When we think about marketing, our minds often jump to lead generation tactics that attract new customers. But marketing isn’t only about bringing in new business. It’s also about keeping existing customers through retention marketing.
In fact, customer retention might be even more important than customer acquisition. Let’s look at why this might be true, and how you can use retention marketing to help increase revenue while spending fewer resources on marketing.
What you’ll learn here (click to a section):
- What is retention marketing?
- Why retention marketing is a smart strategy
- Customer retention marketing strategies you can try
- When to use retention marketing campaigns
- Customer retention metrics
- Retention marketing best practices
- Support retention marketing with strategic data
Let’s jump in!
What is Retention Marketing?
Retention marketing is a strategy that markets to existing customers. It focuses on bringing back customers who have already done business with a brand and keeping customers who are already connected to a brand.
Let’s look at how this retention marketing definition fits into the final stages of customer lifecycle marketing.
At the beginning of the lifecycle, acquisition marketing builds brand awareness, attracts attention, educates audiences, and eventually converts people into buyers. At the end of the lifecycle, retention marketing either brings the buyer back into the purchase funnel if they have jumped ship, or nurtures them in the cycle as an active, engaged customer.
The goals of retention marketing aren’t to increase the number of customers but rather to:
- Increase customer return rates and bring past customers back into the buying cycle.
- Decrease customer churn rates and keep existing customers in the buying cycle.
- Drive purchase frequency and get customers to enter the buying cycle more often.
A few customer retention marketing examples could be a paid gaming app that sends a free life to a player who hasn’t logged into the app for a few days or an online retailer who sends a previous customer a curated list of items they may like based on their recent purchase. Encouraging a customer to upgrade their service is another example of successful retention marketing.
Why Retention Marketing is a Smart Strategy
For new and growing brands, it makes sense to focus most of their marketing plans on customer acquisition. But once a brand has a solid customer base, they need to shift their strategy and put more attention into customer retention.
Without a retention plan, all of the marketing strategies in the acquisition phase are for naught. A brand may work hard to get customers but then lose them by failing to re-engage and remarket to them. This loss of customers is a costly mistake, as retention marketing is proven to boost revenue while using fewer resources than acquisition marketing.
Keeping existing customers increases profits. It pays to keep customers around. Increasing customer retention rates by only 5% can increase profits by 25 to 95%.
Selling to existing customers is easier than selling to new customers. Brands have a 60% to 70% chance of selling to an existing customer versus only a 5% to 20% chance of selling to a new customer.
Every time a customer buys from you, the odds that they return go up. After one purchase, the odds are 60-70% they will buy when they visit you again. If they make a second or third purchase, that number increases to a 54% chance of making another purchase.
It costs less to attract existing customers than to attract new customers. It can cost up to 5x more to acquire a new customer than to keep an existing one.
Existing customers are likely to spend more. People who have already bought from your brand are more likely to return and spend more money when they do. In fact, they spend three times more per visit, according to the Adobe Digital Index.
Happy, existing customers help you acquire new customers. When you have happy brand fans, they turn into brand advocates. This helps lead other customers to your business because customers often trust and take recommendations from friends.
The positive effects of retention marketing show up in all sorts of ways: customer satisfaction, customer engagement, word-of-mouth referrals, repeat customers, and so on. But how do you get started?
Customer Retention Marketing Strategies You Can Try
Let’s get down to building those loyal customers. The following are some ways that you can retain past and current buyers through customer retention strategies and marketing tactics.
The big mission that’s so dear to your heart? It may also be important to your customers! If you’re passionate about helping people live healthier lives, cutting down on pollution, finding happy homes for abandoned pets, or any other cause, set up an advocacy program. Your customers feel good when they can contribute to a good cause, and that bit of sunshine rubs off on your brand. Your customer advocates will be more likely to choose your brand over another that they feel less connected to. Research on advocacy programs also points to added benefits when you get your employees involved.
How to learn what your target audience cares about? Check out our Target Audience Analysis capabilities!
Daily Deals and coupons
Daily deals bring people back to your ecommerce website more frequently than they would visit otherwise. This strategy gives customers an incentive to shop with you again, instead of with a competitor, as they know they’ll find something at a bargain price. It creates urgency, which fuels impulse purchases, because they know the deal is temporary. And it makes them happy: a study by a professor of neuroeconomics found that receiving a coupon increased the shopper’s oxytocin levels by up to 38%! You can rotate new products and let shoppers sign up to hear about new deals via email or social media.
People love to feel special, and you can tap into this for retention marketing. Create an exclusive “club” or membership to make your repeat customers feel like they have access to something others don’t. If you’re a retailer, perhaps you host a night of entertainment at your store for people who spent over a certain amount that month. In B2B, create exclusivity by giving access to product features still in beta to especially engaged customers, for example.
Your customer builds up equity with your business when you reward them for shopping with you. According to a study by TechnologyAdvice, people are 80% more likely to shop at stores that offer a loyalty program. Think of that punch card from your favorite coffee shop in your wallet. This helps keep the shop top of mind, giving you a nudge to visit and collect another star. There’s a rush when you get the perk, too, creating a happy customer experience all around.
