Customer acquisition can be significantly more costly than retention. In fact, it may cost up to five times more to acquire a new customer than to retain an existing one. Moreover, increasing customer retention rates by just 5% can lead to your profits going up by 25% to 95%, according to research by Bain & Company. These figures leave no doubt as to how important a robust customer retention system is. Effective plan for keeping clients on board involves multi-level efforts that include the right tools and well-designed communication campaigns to enhance customer experience and maximize ROI. Let’s get into the weeds of it.
In this article we’ll discuss:
How to approach the process of improving customer retention.
Essentials of an effective customer retention program.
Tools and strategies to improve customer retention efforts.
Assessing the landscape
Start by figuring out what your current customer churn and retention levels are. If they’re bad, it’s high time to stop the bleeding. If they’re decent, there’s surely room for improvement.
Key metrics for measuring customer retention include:
Churn rate: The percentage of customers who stop using your product or service during a specific time period.
Retention rate: The percentage of customers who continue to use your product or service over a specific period.
Customer lifetime value (CLV): The total revenue a customer is expected to generate during their relationship with your company.
Some essential questions you should be asking yourself are: How many customers return to your store on a (semi) regular basis to shop again? How many are keeping their subscription active (and continue using the product, as it signifies they actually need it and not just forgot to cancel which can happen anytime)?
💡 Despite research showing that nearly two-thirds of a company’s business comes from existing customers, 44% of them have a greater focus on acquisition, whereas only 16% focus on retention. This imbalance highlights a major opportunity for companies to improve their profitability by shifting more focus to retention strategies.
Switching priorities to increase customer retention rate
In business, sometimes less is more. Investing time and money into bringing as many one-time shoppers as possible simply isn’t a viable growth strategy for either retail or e-commerce businesses.
Loyal customers significantly outmatch new customers, spending 67% more (source). This statistic highlights the need to design and implement a good customer retention strategy that capitalizes on the most important assets you already have – your existing clients.
Shifting to an existing customer-first approach
You may do it without one, or you may need a dedicated Customer Success Team, working towards improving the customer experience overall. In any case, if you’re looking to decrease the number of people likely to churn, focus on the following:
Prioritize customer experience: Ensure that every interaction with your business leaves a positive impression. This includes everything from customer support to product quality.
Implement a customer relationships program: Reward your loyal customers with exclusive discounts, early access to new products, or other incentives to encourage repeat business.
Personalized communication: Use data to personalize communication and offers. Tailored messages that address customers by name and suggest products based on their previous purchases can significantly enhance engagement.
Solicit and act on feedback: Regularly seek feedback from your customers and act on it. Showing customers that their opinions matter can increase their loyalty.
For instance, Starbucks’ Rewards is a prime example of a successful customer relationship building program that generates repeat customers through personalized offers and rewards, resulting in increased retention and spending.
Switching to a customer-first mentality means recognizing the true value of your existing customer base and focusing your efforts on nurturing these relationships. By doing so, you can generate sustainable revenue growth from a source where it’s clearly most likely to come from.
Efficient customer retention strategies
So, what can you do to make sure you’re not leaving anything on the table? How can you take care of the customers you already have to make them feel appreciated, understood, while also not overwhelmed?
Here are strategies and approaches that will help you build customer loyalty and increase retention.
1. Loyalty program
Think of this program as a tool to collect information such as shopping preferences and customer habits and then use it to boost your sales.
➡️ Why loyalty programs work:
For example, Sephora’s Beauty Insider program offers tiered rewards that increase in value as customers spend more, encouraging ongoing engagement and higher spending. Members enjoy perks like exclusive discounts, early access to sales, free products and services, which significantly enhance their shopping experience and loyalty to the brand.
💡 As of 2021, American consumers, on average, were active in 7.4 loyalty programs (source), highlighting their popularity and effectiveness as a marketing tool.
How MessageFlow supports loyalty programs:
MessageFlow can enhance your loyalty program by allowing you to deliver personalized messages and offers across multiple communication channels. Whether it’s sending exclusive discounts via SMS, personalized offers through Email, or timely reminders via Mobile Push notifications, the platform ensures that your communication is consistent and targeted, keeping your customers engaged and loyal.
For instance, you can use MessageFlow to automate the sending of rewards notifications when customers reach a certain milestone in your loyalty program, or to send personalized thank-you messages that show appreciation for their loyalty.
2. Segmentation
Your customers are different – undecided, frequent shoppers, discount chasers, brand advocates, penny pinchers – those engaged in your communication, and those who aren’t. Considering this diversity, precise segmentation of your customer database is essential to increase the efficiency of your efforts aimed at improving customer retention.
➡️ Why segmentation works:
Segmentation allows you to tailor your marketing efforts to specific groups of customers based on shared characteristics. This can lead to more personalized and relevant communications, which are more likely to resonate with your audience.
Types of segmentation:
Demographic: Based on age, gender, income, etc.
Geographic: Based on location.
Behavioral: Based on purchasing behavior, product usage, and customer loyalty.
Psychographic: Based on lifestyle, values, and interests.
How MessageFlow supports segmentation
MessageFlow can enhance your segmentation efforts by integrating various data points to create detailed customer profiles. With MessageFlow, you can:
Automate the collection of customer data across multiple channels.
Use this data to create precise customer segments.
Send targeted messages that are personalized for each segment, whether through Email, SMS, or Mobile Push notifications.
For instance, MessageFlow can help you identify customers who have not engaged with your brand recently and send them tailored re-engagement campaigns. Or, you can target frequent shoppers with exclusive offers and discounts to reward their loyalty and encourage further purchases.
