How to Boost Customer Retention

How to increase customer retention

Incorporate the following valuable strategies and tools into your sales process to help earn repeat business and support your customer retention goals.

Monitor and reduce churn rates.

The first step in boosting customer retention is knowing your churn rate — the rate at which customers stop doing business with your company. Your churn rate can tell you what’s not working in your customer engagement strategies. Closely monitoring this number can help you pinpoint where in the customer journey disengagement is occurring and adjust your strategy — for example, by improving customer service or personalizing customer outreach — to keep customers engaged and happy. 

Use CRM software to track customer behavior.

The right customer relationship management (CRM) software supports and enables customer retention by helping you track customer behavior over time. It can tell you about customers’ purchase patterns and product usage and alert you when they stop buying from your business. You can also track customer service interactions to understand customers’ frustrations and issues. 

These key customer behavior variables are warning signals that you might lose a customer, allowing you to intervene and potentially save the account. Once you have a clear idea of your customers’ behavior patterns, you can determine if you’re on the right track or if your customer experience strategies need an overhaul. 

CRM software supports customer retention by helping you do the following:

• Plot the customer’s journey
• Personalize offers and correspondence
• Access a centralized database of customer information
• Store customer details, like purchase history, feedback and returns
• Monitor customer interactions with your support team
• Access real-time data insights via CRM reports

Leverage email marketing to improve customer communication.

Email marketing is an incredibly effective strategy for successful lead conversions. However, it can also help you keep current customers. For example, once you have information about when and why customers are leaving, you’re in a better position to send targeted emails with improved offers, service updates and other personalized strategies. 

When you integrate one of the best email marketing software solutions with your CRM platform, you gain the insights and power to do the following: 

• Send targeted emails to customers who are at risk of leaving
• Offer at-risk customers discounts on abandoned e-commerce shopping cart products
• Provide customers with free trials or other perks
• Follow up with customers who ask for support
• Ask email subscribers for valuable customer feedback
• Request online reviews

Email marketing campaigns can dramatically improve communication with customers and help them feel supported. Templates and email automation can make your email-based customer retention strategy even easier. For example, you can set automatic emails to go out to customers who abandoned products in an e-commerce shopping cart or immediately send automated emails to anyone who logged a complaint or product issue.   

Personalize your customer interactions.

CRM and email marketing services make it easier than ever to personalize your communications so customers feel prioritized and important. CRM systems store data about purchases, customer preferences and customer support history. You can leverage this data to launch email marketing campaigns with timely and personalized content for customers, including subject lines that address them by name. Customers are more likely to pay attention when they see a personal touch in marketing communications.

Personalizing your customer interactions creates an incentive for customers to stay with you. They see that you care, creating a closer relationship with your business. Personalization improves customer retention rates through improved customer experiences.

Create customer loyalty programs.

A customer loyalty program rewards customers who frequently buy from your business, incentivizing them to continue shopping with you. It also shows them your business is paying attention to their actions and needs.

To boost your loyalty program’s success, implement these best practices: 

• Reward your top customers. Your CRM system can help you identify your best customers, showing you whom to prioritize. You can create specialized loyalty programs for various customer groups and reward your top customers with the most benefits.
• Gamify your loyalty program. Another way to make customers feel more invested in your brand is to gamify your loyalty program. You often see this with airline businesses that add miles to a traveler’s account. You can reward users with points, badges and other forms of recognition. It’s also important to offer exclusive discounts and other benefits when customers reach various levels.

A customer loyalty program can motivate your customers to buy from your brand, thereby keeping your customer retention rate high.

Build an online community.

A brand’s online community unites a business with its customers, resulting in these benefits:

• Discussion space: An online community creates a space where customers can discuss your brand, products or industry. They can ask questions and answer other members’ queries, thus creating rich discussions.
• Platform to advertise events: Businesses can use an online brand community to share events, contests and other content to foster engagement.
• Engaged users: A brand community facilitates user-generated content, increases brand loyalty and reduces expenses with word-of-mouth marketing.

Building an online community is a powerful way to engage your customers and improve customer retention.

Improve customer support.

Excellent support is essential to customer retention and your business’s success. Your entire team must strive to exceed expectations when addressing customer issues. 

To bolster your customer support, consider adding these support channels:

• Chatbots: Information such as tracking updates, delivery details and reservations don’t need human intervention. Take advantage of artificial intelligence tools, like chatbots, to augment your customer support. Chatbots save time when users need information that can be extracted from a database. That way, your customer support staff can focus on critical issues, and you’ll offer faster support.
• Texting support: Some text message customer service functions include using autoresponders to provide instant answers to customer service questions, scheduling messages to automate the customer service experience, and providing appointment reminders and alerts.
• Social media support: To improve customer retention with social media, monitor social channels like X (formerly Twitter) for customer complaints and respond promptly. You should also reply to comments on social media posts and resolve issues swiftly. 

Differentiate your business from the competition.

Customers often engage with businesses when they do the following:

• Provide products or services that customers can’t get anywhere else
• Have higher-quality products or services than the competition
• Price their offerings more reasonably than competitors 

When one or more of these parameters aren’t met, customers may switch to a competitor. To retain your customers, your business must ensure they don’t view your product or service as a commodity they can obtain from many other companies.

Even if you haven’t developed a unique product, you can determine your business’s unique selling proposition — the quality that sets it apart from competitors — and promote it. You can differentiate your business by showcasing your strategic branding, convenience, exceptional support, company values and contributions to the community. 

Solicit — and act on — customer feedback.

