Customer retention: why is important & how to improve it?

Companies put a lot of effort to attract new customers, using various tools:


  • SEO;

  • Website optimization;

  • Email marketing;

  • Social media;

  • Advertising;

  • Etc.


All this requires a significant investment of time and finances, as well as a lot of effort.

Business owners should never forget how important it is to retain existing clients in the race for newcomers. Customer retention is the key to your company’s profitability.

Statistics show that the chance of a potential customer making a first purchase is only about 5-20%. In contrast, the probability of selling to a client who has already shopped with you is between 60-70%. At the same time, the cost of acquiring new customers is disproportionately higher than the cost of retaining existing ones.



Why is customer retention so valuable?

Here are the top 5 benefits that customer retention brings to a business.

1. Reducing marketing costs

Recurring customers are already familiar with your brand and products. Therefore, you don’t need to invest a lot of money in advertising campaigns.

2. Revenue growth

Recurring orders boost the profit. A 5% increase in customer retention can magnify the income by 25% to 95%. It’s also worth remembering that loyal buyers tend to spend more money than fresh clients and try new products more often.

3. Free advertising

Loyal customers will gladly recommend your company to their friends. Referral advertising is not only one of the most effective types but is also free.

4. More reviews

People who order from you frequently are more likely to leave feedback, pointing out your strengths and weaknesses. This will allow you to identify the weak points of your products and services and adjust them.

5. Enhancing brand image

Customer retention helps brands get to know their target audience better and understand which niches to focus on.

Have you imagined all the extra benefits you can get if you engage in customer retention? Then read on to find out what techniques you can adopt.

3 ways to increase customer retention

To improve customer retention, you must analyze the entire client experience. This also includes evaluating how they think, feel, and behave at every stage of their interaction with your business.


You’ll convert more customers into loyal ones if you manage to effectively set up the communication processes to satisfy their expectations. Conversely, if you fail to make the customers happy, you will be losing them.


So, which aspects should you focus on to retain customers?


1. Offer a beneficial loyalty program

Suppose you already have a loyalty program, but you want to get a better result from its performance. Or maybe this is the first time you’ve decided to develop it. In any case, the following recommendations will be useful to you.


The loyalty program should have at least the following components for the highest effectiveness.


  • Rewards that are aligned with your primary business goals

For example, you want to achieve more visits, growth in sales, or an uplift in your average check. Therefore, the loyalty program must be designed to get the desired result.


  • The most valuable buyers get the highest rewards

Your program should be elaborated so that customers who spend more time and money with you get better rewards.


  • Personalization and customization

Your suggestions should be relevant to users and coincide with their preferences and interests.


An interesting example of a loyalty program is The Sill, a brand that sells houseplants. They offer points for various actions that can be spent on the next purchase.




2. Focus on meeting the needs of your customers

Low prices and high-quality products are not enough for the business’ success. You also need to offer top-level service that exceeds all expectations.


Be supportive of your customers, and they will want to stay with you. Research the clients’ needs through feedback and surveys, find out what your audience is interested in and what they expect from you. Analyzing their behavior and opinion is key to ensuring a positive experience and increasing their loyalty.


If customers trust your brand, they intend to do business with you again and again. So don’t be lazy to create useful guides on the products for them. Offer help and support during all stages of cooperation with you. All this will help to build long-term and strong relationships with the clients.


A great example of customer care is the Clinique brand. Their website has a Skin Services section that offers lots of helpful content and services. These include:


    • Consultations by brand experts;

    • A collection of how-to videos;

    • Foundation selection service;

    • Skin diagnosis function;

    • And more.




3. Use your social nets wisely

Your social media plays a vital role in customer retention, so don’t neglect it. Developing social media allows you to expand your brand’s fan base and strengthen its influence, as well as increase the loyalty of your existing clients.


a) Feedback and user-generated content (UGC)

Be sure to monitor users’ feedback about your company on social networks. Stories and posts on Instagram, the testimonials section of the site, and other resources should not be left unnoticed. Show your customers that you appreciate their interest.


In addition, you can post UGC on the website and social networks. This will benefit your brand significantly. For example, check how the brand Coloured Contacts posts photos of users with their products from Instagram on their site.


b) Running contests and giveaways

Holding various contests is an excellent method of customer retention. It allows you to boost social media activity, fuel interest in the brand, and pamper clients. Also, giveaways will enable you to stimulate their loyalty.


The conditions for entering contests can vary. For example, the Birchbox brand ran a contest on its Instagram in partnership with Province Apothecary with the following conditions:


    • Like both posts;

    • Follow both brands;

    • Tag a friend in the caption.


Wrapping up

Customer retention is a great investment. Returning buyers cost less because no advertising is needed to attract them, and in addition, they spend more money than newcomers.


Now when you know how to increase customer retention, start integrating these tactics into your business. The main methods to focus on first are as follows:

    • Developing a loyalty program;

    • Meeting the clients’ needs (including applying site search best practices, enhancing UX/UI, offering help and support etc.);

    • Enhancing the social nets.

  •  Remember: it is crucial to not only attract new customers but also to retain existing ones.

About the Author

Kate Parish