In a world where consumers are expecting more personalized experiences, businesses that fail to hit the mark will fall short and surely miss out on creating loyal consumers. During this blog, we will cover 5 customer retention strategies that actually work and how Purple can help.
The benefits of customer retention strategies
Initially, let us briefly outline the benefits of customer retention as a metric for success. AnnexCloud notes the following:
- “A 5% increase in customer retention can boost profits by 25% to 95%.”
- “Almost 65% of a company’s business comes from repeat customers.“
- “82% of companies agree that retention is cheaper than acquisition.“
This final statistic is particularly noteworthy, as research into this subject frequently corroborates it. In fact, research typically quantifies the cost of acquisition as 5 to 7 times higher than retention.
Additionally, low retention rates and high churn rates typically denote a suboptimal customer experience (CX). As such, many customer retention strategies aim to holistically improve the customer journey and inspire longstanding loyalty.
5 effective customer retention strategies
One of the most effective ways to tackle low retention rates is to reduce customer churn. Indeed, consider the following key statistics:
- “The probability of successfully selling a product or service to a prospect is between 5-20%. [The probability of successfully selling] to an existing customer [is] 60-70%.”
- “68% of customers churn because they think a company doesn’t care about them.”
- “32% of all customers would stop doing business with a brand they loved after one bad experience.”
However, identifying the exact pain points that hamper customer experience is no easy task. One of the best ways to do so, and an excellent foundation for other strategies, is to survey customers. Consider such ways to survey customers, or otherwise acquire feedback, as:
- Email surveys
- Social media surveys and reactions
- Product and service reviews
Such practices serve a twofold purpose: they let you acquire feedback while showcasing your interest in CX. Thus, with direct, honest feedback in hand, you may reveal shortcomings in your sales funnel and rectify them.
#2 Build a relationship through personalized communication
As highlighted above, psychology is a crucial aspect of CX and, in turn, customer retention. Thus, to create connections that will last, you may leverage personalization across multiple channels of communication.
Examples of such customer retention strategies include:
- Marketing emails. Marketing emails with personalized headlines, subject lines, and copy are a very common form of personalization. Aside from enhancing UX and thus retention, they also yield higher open rates and click-through rates (CTR).
- Customer service correspondence. Personalized customer service may be among the most widely accepted and acclaimed forms of personalization today. Moreover, poor and impersonal customer service specifically constitutes one of the most common sources of customer churn.
- Social media responses. Finally, social media channels offer a distinctly humanizing, personal form of communication. Thus, personalizing responses to messages, comments, tags, and references can further help personalize your brand.
Notably, personalization can delve far deeper than simply using customers’ names. For example, Customer Relationship Management (CRM) software can inform responses based on prior interaction history. Similarly, other analytics tools can help inform tone, style, and even communication channel choice based on customer segmentation criteria.
On the subject of segmentation, lead scoring and email automation are equally potent sets of practices to consider. While this overlaps with the previous step, it diverges in form and purpose; these practices aim to enhance marketing efficiency. In turn, optimal outreach timing and personalized propositions serve to culminate a relationship of value worth retaining.
The principle of re-engagement lies in approaching customers with new, relevant propositions. Lead scoring enhances this practice by informing such aspects as:
- Timing. Different customers are best engaged or re-engaged after specific time periods. Demographic, behavioral, psychographic, and other means of segmentation can inform this factor.
- Frequency. Different customer segments respond differently to outreach frequency. Thus, instead of engaging indiscriminately, you may set different, personalized outreach intervals.
- Pricing. Finally, behavioral and value-based segmentation can both inform optimal price points for re-engagement emails.
Understandably, one cannot reasonably engage in such practices manually. Fortunately, multiple automation and A/B testing solutions exist today to facilitate such customer retention strategies.
#4 Implement a loyalty program
Another tried-and-tested, albeit often underestimated, practice is loyalty program implementation. Such programs have existed for decades, and continue to yield results because they cultivate continued loyalty. In fact, more than 90% of companies have some loyalty program in place today.
Of course, exact loyalty rewards may vary across programs and industries. Nonetheless, research shows that “consumers tend to prefer direct rewards, which are specifically tied to the provider”. In contrast, “providing indirect rewards […] is a suboptimal reward practice and may even be harmful to promoting loyalty”. With this in mind, you may implement a loyalty program that best suits your business, including:
- Point-based programs
- Tiered programs
- Paid loyalty
- Value loyalty
In all cases, loyalty programs specifically aim to foster loyalty and secure customer retention – which they typically achieve.
#5 Under-promise and over-deliver
Finally, you may consider a relatively less straightforward customer retention strategy. Coined by Thomas J. Peters, to under-promise and over-deliver is a viable strategy for enhancing CX. It hinges on the premise of exceeding customer expectations and thus achieving satisfaction.
The most notable example of this practice that sees use across various industries can be found in shipping estimates. Typically, businesses that engage in this practice will offer an estimated shipping date and then ship earlier. This simple strategy provides a pleasant surprise to customers, enhancing the brands’ perceived appreciation for customers. Of course, you may also apply this strategy elsewhere, depending on your business scope, industry, and other factors.