyone in your organization is on the same page and understands the goals of the strategies. From marketing, management, customer service, and sales teams — open communication between departments is essential for successful customer retention strategies.

Improve Your Customer Retention Rates

Customer retention strategies are essential to keep your customers loyal and ensure your business remains profitable over time. Ultimately, you should tailor the strategies for increasing customer retention to meet customer needs and expectations. By understanding these strategies, you can start implementing them effectively and provide customers with a personalized experience that will keep them coming back.

Is your business looking to increase customer retention strategies? Reach out to us today to learn more about how we can help you.