Customer Retention Strategies That’ll 3X The Growth of Your Business
May 6, 2022
Customer retention is one of the most important aspects of any business, yet it’s often overlooked. The chances of landing a sale through an existing customer are as high as 60-70%, but businesses focus much of their energy and resources on acquiring shiny new customers instead.
Ignoring your existing customers is a costly mistake, and it’s been proven that it costs seven times more to acquire new customers than it does to retain current customers. Customer retention is especially important in eCommerce, where competition is fierce and customer expectations are high.
These days the internet is flooded with new eCommerce stores, and the industry is expected to grow 6.7% in the next five years. It is crucial to build strong customer relationships that encourage repeat business, or your business will continue to struggle against the growing competition.
The good news is with the right customer retention strategies in place you can turn a first-time purchase into a long-running lifecycle of business. In this post, we will be outlining the most cost-effective marketing strategies for customer retention, including how to increase customer engagement and brand loyalty.
We will also be looking into:
- Critical customer retention KPIs like customer lifetime value, customer churn and average order value.
- The importance of building trust and how to increase customer satisfaction through customer service.
- How to build customer loyalty programs that incentivize repeat business
- The best strategies for re-engaging your customers through email marketing.
What Is Customer Retention?
Customer retention refers to how many customers continue to do business with your brand after their first purchase. This can be accomplished through various means, such as providing excellent customer service, offering loyalty programs, incentivizing referrals, or running marketing campaigns targeted at existing customers.
Customer retention is important for businesses because it costs less to keep a customer than it does to acquire a new one. Additionally, happy customers are more likely to refer others to your business, which can help you grow your customer base even further.
There are a number of ways to measure customer retention, but one common metric is the Customer Retention Rate (CRR). This is calculated by taking the number of customers who made a purchase in a given period and dividing it by the total number of customers at the beginning of that period. For example, if you start with 100 customers and 10 of them make a purchase in the next month, your CRR would be 10%.
Improving customer retention can be a challenge, but it’s important to focus on tactics that will work for your specific business. There is no one-size-fits-all solution, so it’s important to experiment and find what works best for you. With a little effort, you can keep your customers coming back again and again.
5 Critical Customer Retention Metrics
There are a number of different customer retention metrics that businesses can focus on in order to better understand and improve customer retention rates. These might include things like customer churn rate, customer lifetime value, average order value, or repeat purchase rate.
By understanding which customer retention metrics are most important for their business, you can make data-driven decisions that improve customer satisfaction and reduce customer churn.
1. Repeat Customer Rate (RCR)
Repeat customer rate is a metric that measures the percentage of customers who make a second purchase from a business. A high repeat customer rate is a good indicator that your business is providing value that keeps customers coming back.
There are a few different ways to calculate repeat customer rate. The most common method is to take the number of customers who made a second purchase, divided by the total number of customers.
For example, if you had 100 customers in a month and 30 of them made a second purchase, your repeat customer rate would be 30%.
2. Customer Churn Rate (CCR)
Customer churn rate is the percentage of customers who stop doing business with you over a period of time. A high customer churn rate is a major red flag, as it indicates that your business is losing customers at an unsustainable rate.
There are a few different ways to calculate customer churn rate. The most common method is to take the number of customers who stopped doing business with you in a period of time, divided by the total number of customers you had at the beginning of that period.
For example, if you had 100 customers at the beginning of a month and 10 of them stopped doing business with you by the end of the month, your customer churn rate would be 10%.
Customer churn rate is an important metric to keep track of, as it can have a major impact on your business. A high customer churn rate can lead to decreased profits and a decline in customer loyalty.
There are several strategies you can use to decrease your customer churn rate, including improving customer service, offering discounts or loyalty programs, and making it easy for customers to do business with you.
3. Purchase Frequency (PF)
Purchase frequency is the number of times a customer buys from you over a period of time. A high purchase frequency is an important metric for customer retention, as customers who buy from you more often are more likely to remain loyal in the long term.
There are a few different ways to calculate purchase frequency. The most common method is to take the total number of purchases made in a period of time, divided by the total number of customers.
For example, if you had 100 customers in a month and they made a total of 200 purchases, your purchase frequency would be 2.
