You spend money to attract each new customer — virtually, you “rent” them for a fixed sum. As a result, before you make a profit from this cooperation, you need to pay the rent. The longer your collaboration, the more profit you can generate.

Customer retention should be part of your marketing strategy; moreover, it takes more time and money than customer acquisition. In this article, we will tell you how to calculate your customer retention rate and show the customer retention strategies you can use to maintain a long and profitable relationship with your clients.

What is customer retention, and why is it necessary?

Customer retention refers to a range of activities that ensure that the customers you have already acquired stay with you and continue to purchase your products or use your services.

As we all know, losing clients is expensive, and it plays into the hands of your competitors. A well-known marketer Neil Patel cites that on average, losing a customer costs a company $243. Besides, according to Patel, 61% of all the customers who have left do not stop using a product but rather switch to competitors.

Retaining old customers is easier and more profitable than constantly looking for new ones. For example, the probability of selling something to an existing client is 60-70% and only 5 to 20% to a potential customer. In addition, it is cheaper to sell to an existing client: the cost of customer retention is five times lower than that of customer acquisition.

How to calculate the customer retention rate

Customer retention rate (CRR) refers to metrics that show the percentage of customers retained over a certain period of time.

To calculate your customer retention rate, use the formula below:

customer retention rate formula
Customer retention rate formula

As an example, let’s calculate the customer retention rate for the year. At the beginning of the year, the company had 178 customers. During the year, it lost 18 customers, but gained 24, which makes 184 clients at the end of the year (178-18+24=184). So,
CRR = (184-24) / 178 * 100% = 89.89%.

Note! Segment your customers by activity and calculate the customer retention rate for each segment.

Segmentation is important. Let’s say you have a sushi and pizza delivery business. Some customers place orders almost every day, while others treat themselves only several times a year. If you calculate CRR for a month, then you will not take into account those who placed an order over a month ago. Yet they are still with you, they just buy less.

There is no ideal customer retention rate. Everything depends on your performance and specifics. Calculate your CRR for the past periods so that you can detect seasonal outflow. Compare these indicators with the current ones and use them for forecasting.

Customer retention strategies

High-quality products, good services, expert content, constant contact with customers — these are all proven ways to keep the existing clients as well as to attract new ones. Your customers should feel genuine care. Here are seven ways to retain clients that will help you make an impression:

Quality product and service

This is quite a common way to retain a customer, but its importance may not be so obvious. Fact: only one out of 26 disgruntled clients will complain about a product or service, the rest will simply buy the product from another company. This means that you only have one data point to analyze for 25 other customers that may have left for any number of reasons.

Solution: respond to all feedback and constantly improve your product and service. Employ mystery shoppers, regularly test your service as a client.

Support and feedback

To retain new customers, show them that you care about them even after a purchase. First, you can send some useful resources like how to use your product, where to ask questions, or where to interact with other users. For example, as a content marketing tool, BuzzSumo offers assistance with using the service in their welcome emails. The first option is to read instructions for using the service, the second involves watching a webinar, while the third option suggests addressing questions to the support team.

retaining customers with welcome email
A welcome email from BuzzSumo offering assistance to its customers

Track customer activity. If a user has registered with your service but has not used it, remind them about it, and offer some help. For example, SendPulse sends a helping-hand email to those who have not completed creating a series of triggered emails.

triggered email example
Triggered email from SendPulse offering help with Automation 360

Note! If you offer help, try to do it in a polite and clear manner. Otherwise, you will have the opposite effect — you offered help, but in the end, gave a superficial answer. This will only annoy the customer.

Loyalty programs

Loyalty programs are a system of bonuses and discounts for regular customers. Loyalty programs can be very simple, for example, points for a purchase, or more complex and dynamic with increasing discounts and exclusive offers.

Anyway, both of them work to retain customers. For example, WizzAir offers its clients an annual membership to their Discount Club, which gives them an opportunity to buy tickets at a discounted price and receive extra benefits. Customers are informed about any special offers via email, which is rather convenient.

loyalty program example
An email from WizzAir Discount Club about annual membership renewal

Read the article on how to boost customer loyalty on our blog. You will learn how to build your promotional campaigns and employ bonus systems that will bring your customers value and positive emotions.

