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Why Customer Retention Should Be Your Main Priority


Customer acquisition cost (CAC) is on the rise for both B2C and B2B companies, thanks mostly to an avalanche of marketing activities and the need for brands to stand out in a crowded digital space. According to ProfitWell, CAC is up an astronomical 60% across the board.

To survive in a world of sky-high CAC, brands must re-examine their business strategy and shift their focus from acquisition to retention.

To help you jumpstart your customer retention efforts, we’ve detailed everything you need to know about the subject below. Not only do we cover the basics, but we also share strategies you can use to maximize your customer retention efforts.

What Is Customer Retention?

Customer retention is a key driver of growth. It’s the process of engaging your existing customers so that they continue to purchase your product or service. The best customer retention strategies enable you to form long-term relationships with your customers and increase loyalty.

The Importance of Customer Retention

There are two reasons why brands need to double down on customer retention — rising acquisition costs and ROI.

As we mentioned up top, CAC is out of control. In fact, it’s 5-25X more expensive to acquire a new customer than it is to retain an existing customer. The reasons for this are numerous but the bottom line is that marketing is getting harder.

As a result of today’s competitive market, it’s more important than ever to offset CAC by ensuring that the customers you do acquire stick with your brand.

The other reason to prioritize customer retention is that it dramatically boosts ROI, which in turn improves profits.

Here are reasons why customer retention is vital to success:

  • A 5% increase in customer retention can increase revenue by 25-95%.
  • Brands have a 60-70% chance of selling to an existing customer. Conversely, the probability of selling to a new customer is 5-20%.
  • Loyal customers are worth up to 10X the value of their first purchase. They’re also more likely to refer a product or service to their friends and family — the gold standard in customer acquisition because it’s free.

Now that we’ve explored why customer retention is imperative, let’s take a look at how to measure customer retention.

How to Measure Customer Retention

The good news is that the math isn’t hard! The less good news is that it does involve hunting down data. (Think of it as a great way to meet your coworkers.)

Customer retention is measured with customer retention rate (CRR). Specifically, CRR is the percentage of customers a brand has retained over a given period of time.

To calculate CRR, you first need to identify a period of time. The period of time you opt to use will depend on your business, but it’s common to evaluate this metric annually, quarterly, and monthly.

Once you’ve identified the correct period, you need to collect three piece of information:

  • Number of existing customers at the start of the period (S)
  • Number of total customers at the end of the period (E)
  • Number of new customers added in the period (N)

After you collect your data, drop the numbers into this formula:

((E-N)/S) x 100 = CCR

For example, let’s assume you had 125 customers at the start of a one-month period (S). During this period, you lost 5 customers, but gained 30 (N) new customers. This means at the end of the period you had 150 total customers (E).

Your CRR formula would look like this:

((150-30)/125) x 100 = 96%

This may be obvious, but the higher your retention rate, the better. Put another way, a high customer retention rate means you have more repeat purchases, and ultimately, more revenue.

Next, let’s examine strategies you use to improve your customer retention rate and start driving more growth.

10 Proven Customer Retention Strategies

The following are customer retention strategies and tactics that span the customer journey, from setting expectations to developing specific initiatives.

Lean into content-led commerce

It’s not enough to get your product into consumers’ hands, you have to also help them get the most out of their purchase. This is where content comes into play. To keep your customers coming back, create articles, ebooks, and videos that showcase interesting ways to use your product or that touch on related topics.

For example, beauty brands can create tutorials using their product. The same concept applies to brands that sell weight lifting supplements. They can offer their customers detailed exercise routines and tips on how to build muscle mass.

Implement a subscription program

Subscriptions deliver real value to consumers, which is one of the most important ways to keep them using your product.

The two main consumer benefits for using a subscription are convenience and cost savings.

Subscriptions are convenient because they give shoppers back time and brain space by ensuring their favorite products are delivered to their door. This frees them up to do things they actually care about.

Subscriptions are also cheaper than one-and-done purchases over the long term. It’s common for brands to offer 10%, 15%, and even 20% off products purchased through subscriptions.

If you’re interested in a subscription program, check out our quick-start guide. You’ll be up and running in no time.

Leverage a customer loyalty program

A customer loyalty program rewards shoppers for sticking with your brand. The more they purchase and interact with your company, the more they’re rewarded. This keeps customers coming back because they get more from the experience than your product.

Start texting

SMS is an eCommerce darling and it’s easy to see why. SMS engagement rates are six to eight times higher than email marketing rates and consumers say they actually prefer text messages to other forms of communication.

On a practical level, however, SMS can help you better communicate with your customers, which leads to an enhanced brand experience.

Some ways you can use SMS:

  • Order confirmation
  • Delivery updates
  • Calendar invites
  • Promotional coupons

Roll out reorder capabilities

One of the keys to retention is removing friction. Incorporating reorder capabilities makes it easier for customers to log on to your site and quickly purchase items. Here are some reorder options to consider:

  • Allow your customers to save and easily view their favorite items
  • Enable one-click reorder in your customers’ account history
  • Send “time to reorder” emails or SMS messages

Collect customer feedback

If you want to know how your customers feel about your brand — ask. A great way to start is to develop a customer feedback survey. You can use customer responses to diagnose friction points and then develop a roadmap to elevate problems. Put another way, you can proactively remove roadblocks.

Get personal

The goal of personalization is to make your customers feel special and valued. If done right, a personalized experience will keep your customers from dropping your product in favor of your competitors.

The great thing about personalization is that it builds on itself. The longer a customer stays with your brand, the more you learn about them and the better you’re able to personalize their shopping experience.

Offer incentives

Incentives are a time-tested way to keep your customers from churning. You can use discounts or coupons. In recent years, incentives around “anniversaries” have become popular. For example, you might offer your customers an incentive on their birthday or the day they started shopping with you. You can also provide a surprise free gift.

Be social

There’s a ton you can do with social media to build customer loyalty. Some of the most common tactics include:

  • Offering product support to solve customer headaches
  • Providing insights into your brand’s culture to build rapport
  • Sharing user-generated content about your product
  • Rewarding brand advocates with gifts and shoutouts

You can also use social media as a learning opportunity. Analyze what your customers are saying about your brand and product. You can spot positive and negative trends and work quickly to promote the good or mitigate the bad.

Invest in customer service tools

The more your brand grows, the harder it becomes to deliver the level of service your customers expect. By investing in customer service tools, you can collect data, streamline communications, and ensure service requests don’t fall through the cracks.

There are a ton of CS solutions out there. We aren’t going to detail specific platforms, but instead offer up a few CS technology tools and features you should consider.

Tools you should consider:

  • Help desk software to track customer requests
  • An all-in-one inbox for multi-channel support
  • A self-service help library for customers
  • Real-time communication tools (video, chat, and phone)

Final Thoughts

If you want to succeed in today’s competitive business environment, customer retention should be your No. 1 priority. Not only will it help offset high acquisition costs, it’ll drive growth and lead to better ROI. Even implementing a single customer retention strategy is guaranteed to pay for itself down the line.

Ready to maximize your subscription program? Contact us today to learn how Ordergroove can help you unlock your recurring revenue potential.

Special thanks to our friends at OrderGroove for their insights on this topic.
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