Customer Retention Strategies: The Ultimate Guide and Examples

Customer Retention

Customer retention strategies can help your business retain existing customers and build long-term relationships. This is a particularly effective strategy because it’s more cost-effective to retain customers than acquire new ones. With the right CRM software, you can do this more easily than ever before.

This page will explain everything you need to know about customer retention strategies, explaining how they can help your business improve customer loyalty, enhance brand reputation, boost revenue, and generate valuable word-of-mouth referrals.

We’ll also show you top tips on how to nail your strategies, plus real life examples to help you see the best CRM strategies in action.


What is customer retention?

Customer retention is a metric for businesses to evaluate customer loyalty and overall success over time. To enhance customer retention, companies employ diverse tactics aimed at minimizing customer churn while improving customer experiences, ultimately fostering loyalty towards the business.

Customer retention is essentially the process of transforming one-time buyers into loyal, repeat customers, ultimately preventing them from seeking alternative options. The significance of long-term customers can’t be understated across various industries. 

If you run an ecommerce brand, it’s vital to keep existing customers actively engaged with your brand. Similarly, subscription-based businesses heavily rely on the number of retained customers, as it directly affects the success and sustainability of your operations.


Customer retention rate and other metrics

There are a number of ways your business can assess your customer retention, which we’ll explain below…

The customer retention rate

This is determined by dividing the difference between the total number of customers at the end of a specific period and the number of new customers acquired during that period by the number of customers present at the beginning of the same period.

Here's the revised formula:

Customer Retention Rate = (Total # of Customers at the end of the Period – New Customers Acquired) / Customers at the Start of the Period

As an example, suppose a company had 80 customers at the beginning of the year, acquired 20 new customers, and concluded the year with 60 customers. The calculation would be [(60 – 20)/80] x 100, resulting in a customer retention rate (CRR) of 50%. Smaller businesses generally target a minimum CRR of 20%, while larger insurance or media companies aim to maintain a CRR above 79%.

Once you’ve determined your customer retention rate, devising long-term strategies to improve and raise the percentage becomes more feasible.

The media and professional services industries exhibit the highest customer retention rates, as evidenced by a global survey conducted in 2018. 

This survey revealed that both industries boasted a remarkable customer retention rate of 84 percent. Conversely, the hospitality, travel, and restaurant sector recorded the lowest customer retention rate, standing at 55 percent.

Other customer retention metrics

Metric

Formula

What does it mean?

Customer Satisfaction (CSAT)

It’s often determined through customer surveys or feedback. CSAT scores help businesses gauge customer happiness and identify areas for improvement.

Measures how satisfied customers are with a product, service, or overall experience. 

Net Promoter Score (NPS)

NPS is determined through a simple survey question asking customers to rate their likelihood of recommending on a scale of 0-10. It provides insights into customer loyalty and serves as a predictor of business growth.

Assesses customer loyalty and advocacy. It measures the likelihood of customers recommending a company or its products/services to others. 

Churn Rate

The percentage of customers who discontinue using a product or service within a given period.

A high churn rate suggests that customers are leaving, impacting revenue and growth. Lowering the churn rate is important to maintain a stable and growing customer base.

Customer Lifetime Value (CLV)

CLV is the predicted net profit a business can expect to generate from a customer over the entire duration of their relationship. 

CLV is the predicted net profit a business can expect to generate from a customer over the entire duration of their relationship. 

Repeat Purchase Rate

 Repeat purchase rate measures the percentage of customers who make multiple purchases from a company within a given period.

It reflects customer loyalty and engagement. A high repeat purchase rate signifies satisfied and loyal customers, demonstrating a strong customer retention strategy.


Top 7 customer retention strategies and examples

These are the best customer retention strategies your business should consider using, along with real life examples from leading brands…

1. Provide omnichannel customer service

Providing omnichannel customer service is beneficial for customer retention because it allows businesses to offer support through various channels and in different ways. This approach is important because customers have different preferences and expectations regarding communication.

Your business can use multiple channels such as phone, email, live chat, social media, and self-service portals to provide support, and by offering diverse communication options, you can cater to customer preferences, ensuring accessibility and convenience.