Post-purchase bonuses

A bonus for the next purchase is probably the easiest way to retain a customer. You do not even have to start a loyalty program for that. For example, you can send a discount coupon with your thank you email.

By the way, you can emphasize that the discount code has an expiry date to build a sense of urgency and encourage customers to make a purchase within a specified period of time. Take a look at how a well-known clothing store Forever 21 offers an additional 30% discount to its existing customers and accompanies the coupon with a countdown timer.

email with countdown timer
A coupon for an extra discount with a countdown timer

Exclusive offers for customers

Make “exclusive” offers to retain old clients. An individual discount, a closed sale for club members — all these allow people to feel their special importance. This is one of the psychological tricks for forming brand loyalty.

Below, you can see a discount coupon delivered by True Citrus to its customers to celebrate six months since their first purchase. Take note that the offer also has an expiration date to encourage the clients to make purchases faster.

individual discount coupon in email
An individual discount coupon to celebrate six months with the company

Email marketing

Email marketing is a universal tool that allows you both to warm up your leads and retain your customers. Here are some ways to communicate with your clients so that they continue to buy your products or use your service:

  • try to promote products relevant to your subscribers in your emails;
  • send milestone emails dedicated to important events like birthdays, holidays, subscription anniversaries;
  • compile selections of products that could be interesting for your audience;
  • remind your customers about the loyalty program in your emails.

Most importantly — do not slide into continuous boring advertisements. Segment and personalize your email campaigns, make them attractive, functional, funny, and useful.

See how SkinCeuticals wittily dedicate their promotional emails to various occasions, such as Vitamin C Day:

Informative emails from SkinCeuticals to keep their customers interested

Social media marketing

A thorough SMM strategy can help you boost the engagement of customers and their brand loyalty, present the brand in a favorable light, and timely address customer complaints. Encourage customers to subscribe to your social media channels by incorporating social media buttons to your website and emails.

To retain customers, try to

  • make educational posts about topics that are important to your audience;
  • entertain the audience with funny stories and memes;
  • involve your potential clients by asking questions in every post, initiating games and quizzes;
  • sell without selling — combine advertisements with useful content.

To ensure customer retention and increase brand authority, you need expert content. However, there is no need to force specialists in your company to write posts as this is not their main task. A best practice in this respect is to take information directly from experts and ask the social media manager to present it in an attractive way.

Note! Do not take long breaks between posts as it greatly reduces the weight of publications during ranking — they will end up at the bottom of the feed. One publication will do, but you should post daily.

Respond to comments as quickly as you can. Social media leads are hot, but they quickly cool down, so try to respond to all reactions within an hour. This will show to the rest of the users that the group is “alive” and the brand cares about their subscribers.

Here is an inspiring example of how TaylorFarms make their content more useful to its clients by posting recipes for cooking with their products.

useful instagram post
An Instagram post featuring useful content

Things to remember

Customers need to be retained: not only do regular clients bring a company more profit, but also they are less costly than those who make only one or two purchases. In addition, customers who leave are more likely to switch to competitors rather than just stop using the product.

To understand how many customers stay with you within a given period of time, you need to calculate the customer retention rate.

Be sure to calculate customer retention rates separately for different segments of the audience depending on their purchase frequency. This will give you a more accurate picture of your client base. The CRR can also be used to forecast seasonal outflows and make plans for the future according to other key indicators.

Here are the customer retention strategies that can help you convert the majority of your new customers into regular clients:

  • quality product and service;
  • good support and timely feedback;
  • loyalty programs;
  • post-purchase bonuses;
  • exclusive offers for individual customers;
  • email marketing;
  • social media marketing.

Register with SendPulse to retain customers with the help of quality email campaigns and inform them about new offers via SMS, Facebook Messenger chatbots, and web push notifications. Remember that by expressing love and care towards your clients, you can definitely boost your conversion rates.

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