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What is customer retention marketing — and how do you do it right?

By September 21, 2020 July 20th, 2022 CCG Retail Marketing Blog

The value of customer retention is at least equal to that of customer acquisition — and essential to any organization’s stability and growth. Learn effective strategies to increase it.

Article Highlights

  • Without a customer retention strategy, you may lose as many as 30% of your customers every year.
  • Customer retention can help lower marketing costs and increase profits.
  • Your customer data can help you spot and act on retention trends.
  • Customer experience is critical to long-term retention.

What is customer retention?

Customer retention and customer acquisition both involve engaging customers with your company. However, while acquisition is the practice of getting new customers in the door, customer retention is the act of getting them to return — of changing one-timers into repeat customers.


What is retention marketing?

If you think of your client base as a bucket, then acquisition marketing focuses on pouring water into the bucket, while retention marketing focuses on plugging leaks so the water stays put. Both are necessary if you want to keep the bucket full — and keep your company in business for the long term. Focusing solely on getting new customers gives you a steady stream in. But if you don’t plug the leaks, that stream just dribbles right out again, and you still wind up with an empty bucket and fewer profits.

There is no definitive formula to say what percent of your budget should focus on customer retention marketing versus customer acquisition. The answer depends on your company, your goals and your customers. But it is a mistake to apply your financial, time and personnel resources predominately toward acquisition — which doesn’t stop many retailers from doing exactly that.

Source: Invesp

Why is customer retention important and what are the major benefits?

Companies lose anywhere from 10% to 30% of their customers every year — more for online stores, says business solution developer Cincom. That’s a pretty big leak in the bucket. Paying more attention to customer retention can help lower those numbers. And it can benefit your company financially through lower costs and higher profits, further validating the importance of customer retention.

Click to enlarge.

Even if you replace the same number of customers you lose every year, you’re hurting your bottom line. The reality is, there is a cost to not only acquiring customers but also to building long-term relationships with them. Plus, when you have constant and significant customer churn, you have a smaller stable client base to rely on, which means less data on which to base business decisions, conduct research, make forecasts and so on.

And since we know it costs more to get those new customers than to keep them, by having to focus on acquisition, you divert money from other initiatives and needs.

Other customer retention benefits include:

  • Repeat customers obviously have a higher lifetime value; Invesp says repeat customers spend 31% more than first-timers and have a significantly higher likelihood of purchasing and of trying new products
  • Repeat customers refer friends and family
  • Your best returning customers become advocates who share and interact with you on social media
  • Data from long-time customers allows you to develop look-alike models to identify customers’ potential value

What is the average customer retention rate?

Customer retention rates vary by industry. For instance, the average customer retention rate is 63% in retail and 75% in financial services, according to ProfitWell. Why the difference? In general, it’s much easier for a customer to switch the stores where they shop compared to changing the banks where they have accounts they may rely on every day.

average customer retention rate is 63% in Retail
average customer retention rate is 75% in Financial Services

Source: ProfitWell

Knowing these benchmarks gives you a solid guideline when assessing whether or not your company has a good customer retention rate. Comparing yourself to an average helps you understand where your business stands compared to others in your industry. But it’s also important to benchmark your company’s retention rate and re-calculate it on a regular basis to gauge progress within your own universe. You can then use these measurements to inform your retention strategies going forward.

How can you increase customer retention?

To improve customer retention, you’ll need a strategic approach. In general, there are two tactics to consider:

  • Leveraging data to understand and act upon customer retention trends within your organization
  • Focusing on the customer experience to develop long-term relationships and build customer loyalty

Understanding Customer Retention Trends

With data analysis, you can track your customers, know which ones you’re keeping and which you aren’t, and understand customer brand loyalty and retention trends in your organization. For instance, by knowing your customers’ purchase journeys and purchase patterns, you can see when customers are most likely to return. You can also see when someone doesn’t repeat the pattern, signaling a potential loss of interest and a customer who is getting ready to defect.