To implement omnichannel customer service, you need appropriate software systems to manage and track customer interactions across channels. You also need sufficient material resources such as devices and infrastructure, along with trained human resources to handle customer inquiries effectively.

Meeting customers on their preferred channels leads to better engagement, personalized experiences, and seamless support, fostering long-term relationships and boosting customer retention. You should consider investing in this strategy to deliver superior customer experiences, gain a competitive edge, and ultimately drive business growth and profitability.

Omnichannel customer service: The Nike example

Nike offers various channels for customer support, including phone, email, live chat, social media, and a comprehensive self-service portal on their website.

Customers can reach Nike's customer support team through multiple communication channels based on their preference and convenience. They can ask questions, seek assistance with orders, request product information, or address any concerns they may have.

Nike's customer service software and systems seamlessly integrate customer interactions across channels, ensuring a consistent and personalized experience. Their customer support team is well-trained and equipped to handle inquiries efficiently, providing prompt and helpful resolutions.

Nike customer support
Nike offers many channels for customer support, making it easy for customers to fix issues

2. Build a strong loyalty program

Loyalty programs offer rewards, exclusive perks, and personalized experiences, fostering customer satisfaction and strengthening their bond with your brand.

Investing in loyalty programs benefits both customers and businesses. Customers benefit from convenient and accessible support, personalized experiences, and exclusive rewards. 

Your business will also benefit from increased customer satisfaction, higher retention rates, improved brand reputation, and increased customer lifetime value. The investment demonstrates a commitment to customer-centricity, differentiation from competitors, and long-term profitability.

Strong loyalty program: The Sephora example

Sephora's Beauty Insider program offers various benefits, rewards, and exclusive experiences to its members. Customers can earn points for their purchases, which can be redeemed for beauty products or special gifts. The program also offers access to exclusive events, personalized recommendations, and early product launches.

Sephora's loyalty program not only incentivizes customers to make repeat purchases but also enhances their overall shopping experience. By providing personalized offers, exclusive perks, and a sense of community, Sephora strengthens customer retention and loyalty. The program encourages customers to stay engaged with the brand, increases their lifetime value, and fosters a loyal customer base.

Sephora's reward program keeps customers incentivized to buy their products

3. Enhance customer onboarding processes

A smooth onboarding experience ensures that customers understand how to effectively use the product or service, feel supported, and see value from the start.

For your business, it leads to improved customer satisfaction, increased customer retention, enhanced brand reputation, and potential upselling opportunities. Investing in these resources demonstrates a commitment to customer success, drives loyalty, and contributes to long-term business growth and profitability.

Enhanced customer onboarding: The Slack example

Slack, a popular communication and collaboration platform, has a comprehensive onboarding process that helps new users quickly understand and use its features effectively.

When you sign up for Slack, you’re guided through a step-by-step onboarding journey that introduces you to key features and functionalities. Slack provides interactive tutorials, tips, and prompts to help you navigate the platform and understand its capabilities.

Slack also offers various resources such as help articles, video tutorials, and a dedicated customer support team to assist you during your onboarding phase. The combination of user-friendly interface, informative resources, and responsive support ensures that new users can easily adopt Slack and start experiencing its value from the beginning.

Slack onboarding
Slack makes it easy for users to get started and keep using the platform

4. Leverage social media for customer engagement

This allows your business to connect with customers on platforms they actively use and enjoy. Social media provides an opportunity to foster ongoing communication, build relationships, and create a sense of community, which enhances customer loyalty.

Material resources may include smart devices, computer infrastructure, and tools to manage customer interactions via social media channels, while human resources involve trained staff to provide effective support and engagement across channels like Facebook, Instagram, Twitter and LinkedIn.

Leveraging social media: The Glossier example

Glossier, a beauty and skincare brand, has built a strong presence on social media platforms such as Instagram, Twitter, and YouTube.

Glossier actively engages with its customers through social media by responding to comments, addressing inquiries, and sharing user-generated content. They use social media as a platform to showcase their products, share beauty tips, and create a community around their brand.

The brand also encourages customer engagement through interactive campaigns and hashtags, inviting customers to share their experiences and opinions. Glossier's social media strategy focuses on fostering authentic connections and building a loyal customer base through continuous engagement and personalized interactions.