If this calculation produces a result you are unhappy with, you can increase your purchase frequency by offering discounts or loyalty programs that encourage customers to buy more often. Or, you can create a sense of urgency by running limited-time promotions.
4. Average Order Value (AOV)
Average order value (AOV) is the average amount of money spent by a customer on a single purchase. AOV is a key metric for eCommerce businesses, as it can be used to increase revenue and profits.
There are a few different ways to calculate AOV. The most common method is to take the total amount of money spent on all purchases in a period of time, divided by the total number of purchases made in that period.
If you are looking to increase your AOV, there are several strategies you can use, including selling higher-priced items, upselling and cross-selling products, or offering discounts on larger orders.
There are several benefits of having a high AOV, including:
- Increased profits: If all other factors remain constant, a higher AOV will lead to higher profits. This is because you will make more money on each sale.
- Improved customer retention: Customers who spend more money on each purchase are more likely to be loyal and stick around in the long term.
- Easier to reach sales goals: With a higher AOV, you need to sell fewer items to reach your sales goals.
5. Customer Lifetime Value
Customer lifetime value (CLV) is the total amount of money a customer will spend with your business over the course of their relationship with you. CLV is important because it allows you to see how much each customer is worth to your business. The higher the CLV, the more valuable the customer.
To calculate the value of a customers’ lifecycle, you must use the data gathered from each of the calculations listed above. Use that data to complete the following calculations:
Customer Value = Average Order Value x Purchase Frequency Rate
Average Customer Lifespan = Sum of Customer Lifespan/Number of Customers
Then put those numbers into this formula:
Customer Lifetime Value = Customer Value x Average Customer Lifespan
How To Improve Customer Retention: 10 Proven Strategies
Customer retention is important for any business, big or small. Having a strategy in place to improve customer retention can help keep your customers coming back, and spending more money with your business.
There are many ways to improve customer retention, but we’re going to touch on just the most effective strategies (and our favorites!)
1. Build Trust with Excellent Customer Service
One of the best ways to improve customer retention is to improve your customer service. Customer service is the number one reason why customers leave a company. In fact, 89% of consumers say they’re willing to switch to doing business with a competitor following a poor customer experience.
There are a number of ways in which customer service can impact customer retention. First, good customer service can create a positive brand image that will encourage customers to continue doing business with the company.
Second, good customer service can build trust and loyalty among customers, which will keep them coming back even if there are cheaper options available. Finally, good customer service can help resolve problems quickly and efficiently, and prevent customer churn.
If you want to keep your customers, then you need to make sure you’re providing them with the best possible customer service. This means being responsive to their needs, addressing their concerns, and going above and beyond to meet their expectations.
- Provide fast and efficient service
- Resolve customer complaints quickly and efficiently
- Keep customers informed about product or service changes
- Provide a human touch – treating customers as individuals rather than numbers
- Go above and beyond for customers – going the extra mile to make them happy
2. Re-Engage Customers Using Marketing Automation
One of the best ways to keep your customers engaged is to send them reminder emails and other notifications. This helps them remember your brand and keeps them coming back for more.
So, how do you go about ensuring that your customers stay engaged with your brand?
One way to keep your customers engaged is by using a tool like CartStack. CartStack allows you to recover abandoned carts, which can help increase customer retention. By sending targeted emails to customers who have abandoned their carts, you can bring them back to your site and encourage them to complete their purchase.
In addition to using a tool like CartStack, there are a few other things you can do to keep your customers engaged:
- Make it easy for them to reach you. Provide multiple channels for customer support, including phone, email, and live chat.
- Keep your promises. If you say you’re going to do something, do it. Customer loyalty is built on trust.
- Show them that you care. Take the time to get to know your customers and their individual needs. Personalized service goes a long way.
- Listen to their feedback. Customer feedback is invaluable. Use it to improve your products and services.
3. Reward Promoters And Loyal Customers
Customer loyalty programs help to increase customer retention by giving customers an incentive to continue doing business with a company. Customer loyalty programs can be achieved in many ways, such as giving customers discounts, rewards points, or special treatment.
For example, a company might offer a discount to customers who sign up for a loyalty program or give loyalty program members early access to new products. By giving customers an incentive to stay loyal, companies can keep their customer base from defecting to competitors.
