Revenue growth means finding more customers, right? Not necessarily. And that’s fortunate because, as you know, it’s becoming more costly to acquire them. We see it all the time: brands that want to grow their revenue decide to focus their efforts and budget on acquisition marketing. Or, they say they want to focus more on retention, but don’t make changes to their strategy and actually do it.
We want to remind brands: customer retention matters! You can more effectively and sustainably grow revenue and reduce costs by balancing customer acquisition with customer retention. Keeping existing customers and encouraging them to be repeat buyers can be extremely effective and profitable.
How do you get started? You need a strategy, a plan, and a team to make it happen. We can help with that.
Making the case for customer retention
Let’s take a quick pause before diving into strategies to review how implementing customer retention strategies can make a big difference to your bottom line. Customer retention is more relevant now than ever, particularly in today’s landscape of high ad costs and less available third-party data. Also, as we saw during the pandemic, more consumers are willing to try new brands. As customers have more choices and are willing to switch, brands need to work harder to keep them.
If you need to convince others of the wisdom of focusing on customer retention, there is research available to help you make your case. Here are a few interesting stats:
- A 5% increase in customer retention can produce more than a 25% increase in profit
- 61% of small business owners report that business from repeat customers makes up more than half of annual revenue
- A brand is 14 times more likely to sell something to an existing customer than to a new customer
- More than 85% of the growth of mature brands comes from their most loyal customers
- Customers in loyalty programs generate 12-18% more incremental annual revenue growth than customers who aren’t in loyalty programs
- 86% of loyal customers say they will recommend a brand to someone else
- 46% of loyal customers remain loyal, even after a bad experience
4 customer retention strategies you need now
While customer retention strategies are not new, it’s surprising how many brands still don’t apply them. What an opportunity! We recommend some combination of the following four strategies as must-haves for increasing customer loyalty, AOV, customer LTV, and ultimately revenue.
Strategy 1: Post-purchase communications
Staying engaged with customers to keep your brand top of mind after they purchase is a clear way to increase customer retention. You need a strategy for connecting with customers in a personalized way via email and SMS, and a plan for how you’ll interact with them over time.
To keep customers engaged, it’s important to offer a blend of personalized marketing and lifestyle content that brings value. Marketing content could include cross-sells/product recommendations, birthday discounts, asking for feedback/customer surveys to improve customer experience, refer-a-friend discounts, and loyalty program invitations. To weave in lifestyle content that builds your brand, consider telling your brand or founder story, highlighting your brand values, featuring professionals or influencers who use your products or services, showcasing makeovers, explaining your cutting-edge/environmentally friendly manufacturing process, or educating customers about your ingredients.
An easy place to start nurturing the customer relationship with regular communications is with the purchase confirmation email, which can have an open rate of 60%. In addition to confirming the purchase was made, consider:
- Suggesting complementary or related products to add before the order ships
- Offering helpful tips, recipes, or tutorials on how to use the product to get the most out of it
- Providing regular, branded updates on the delivery status of the product, including tracking information and expected delivery date
Tip: Encourage in-store buyers to sign up for email or SMS communications. Then, use your first-party data to help you craft personalized messages and offers for all of your customers (what did they buy – what other products might they like? When did they buy it – when might they be ready for more product?).
Tip: More is not always better – sending too many emails or text messages that aren’t relevant or cause information overload can damage the customer experience and push customers away. Developing a content strategy can help you coordinate all of your customer communications.
Strategy 2: Subscriptions
If you don’t have a subscription program and a subscription model would make sense for your business, it’s time to implement one. Revenue from eCommerce subscriptions continues to grow, and many consumers happily sign up for more than one subscription. Beyond additional revenue, subscriptions provide predictable revenue, which is priceless. It’s important to make your subscription program as flexible as possible – enabling customers to skip, delay, or edit preferences such as products, quantities, and delivery frequency – to increase the chances your customers will stick around versus unsubscribing.
Tip: Be sure to highlight your subscription’s value by showing the price savings for each product that’s listed in their subscription portal (e.g., list the original price, % off savings, and subscription price). Otherwise, over time, customers may forget they’re getting a discount and start questioning if the subscription is really providing value.
Strategy 3: Loyalty program
Loyalty programs can be an effective way to bring in additional revenue. They also are an important strategy for helping brands – and customers – weather economic downturns. Loyalty programs can be a win-win solution, as customers are looking for ways to stretch their budgets, and brands can spend less on customer acquisition.
Similar to the post-purchase communications strategy, it’s important to balance transactional benefits of the loyalty program with lifestyle content or experiential rewards that connect customers to the brand. For example, early access to new product drops, an invitation to join an online brand community or access to merch in a tokengated shop. More brands are catching on to the importance of going beyond the transactional: 55% of companies that are planning to launch a loyalty program say they plan to include experiential rewards.
Tip: While the vast majority of businesses do have some sort of loyalty program, some are more successful than others. Whether the loyalty program is structured to offer points or VIP tiers, to be successful today it needs to be omnichannel – i.e., customers can accrue and use points or participate no matter if they shop online or in-store.
Strategy 4: Membership program
A membership program is essentially a loyalty program – but customers don’t have to “earn” their benefits. Instead, they sign up (for free or for a fee) to participate. A paid membership program model can give brands more leeway (i.e., budget) to offer more interesting benefits, such as events or access to exclusive products. Also, research shows that customers who “pay to play” are 62% more likely to spend more with a brand versus 30% of customers who were part of a free loyalty program.
For customers, a membership program is typically about access: this could include access to classes, member events, new product drops, discounts with partner brands, faster returns, fast-tracked customer service, and more.
For brands, a membership program can exponentially accelerate growth, retaining customers who then become DTC brand ambassadors who wear or use a brand’s products in their own communities and help attract new customers.
Tip: To create an engaging membership program, ask customers how they use your products and services in their daily lives and what benefits they actually want. Try adding a quick post-purchase survey or reaching out via email to your VIP customers for feedback.
Customer support matters for retention, too
Bad customer service is a relationship killer. Therefore, while you’re strategizing how to improve customer retention, it can be a good time to review your customer support experience to see if anything needs to change or improve, such as:
- FAQs content
- Returns process
- Subscription Customer Portal
- Live chat functionality
Implement faster with retention services
Developing a customer retention strategy and plan requires work. However, you don’t have to do it all yourself – you can tap your agency to help you develop the customer retention strategy, craft a plan, and integrate the apps and functionality you might need to make it all work. Learn more about our retention strategy services and give us a ring – we’re happy to chat about your specific business challenges.