By leveraging social media for customer engagement, Glossier strengthens customer relationships, increases brand loyalty, and ultimately enhances customer retention. The brand's active presence on social media allows them to stay connected with their audience, address customer needs, and create a sense of belonging within their community.

Glossier instagram
Glossier's social media presence keeps its customers interested and coming back for more content

5. Improve responsiveness

Improving responsiveness is beneficial for customer retention as it demonstrates a commitment to customer satisfaction and builds trust. Promptly addressing customer inquiries, concerns, and issues creates a positive customer experience, which leads to increased loyalty and repeat business.

Responding to your customers through different channels and in various ways is important because it caters to different customer preferences. For example, you can respond to customers quickly via phone, email, live chat, social media, self-service portals, and in-person interactions. The necessary software includes customer support platforms that integrate and manage interactions across channels.

Improving responsiveness: The Amazon example

Amazon offers a variety of channels for customer support, including phone, email, live chat, social media, and self-service options through their website and mobile app. They prioritize responsiveness and aim to address customer inquiries and issues promptly.

Through their “Contact Us” page, customers can choose their preferred method of communication and receive support from Amazon's customer service team. Also, Amazon has a strong presence on social media platforms, where they actively engage with customers, respond to queries, and provide assistance.

By providing support through multiple channels, Amazon ensures that customers can reach out in ways that are convenient for them. This approach enhances the customer experience, builds trust, and contributes to customer retention. Customers appreciate the availability of different support options and the timely responses they receive.

Amazon's investment in the necessary software, material resources, and human resources demonstrates their commitment to providing exceptional customer support. This dedication to responsiveness and multi-channel support has contributed to Amazon's reputation as a customer-centric brand and has played a significant role in their success and customer retention.

Amazon responsiveness
Amazon prioritizes quick responses to reassure customers they're in good hands

6. Seek feedback (with surveys) and embrace change quickly

Seeking feedback via surveys and embracing change demonstrates a commitment to improving customer experience and meeting their evolving needs. Surveys provide valuable insights, allowing your business to identify areas for improvement and make necessary changes to enhance customer satisfaction.

With surveys, your business can gain valuable feedback, identify pain points, and make informed decisions to enhance the customer experience. You may need to invest in human resources, i.e. training your staff, to provide effective surveys and gather feedback across channels. 

Seeking feedback: The Airbnb example

Airbnb regularly collects feedback from its users through surveys and ratings after each stay. They gather insights on various aspects such as cleanliness, communication, and overall experience. Based on this feedback, Airbnb makes continuous improvements to their platform, policies, and customer support.

Airbnb's commitment to listening to customer feedback and embracing change has led to enhancements in their booking process, safety measures, and host standards. They actively implement updates based on user suggestions, ensuring that their platform evolves to meet customer expectations and preferences.

By actively seeking feedback and making meaningful changes, Airbnb enhances the customer experience, instills confidence, and fosters customer loyalty. Users appreciate the opportunity to have their voices heard, and they see the direct impact of their feedback on the platform. This customer-centric approach has contributed to Airbnb's success and customer retention as users feel valued and supported throughout their booking journey.

Airbnb survey
Airbnb always gathers feedback in order to provide a better customer experience

7. Do personalized marketing (targeted ads and emails)

Personalized marketing enables your business to create targeted and tailored experiences for individual customers, which is one of the most effective ways to retain customers. By analyzing customer data and preferences, you can deliver relevant content, recommendations, and offers that resonate with each customer, increasing engagement and loyalty.

Overall, customers benefit from accessible and convenient content, tailored to their preferred channels. Your customers receive personalized assistance, quick issue resolution, and an overall enhanced customer experience, while your business gets improved customer satisfaction, increased customer retention, stronger brand loyalty, and the potential for cross-selling or upselling opportunities. You can achieve this with an email marketing CRM.

Personalized marketing: The Netflix example

Netflix uses sophisticated algorithms to analyze user data, including viewing history and preferences, to provide personalized recommendations. By tailoring content suggestions to individual users, Netflix enhances the customer experience and encourages continued engagement with the platform.