Another great option that will increase customer loyalty and engagement, is to run giveaways and promotions through social media. Running a giveaway that relates to your customer retention program will increase the likelihood of customers signing up for the long run and attract a number of new customers to the program!
- Create a rewards program (ex. Starbucks Gold Rewards)
- Offer exclusive discounts to members
- Incentivize repeat purchases
4. Personalize your communications
There are a lot of ways to keep your customers coming back for more, but personalization is key. By understanding your audience and segmenting them accordingly, you can create marketing and communications campaigns that speak directly to their needs. This way, you’re not just talking at them – you’re talking to them, and that makes all the difference.
What’s more, personalized content has been shown to be more effective than generic content across a range of measures. Personalized email subject lines are a great example of this.
Personalized email subject lines can boost your open rates by 20%. So if you’re looking for ways to increase customer retention, this is a great place to start. If you’re looking for inspiration, we created a list of 17 effective and personal email subject lines that you can start using today!
Here are some other tips on how to personalize your marketing and communications:
- Know your audience. Segmenting your audience is essential for understanding who you are talking to and how to personalize your offerings for them.
- Create targeted content. Once you know who your audience is, you can create content that is specifically tailored to their needs. This could be in the form of blog posts, e-books, whitepapers, or even just email campaigns.
- Use data to your advantage. Data is a powerful tool that can help you understand your customers on a deeper level. Use it to segment your audience, create targeted content, and measure the success of your campaigns.
- Be human. At the end of the day, your customers are people – so treat them as such. Be personable in your communications, and make sure that there is a human element to your brand.
If you’re looking for more personalization tips, you can find everything you need in our complete guide to eCommerce personalization.
Average Customer Retention Rate By Industry
|Industry||Average Customer Retention Rate|
Customer retention is a key metric for businesses in many industries. For some businesses, customer retention is vital for survival, and costs can quickly climb if it is ignored.
Media, professional services, and retail are all industries where customer retention rates can differ significantly. Media companies, for example, typically have higher customer retention rates than professional services firms. And retail businesses may have lower customer retention rates than either media or professional services companies.
There are a number of factors that can affect customer retention rates in different industries. The type of product or service offered, the price point and the competitive landscape are all important variables. But ultimately, it comes down to the quality of the customer experience.
Businesses that provide a great customer experience are more likely to retain their customers. The key is to provide value at every touchpoint, from the initial sale all the way through to customer service and support.
Why Ignoring Customer Retention Can Kill Your Business
Customer retention is often ignored in favor of customer acquisition, but this graph shows why that is a mistake.
As you can see, even a 5% difference in customer retention rates can have a huge impact on revenue growth over time. In fact, a 10% retention rate results in nearly twice as much revenue as a 5% retention rate.
This is because it is much cheaper to keep a customer than to acquire a new one. In fact, “He or she who can afford to spend the most to acquire a new customer, wins.” This quote means that the business with the most money to spend on acquiring new customers will be the most successful.
So, if you’re not focusing on customer retention, you’re ignoring a key aspect of growing your business. Not only that, but you’re also at a disadvantage compared to your competitors who are focused on retention.
Ignoring customer retention can kill your business in the long run, so make sure you focus on keeping your customers happy and engaged.
“He or she who can afford to spend the most to acquire a new customer, wins.”
Grow Your Business By Selling More To Existing Customers
Customer retention is essential for any business. It costs far more to acquire a new customer than it does to keep an existing one, so it only makes sense to focus on retaining the customers you already have.
There are many ways to increase customer retention, but one of the most effective is through abandoned cart emails. These are emails that are sent to customers who have started the checkout process on your website but haven’t completed their purchase.
Abandoned cart emails are a great way to remind customers about items they were interested in and encourage them to complete their purchase. They can also be used to offer discounts or other incentives to encourage customers to buy. For the best results, use one of the top three email templates for cart abandonment to re-engaging your customers and start building long-lasting relationships.
Plus, with CartStack, you can easily set up automated emails for abandoned carts and start recovering lost sales. Easily customize one of our many email templates, and with just a few clicks you’re up and running. Try it out today, with our completely free 14-day trial.
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