Email marketing continues to be an important medium for building customer relationships. Despite the deluge of emails people face every day, they still love to hear from their favorite brands. If you use content marketing, email newsletters are an excellent channel for letting customers know you’ve published new material in your blog. And consider emailing discounts to your customers. A study by Adestra shows that emails containing discounts influence purchasing decisions more than review websites and online ads.
McKinsey & Company has reported on the positive effects of having a formal customer feedback channel. They noted that a resulting innovation tripled the retention rate for an energy company! Could your customers advise you on product design? Why not create a panel of your most engaged or passionate customers to create a feedback loop. This shows customers that you value their input — and it can align your products better with what customers really want.
Is there something you could help your customers with through a free tool? Maybe your tool simulates how a product will look in their home or helps a customer calculate savings when they make financial choices. Consider offering a “freemium” version of your product. Research shows that consumers perceive more benefits and fewer sacrifices with free versions. This can build up a good name for your business and make customers more likely to choose you over your competitors.
Research shows that referral programs can increase a customer’s commitment to your business. You see referral bonuses in both B2C and B2B customer loyalty programs. If you’ve used a grocery delivery service, for example, you might get offered $10 to refer a friend — and the friend saves money, too! Likewise, businesses can offer bonuses to customers who recommend their products or services to colleagues. Research by referral marketing company Extole shows that 13% of friend referrals convert to a sale.
Top retailers enlist personalization to provide a great shopping experience. In fact, Stephen Tucker of Smart Insights says personalization is no longer a luxury — shoppers expect it because they’ve become accustomed to how Amazon tailors its offerings. Personalization can also be effective in B2B customer retention strategies. One example: emails that use the recipient’s name. A study by Yes Lifecycle Marketing found that simply including the recipient’s name in the subject line increased opens by 50%.
Retargeting is the term for online advertising based on a person’s browsing history. Now a staple of ecommerce stores, this digital marketing tactic brings the shopper back to complete the transaction when they might have otherwise forgotten about it. And there is no doubt that it works. The Journal of Marketing Research reports that it can bring 14.6% of browsers back to your website. Some retailers are spending 50% of their digital advertising budget on retargeting now, according to one Stanford researcher.
Exceptional service also has the power to bring customers back. Research in the financial sector found that offering high-quality service increases customer retention, and this, in turn, leads to higher customer commitment and loyalty. So, from the very first purchase, extend the best customer service experience you can. There are plenty of ways to do this, from personalized confirmation emails to remembering the customer’s name when they return to your shop. Perhaps you accept returns with no questions asked when your competitors are notoriously stingy. Zendesk Sell recommends B2B salespeople connect with their prospects as humans first on social media.
Want to see real-life examples of retention marketing? Check out retention marketing examples from 12 of today’s top brands.
When to use Retention Marketing Campaigns
As you start to put together ideas for retention marketing plans, consider launching one or more of following types of campaigns.
- Onboarding Campaigns: Design a system for welcoming and nurturing new customers and clients that gets them to the “WOW” moment. Create an amazing first impression that will stay with customers and keep them coming back.
- Active Customer Campaigns: Don’t forget about customers who are regularly coming back to your brand. It’s important to create strategies to continue to connect with and educate these dedicated customers, even if they seem like they aren’t going anywhere.
- Lapsing Customer Campaigns: Create campaigns specifically designed for customers who appear to be on their way out of the buyer’s cycle. These customers may be people with accounts or free trial offers that are about to expire.
- Re-Engagement Campaigns: A “lost” customer could be someone who opted out of a paid subscription or hasn’t returned to your business for more than a year. A re-engagement campaign works to pull them back in.
Customer Retention Metrics
Now that you know the benefits of customer retention marketing, let’s look at some of the metrics you need to know to launch a customer retention campaign of your own.
Customer Churn Rate
Customer churn is the rate at which customers stop doing business with you. This number helps you see the rate at which you lose customers. You can measure churn rates over various amounts of time, but it’s most often measured on an annual basis.
Find It: (Number of Customers at Start of Year – Number of Customers at End of Year) / Number of Customers at Start of Year
Revenue Churn Rate
Revenue churn rate is the percentage of revenue you lose as a result of existing customers canceling a service with your business. This is mostly relevant to SaaS and subscription businesses, as it helps them see the revenue they lose as a result of customers deactivating their accounts. In the equation, MRR is monthly recurring revenue.
Find It: (MRR Lost From Existing Customers During Month – New MRR Gained From Existing Customers During Month) / MRR From Existing Customers at Start of Month
Repeat Purchase Rate
The repeat purchase rate is the percentage of your customers who have bought from your brand more than once. It helps you see how many of your customers are returning back to your business.