With this information, you can shift your customer retention marketing strategies into lapsed customer win-back mode. That often means sending them special promotions, but could also include reminding them of what makes your brand unique and different. In short, your tactics need to revolve around giving the customer solid reasons to come back.

In this campaign, PETCO used a special offer and pet-specific copy to win back customers. They also developed a loyalty program to maintain long-term relationships.

Similarly, you can use data analysis to develop proactive customer retention programs. In this process, you can use past-purchase information to make your communications as targeted as possible. For instance, if you know a customer has shopped back-to-school in the past, buying girl’s footwear from Brand X, then send a message showing her this year’s BTS styles for girls, from that brand. In cases like this, you’re working to keep existing customers engaged and active by proactively reminding them of why they shopped with you before and the value you bring.

Developing Relationships and Maintaining Customer Loyalty

Creating great customer experiences and maintaining an ongoing dialogue are key to developing long-term relationships and then maintaining customer loyalty for the long-term.

Of course, there are many ways to create satisfying customer experiences, from superior customer service to “surprise and delight” gifts to reducing pain points or friction in the purchase process. Again, data analysis can help you understand which approach is likely to be most effective with your customer base or with different segments of your base.

Likewise, you can leverage your data to understand what motivates customers to shop with you. For instance, some segments may be motivated primarily by price, while for others it’s all about your convenient location, the quality of your goods or the values for which your company stands. You can use these insights to create relevant messaging and offers, or to develop and promote apps and other tools that speak to each group’s specific interests.

With this mailer, GAIAM® focused on shared values to develop a new customer relationship.

Ongoing communication is another keystone of your customer retention loyalty and marketing strategy. It’s helpful to create an annual content calendar that outlines when and how you’ll reach out to your customers. This may include tips and informational blogs, special offers and trigger communications. Many content plans are multi-channel. Still, it’s a good idea to identify your customers’ preferred communication channels so you can use those for the majority of your messages to that individual or segment.

Last but not least, remember that good relationships are built on two-way dialogue. Don’t just send messages outward — give customers ways to communicate with you, including periodic surveys, attentive customer service personnel and social media interaction. Not only will this help solidify your relationships, but it can also provide you with useful insight about customer behavior, preferences and problems.

How can you improve customer retention using loyalty programs?

Loyalty programs can relate to both understanding customer retention trends and developing customer relationships. After all, one great benefit of loyalty programs is that they allow you to gather large amounts of useful customer data. But it’s also a proven way to create great customer experiences and, of course, maintain customer loyalty.

Success Stories:

See how CCG helped another company create a customer retention and loyalty program that boosted visits, sales and profits. Read More

See how data analytics helped one company prove the value of its customer loyalty program. Read More

Loyalty programs can also justify themselves in direct dollars. Shopify reports that loyalty program members generate 12% to 18% more annual revenue growth than non-members. And they note that nearly three-fourths of customers are more likely to return to stores with loyalty programs.

Make Customer Retention Part of the Routine

Customer retention isn’t a once-and-done action. It needs to be an ongoing part of your overall marketing plan, so your company can benefit from the value of customer retention in keeping your revenue bucket full to overflowing.

We Can Help

Whether you’re wondering how to do retention marketing, how to measure customer retention or how to handle ongoing customer retention management, CCG’s retail marketing experts can help. Our full-service suite of solutions includes data collection and analysis, communication strategy and creation, loyalty program development and refinement, and much more. Request a free consultation today or call us at 303.986.3000 to start strengthening your customer relationships.

Sandra Gudat

Author Sandra Gudat

Sandra Gudat is CCG’s president & CEO. Considered a pioneer in the field of customer marketing, she has a diverse background in consulting, database marketing, advertising, retail and business management. She is a frequent speaker on customer loyalty marketing and developing customer-centric policies

More posts by Sandra Gudat

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