Retention Marketing: Strategies to Boost Customer Loyalty



Understanding Retention Marketing

Retention marketing has emerged as an immensely powerful modern business strategy for transforming how companies interact with and profit from their customer bases. As entrepreneurial competition proliferates and customer acquisition costs rise, retaining the customers you’ve already captured becomes not just a post-recession perk but a real necessity for almost any kind of sustainable growth. As with all marketing strategies, retention marketing is a discipline unto itself with well-evangelized best practices. From the many insights it offers, we’ve pulled together some intelligence on what retention marketing can mean for your business and what kinds of actions it can inspire.

Retention marketing is much more than just keeping an existing customer; it is a kind of customer relationship management that nurtures the customer-to-brand bond. It encourages customers to not only come back but to come back more often and to talk about your brand to others. It can do all this in part because it uses more than just direct, overt messaging and marketing to achieve its aim. Why invest in retention marketing at all? Because the old business adage of it being much cheaper to keep a customer than it is to find a new one still holds true. In fact, some studies raise the cost differential to as high as 1:10. And the potential revenue upside if you do keep a customer is huge. Customers who return are customers who tend to spend far more and far more often.

The distinction between retention marketing and customer acquisition is best understood by examining the different goals each one serves. The goal of acquisition marketing is to find and win over new customers. It accomplishes this by using attention-getting strategies that work at the top of the marketing funnel. The best acquisition marketers know that kindling interest in a potential customer can happen only through certain channels: advertisements, social media campaigns, and so forth. In comparison, retention marketing works at the bottom of the funnel and is aimed at customers who already have an established relationship with the brand. The most successful retention marketing campaigns focus on maximizing the number and quality of touchpoints between customer and brand after the sale has been made.

Financial Efficiency of Retention Marketing

Retention marketing isn’t merely about maintaining relationships; it is also about maintaining financial efficiency. Compared to acquisition marketing, it is just plain cheaper. To put it in perspective, acquisition marketing expenditures can encompass a number of different channels: SEO, PPC, and influencer partnerships, to name a few. The retention marketing toolkit, however, can be opened with a simple key: the brand itself. Email re-engagement campaigns, loyalty programs, and other such tools are profitable to the extent that they converse with individuals already inclined to do business with the brand in question. Data from Harvard Business Review even go so far as to quantify this profitability in stark terms: “You have a 60–70% chance of selling to an existing customer, compared to only a 5–20% chance of selling to a new one.”

Measuring Retention Marketing Effectiveness

Retention marketing attempts to ensure that satisfied customers keep revisiting happy experiences with your brand—in short, they attempt to keep customers from defecting. But how do you know if a retention marketing strategy is working? How do you assess its effectiveness? The answer, of course, is metrics—counting things. But what should you count? There are a number of different metrics you can look at, but here are a few important ones that everyone should consider.

The customer churn rate is the flip side of retention. It tells you the percentage of customers who no longer want to do business with you and have stopped doing so within a given period. A business that has a low churn rate has a business that has many repeat customers and that does well at retention. If your company has a high churn rate, you want to investigate and understand better what is going on behind the scenes. The repeat purchase rate is the measure of how many customers want to keep coming back and, ideally, to the same business. Businesses with high repeat purchase rates often have targeted and effective customer loyalty programs.

Tracking the average time between purchases can indicate the effectiveness of retention marketing. If customers take longer to purchase again, that may signal a need for more interesting marketing. There are many ways to look at marketing effectiveness; one of the simplest is to ask whether CLV is going up or down. If customer lifetimes are extending, if average purchase values are increasing, and if the time between purchases is shortening, then retention marketing is probably working.

Retention Marketing Strategies That Yield Results

Customer loyalty is essential to the success of any business. Therefore, marketers concerned with securing that loyalty must focus on effective customer retention strategies. Here are several of the most effective that deliver results. The first strategy is the use of loyalty programs. At their core, loyalty programs are a way of using customer data to tailor marketing methods to those individual customers. Programs use a variety of formats. For example, the use of a points-based system is a very popular method. E-commerce platforms are good examples of using such programs as retention strategies. Many e-commerce customers receive a tiered rewards system that encourages not only the program’s participation but also increased purchase amounts.

Reengaging with your brand through win-back campaigns can bring non-active users back into the fold. They target recent interactions, not the recent past. These campaigns, whether through email, text, or push notification, should aim to make a connection as the first step to re-engagement. They might not be casual consumers anymore, but this audience is still valuable. So what should these win-back notifications say or do? Here are some tactics and strategies (with examples) for how to pull off a successful win-back campaign.

Effective Use of Data in Retention Marketing

Retaining customers depends on effectively using various kinds of data, particularly zero- and first-party data, which customers share willingly. The types of data that we monitor most closely includes not just purchase behavior but also preferences and direct feedback. With these in hand, businesses are in a much better position to refine and constantly evolve both their products and the quality of the customer experience. The subscription service, by its very design, forces a business to think constantly about the customer experience.

Subscriptions That Allow for Changes and Pausing

Avoid rigid subscription models. The latest trend is subscriptions that allow for pausing and other adjustments. Customers who can modify a subscription when needed are far less likely to cancel. You might call this “subscription recalibration.” If that doesn’t sound enticing, it could also be described as “subscription maintenance avoidance.”

Engaging with Customers Across the Channel

Most businesses use several platforms to communicate with their customers. The average consumer now engages with brands on more than three different channels. Most businesses, then, must employ a system of omnichannel communications to reach their customers.

For businesses that use apps, push notifications and mobile communication opportunities are channels of instantaneous, personalized attention for users that keep them engaged and present in the moment of app usage. Pushing a notification at the right time, with the right offer, can even push a user back onto the app. Even with the medium being perfectly acceptable (which it is, in app-based business), these notifications have to be cultivated as respectful forms of user engagement that prioritize user convenience and push offers that are genuinely useful in the moment. “Retention” is a tricky word in business sleight of hand that has been touched up to appear more glamorous than it is. It has become something of a buzzword associated with the penultimate step of the marketing funnel, where every potential customer’s lead is counted in how many times that customer can be sold to after the initial sale.

Monitoring Metrics for Continuous Improvement

Monitor Your Metrics: Know how your campaigns influence key metrics like Customer Lifetime Value (CLV), repeat purchase rate, and churn. Make privacy and trust the core of your operations: Too much reliance on customer data for personalization can come off as creepy. Trust is hard-won; it’s all too easy to lose. Secure your data and process your marketing in a way that respects the privacy of your customers. If you do that, when the marketing pushback finally comes, it will be too late. Retention marketing today acts as a shield against that future. We’re doing it anyway in some form; we might as well do it well, profitably, and in a way that’s delightful for our customers.