Find It: Number of Returning Customers/Number of Total Customers
Return Website Visitors
Repeat visitors are the number of website visitors who have been to your website before. While this number doesn’t necessarily represent how many return customers you have, it can be helpful for determining how much of your audience is regularly engaged with your brand.
Find It: Use web analytics on your website and refer to new vs. returning visitor audience data to find this information.
Customer Lifetime Value (CLV)
CLV is the value that a customer gives to your brand over their lifetime of doing business with you. This number doesn’t help you assess your customer retention, but it can help you put a value on your retention marketing, as it shows how valuable it is to keep a customer around.
Find It: Figuring out the customer lifetime value is dependent on your business model. Learn how to calculate it here.
Net Promoter Score (NPS)
A Net Promoter Score helps you see how likely your customers are to refer someone to your business. To find this number, you have to survey your customers and ask them to answer the following question on a scale of one to 10: “How likely are you to recommend our company to a friend or colleague?” From their responses, you can calculate the number of promoters, passives, and detractors you have. Then you can use the formula to determine your Net Promoter Score.
- Promoters: Customers who answer the question with 9-10
- Passives: Customers who answer the question with 7-8
- Detractors: Customers who answer the question with 0-6
Find It: Percentage of Promoters – Percentage of Detractors
Retention Marketing Best Practices
Keep the following best practices in mind as you craft your customer retention strategies.
Don’t accept high churn rates as a given.
A mistake that many brands and marketers make is tracking customer churn rates but not doing anything about it. Many believe the churn rate is nothing more than a factor to consider in their financial projections. Don’t make this mistake. Track your customer churn rate, and then develop retention marketing strategies for decreasing it. Don’t just accept it as a static statistic in your business.
Collect customer data.
To remarket to your customers, you first have to know who they are. Use a client relationship management system to create profiles for your customer and collect information about who they are, how they act, and how you can reach them. Develop a system that collects customer contact information and data about their brand interactions (what they buy, how often they buy, and when they last engaged with your brand).
Put customer data to use.
Once you start collecting customer data, use that data to create strategic remarketing and retention marketing plans. Segment your lists, and use what you know about your customers to create lists based on characteristics and brand habits. Targeting in marketing helps you use the demographic and psychographic segmentation information you collect to send content, offers, and messaging based on what you know about customers. You can segment audiences based on brand engagement and past purchase history to provide suggestions for new purchases and options for cross-sells and upsells.
Provide top-notch brand experiences.
No amount of retention marketing is going to bring back a customer if they had a negative experience with a business the first time around. It’s essential to provide exceptional customer experiences to keep customers coming back for more.
- Deliver on what you promise. Never oversell or overhype the products and services you offer.
- Personalize the process. Use the customer’s name whenever you can to add a level of personalization to the experience.
- Focus on customer service. The customer experience doesn’t end once buyers make a purchase. Provide follow-up service and solutions that help customers past the checkout.
Focus on attracting the right customers.
An important part of customer retention actually happens in the customer acquisition phase. For you to retain customers, you need to attract the right customers in the first place. These ideal customers are a perfect fit for your brand. They have a need for what you sell, and they also align with your brand’s values. To ensure that you attract the best customers from the start, create a detailed buyer persona that outlines exactly who your brand wants to pull into the purchase funnel.
Keep up your brand visibility.
To increase the chances that an existing customer will return or stick with your business, keep your brand at the top of their mind. Show up where your audience spends time. Outside of your own platforms and media, seed your content in other places where your audience will find it. Look for guest blogging opportunities that allow you to get your brand name in front of your target market, and do a competitor keyword analysis to target top keywords your audience is using in search.
Focus on early customer engagement.
Don’t disappear once a customer makes a purchase. Once you make an impression on your audience, stay visible. After you send a welcome email keep a consistent presence with an informative email drip series, newsletters, or product announcements.
Make marketing engagement and retention fun for the customer.
Give your customers and audience a reason to return to your brand. Provide customer loyalty programs that offer rewards and prizes for continued support of your business. Also, incorporate gamification elements that make customers want to come back and earn status points and exclusive offers.
Regularly survey your customers.
A consistent part of your marketing objectives should be surveying your customers. The best way to understand how to better serve (and keep) customers is by asking them what they like, want, and need. Give your customers an opportunity to share their experiences with your brand, so you can find ways to improve the customer process as well as your products and services.
Support Retention Marketing with Strategic Data
Acquisition marketing is what pulls audiences into your purchase funnel and drives them to become new customers and buyers. This is an important part of marketing, but it’s just the beginning.
You also need to use retention marketing to keep customers in the buyer’s cycle and encourage them to return again and again. Focusing on the full customer lifecycle is how your brand will increase revenue while expending fewer resources, money, and time.
Use the tactics and tips in this post to leverage your existing customer base to grow your revenue. And get more help with planning strategic, holistic marketing campaigns by signing up for a free trial of Alexa’s Advanced Plan. Our competitor, SEO, and content research tools will help you set up smart campaigns for your entire customer lifecycle marketing plans.
This article was originally published in September of 2018 and updated on March 19, 2020.