If you’re losing customers, you must determine why they’re leaving your business so you can pinpoint and fix the problems before more customers follow suit. You may not be able to salvage customers who have left, but you can retain those who remain. Consider these strategies to solicit feedback: 

• Conduct exit interviews when customers cancel an ongoing subscription or service. This can be as simple as having them select an option about why they’re leaving — for example, it’s too expensive or the service is unreliable.
• Send customers regular, proactive customer surveys where you ask them to rate product features, value, service quality, policies and more.
• Engage customers on social media to gauge their thoughts on your offering and its value and to suss out unhappiness and problematic issues. 

Once you identify significant issues that lead to customer churn, it’s time to address them. For example, you may find that you must improve product quality, change policies, retrain customer service reps or revamp your offering. Consider reaching out to former customers to share the changes you’ve made; it may not be too late to bring them back. 

Proactively reduce customer friction.

After you address significant causes of customer churn, set up a system to continually seek and eliminate sources of customer friction — anything that makes buying from you difficult, confusing or annoying. This proactive approach can help prevent customers from leaving due to frustration.

For example, you can reduce friction on your e-commerce site by increasing its page-load speed, offering multiple payment methods and ensuring it’s mobile-friendly. Any business can also reduce friction by implementing a reasonable return-or-exchange policy and reducing checkout wait times. 

Appreciate, surprise and delight customers.

Nobody wants to be taken for granted, so periodically expressing gratitude to your customers for their business is essential for retention. Consider setting up a customer appreciation day when you invite customers to take advantage of special discounts or give them early access to new products. Send them something unexpected, like a free sample or a handwritten note. These surprise touches will delight customers and keep them loyal.

Mistakes that hurt customer retention

Customer retention rates vary across industries, depending on the competitive environment and how easily customers can switch providers. You can calculate your customer retention rate with this formula: 

Customer retention rate = (Total number of customers at the end of the period – New customers acquired during the period) / Number of customers at the start of the period  

If your customer retention rate is lower than the industry average, you may be committing one or more of the following mistakes. 

Delivering a poor customer experience

A poor customer experience is the primary reason customers jump ship. They may have had a bad experience with the product or service or dealt with unhelpful or inattentive employees. To protect your brand reputation, consider monitoring and observing the customer experience to identify points of friction that can lead to dissatisfaction. 

Not providing a good value

Whether your offerings are budget-friendly or luxury items, customers want a good value. If they feel taken advantage of, they will likely seek an alternative provider. Improve product or service quality wherever possible. If you can’t cut costs, consider adding low-cost offerings that provide additional value, such as proactively letting customers know when a new version of their product is available or offering solid warranties.

Not understanding your customers

To retain customers, you must thoroughly understand their experience before, during and after the sale. This takes some effort and investment. If your company is struggling financially, it’s more important than ever to identify and fix the problems that are causing customer abandonment. Send out customer surveys, show customers you care about them and their experience with your company, and gather feedback to implement programs to stop the attrition. 

Relying on only one feedback source

Companies typically have multiple feedback sources, such as complaints to the customer service team, online reviews, social media comments, customer surveys and conversations with sales reps. With all this data coming in, it’s tempting to focus on only one source. However, when you monitor all channels, you get a more complete view of how customers experience and perceive your product and company.

Ignoring customer complaints and feedback

Many customers just want to be heard. Empathy goes a long way, and it starts with quickly acknowledging that you heard the customer’s complaint and are doing something about it. Respond to all online reviews, both good and bad. Immediately acknowledge and sympathize with customer complaints even if you can’t give them the resolution they want (and if that’s the case, offer alternative solutions). Thank them for their business, and apologize for the problem. Examine feedback to find pain points in your product, people or processes so you can fix the problem. 

Not keeping customers in the loop

You should stay in constant communication with your customers. If something will affect them, let them know in advance. For example, inform customers if you are moving or closing locations, discontinuing a product, replacing or changing a product, or changing a policy. Explain why you are making the change. 

Having no exit/retention process

If you have a subscription business model or a membership website where customers must call or email you to cancel, you have the perfect opportunity for a second chance to keep them. Put a customer retention process in place with a specially trained employee to discover the problem, try to resolve it and possibly offer the customer an incentive, such as a discount or freebie, to stay. 

Why customer retention is important

Here are some of the main reasons it’s essential to retain your customers:

• Customer acquisition is expensive. Every time you lose a customer, you must invest in marketing and sales to replace them. According to Invesp, it costs five times as much to gain a new customer as it does to keep a current one. 
• Current customers are more likely to buy. According to Invesp’s data, the probability of selling to existing customers is 60 to 70 percent, compared with only 5 to 20 percent for new customers.
• Longer-term customers spend more. Widely cited data says that repeat customers spend, on average, 67 percent more than new customers do.
• Losing customers strengthens your competitors. When former customers switch to a competitor, your competitor now has a larger market share and more revenue with which to continue growing.
• Customer retention leads to higher profits. Increases in customer retention can boost profits significantly. According to one widely cited calculation, increasing retention by 5 percent can boost profits by 25 to 95 percent.
• Customer retention drives growth. More profits give you more money to reinvest in your business’s continuing success. When you keep customers while adding new ones, you grow your customer base, allowing you to sell more products and cross-sell and upsell more easily. 

Keeping current customers happy

Customer retention is about keeping your current customers happy. When it’s done correctly, customers become unwilling to switch to another business. You can make it more convenient for them to stay with you than to buy from a competitor. Successful businesses recognize that customers form the backbone of their organization. Support your customers with retention strategies, and they’ll support you.