Also, Netflix personalizes its marketing efforts by sending targeted emails and notifications to subscribers based on their viewing habits. They provide personalized content updates, recommendations for similar shows or movies, and reminders for upcoming releases, keeping customers engaged and interested in the platform.

By leveraging personalized marketing, Netflix strengthens customer retention by offering a highly curated and relevant viewing experience. Customers feel valued and understood, which increases their loyalty to the brand. The ability to deliver personalized recommendations and tailored marketing messages contributes to Netflix's success as a leading streaming service and plays a significant role in their customer retention efforts.

Netflix
Netflix uses your choices to personalize it ads and emails

How can you leverage technology for customer retention?

There are three main ways to build your customer retention, which we’ll explain in detail below…

Use a customer relationship management (CRM) software

Using a CRM system helps businesses retain customers through data gathering, database management, and targeted marketing. CRM software like Salesforce, HubSpot, and Zoho enables efficient data collection, centralization, and personalization. It also offers database management features for segmenting customers. 

Additionally, CRM systems like Zoho support personalized messaging and automated marketing campaigns. They also integrate with ticketing systems, ensuring prompt customer support. 

Examples of CRM systems with customer service functionalities include Zendesk and Freshworks. By leveraging CRM software, businesses can enhance customer retention through data-driven strategies and efficient customer management.

Automation and personalization tools

Automating tasks and personalizing the customer experience can significantly contribute to customer retention by enhancing efficiency, offering consistent messaging, and providing personalized customer experiences.

By automating tasks and personalizing experiences, businesses can create a seamless and tailored customer journey. CRM software acts as a powerful tool to manage and optimize these efforts, resulting in improved customer satisfaction, loyalty, and ultimately higher retention rates. Choosing the right CRM software depends on your specific requirements, scalability needs, and budget considerations.

Analyze customer data for insights

Analyzing customer data helps businesses understand customer behaviors, preferences, and patterns, which is essential for effective customer retention strategies. By gaining insights from data, businesses can personalize experiences, identify trends, and make data-driven decisions to enhance customer satisfaction and loyalty. 

CRM systems play a vital role in data collection, storage, and visualization, offering tools such as dashboards and reports to help businesses track key metrics and monitor customer interactions. 

Examples of CRM platforms with robust data analytics capabilities include Salesforce, HubSpot, and Zoho. By making data analysis a core component of your customer retention strategy and leveraging CRM software, businesses can continually adapt and improve their customer experiences, leading to stronger customer relationships and higher retention rates.


Verdict

In short, a well-executed customer retention strategy is vital if your business wants long-term success. By prioritizing customer satisfaction, implementing personalized experiences, and leveraging data-driven insights, your business can foster strong customer relationships and increase loyalty.

CRM software plays a pivotal role in supporting customer retention efforts, enabling effective data gathering, segmentation, targeted marketing campaigns, and streamlined customer service. Some of the best CRM platforms, such as Salesforce, Zoho and HubSpot, offer robust CRM solutions with comprehensive functionalities to support customer retention initiatives. 

Investing in a CRM system empowers your business to optimize customer interactions, improve retention rates, and drive sustainable growth. 



FAQs

How do customer retention strategies differ from customer acquisition strategies?

Customer retention strategies focus on maintaining and nurturing existing customer relationships, while customer acquisition strategies aim to attract and convert new customers.

How long does it take to see results from customer retention strategies?

The timeframe for seeing results from customer retention strategies can vary, but businesses may start observing positive impacts within a few months. However, significant results often require consistent effort and nurturing of customer relationships over time.

What are some cost-effective customer retention strategies?

Cost-effective customer retention strategies include personalized communication through email marketing, loyalty programs with incentives for repeat purchases, social media engagement, proactive customer support, and gathering customer feedback to improve the customer experience.

How can I measure the success of my customer retention efforts?

The success of customer retention efforts can be measured using key performance indicators (KPIs) such as customer retention rate, repeat purchase rate, customer lifetime value, customer satisfaction scores, and Net Promoter Score (NPS). CRM software can help gather and analyze customer data to track and monitor these metrics.

Written by:
Dan’s a Senior Writer at Expert Market, specialising in digital marketing, web design, and photocopiers, amongst other topics.