3. Opinion polls
Customer feedback provides you with valuable insights and shows people you care about improving your offering to better suit their needs, convincing them to stay.
➡️ Why opinion polls work:
Opinion polls and surveys are crucial for understanding customer satisfaction and areas needing improvement. According to research by Microsoft, 77% of consumers view brands more favorably if they proactively invite and act on customer feedback. By engaging with customers through polls, you demonstrate that their opinions are valued, fostering loyalty and trust.
Implementation
Automated Emails dispatched at scale as a one-time campaign, or perhaps at a preset time after each purchase, will streamline the process. Consider including an additional incentive in the form of a discount code provided upon the completion of the survey. This not only encourages participation but also drives future purchases.
Leveraging feedback
The opinions you collect can be used in various forms of marketing communication. For example, positive feedback can be featured in testimonials, case studies, or social media posts, while constructive criticism can guide product improvements and customer service enhancements.
How MessageFlow supports opinion polls:
MessageFlow can enhance your feedback collection efforts by allowing you to automate the process. Using the platform, you can:
Embed and send personalized survey invitations via Email, SMS, or Mobile Push notifications.
Automate follow-up messages to thank customers for their feedback and provide them with any promised incentives.
Analyze feedback data to identify trends and insights that can inform your business strategy.
MessageFlow can help you segment your customers based on their feedback, allowing you to send targeted messages that address their specific concerns or highlight improvements made based on their suggestions.
4. Product recommendations
This is a rather widely applied practice but in order for it to work effectively, you need to make these recommendations fit very well with the preferences, needs, and habits of your online store visitors.
➡️ Why product recommendations work:
Product recommendations are effective because they provide a personalized shopping experience, making it easier for customers to find products they are likely to purchase. According to a report by McKinsey, 35% of what consumers purchase on Amazon and 75% of what they watch on Netflix come from product recommendations This highlights how impactful personalized recommendations can be in driving sales and enhancing customer satisfaction.
Key elements of effective product recommendations
A well-designed product recommendation system includes various components to ensure relevance and engagement. These can be implemented on your website and through Email or Mobile Push notifications:
Products most viewed in a particular category: Showcase popular items to attract attention.
Best sellers: Highlight top-selling products to build trust and encourage purchases.
Similar products: Suggest alternatives that might better suit the customer’s needs.
Complementary products: Increase basket value by suggesting items that go well with what the customer is already considering.
Recently viewed products: Remind customers of items they showed interest in, making it easier for them to make a purchase decision.
By showing products that people are genuinely interested in, you can expect higher conversion rates, increased average order sizes, and strengthened customer loyalty. This approach helps in shortening the conversion time by making the shopping process more efficient and enjoyable.
How MessageFlow supports product recommendations:
MessageFlow can improve your product recommendation strategy by automating the delivery of personalized suggestions drawn from your CRM or another marketing automation tool via Email, SMS, or Mobile Push notifications.
5. Abandoned cart reminders
Sometimes it takes time for the customer to take that final step and complete the purchase. Since 2018, the global rate of online cart abandonment has been staying at around 70% mark. That’s a huge segment holding plenty of potential for conversion.
➡️ Why abandoned cart reminders work
Abandoned cart reminders are effective because they re-engage customers who have shown interest in your products but haven’t completed their purchase. Sending a well-timed reminder can recover a significant portion of these potential sales. In fact, research suggests that abandoned cart Emails show an open rate of nearly 40%.
Implementation
If you’re mostly focused on gaining new customers for your ecommerce business, a large portion of them may end up not spending with you as soon as you would perhaps expect. Instead, you most likely already have people with products in their baskets, who need an extra nudge to convert, significantly improving your bottom line.
How to set up abandoned cart reminders
Timing: Send the first reminder within an hour of cart abandonment, followed by subsequent reminders at 24 hours and 48 hours if the purchase hasn’t been completed.
Personalization: Personalize the Emails with the customer’s name and the specific products left in their cart.
Incentives: Offer incentives such as a discount code or free shipping to encourage customers to complete their purchase.
How MessageFlow supports abandoned cart reminders:
MessageFlow can boost your abandoned cart recovery strategy by integrating with a marketing automation system to deliver personalized reminders across multiple channels. The platform can help you with:
Email and SMS automation: Automatically send personalized abandoned cart reminders via Email and SMS.
Cross-channel approach: Reach customers through various channels, increasing the chances of recovering the sale.
Segmentation: Segment customers based on their browsing behavior and purchase history to tailor the reminders and incentives.
For instance, MessageFlow can play a role in automated workflows that trigger abandoned cart reminders at optimal times, ensuring that your message reaches customers when they are most likely to return and complete their purchase.
MessageFlow supporting your customer retention program
MessageFlow, a cross-channel communication platform, is designed to boost customer retention and customer success efforts by providing the tools you need to automate and personalize the customer journey. In essence, it allows you to:
Create personalized campaigns: Use data-driven insights to tailor your communication to each customer segment, ensuring relevance and engagement.
Set up cross-channel journeys: Integrate Email, SMS, RCS, and Mobile Push notifications into a cohesive communication strategy, ensuring consistent customer experiences across every touchpoint.
Reach customers across channels: Leverage Email, SMS, and Mobile Push notifications to ensure your message reaches your customers on their preferred platform.
Analyze and optimize: Continuously monitor the effectiveness of your campaigns with advanced analytics and make data-driven adjustments to improve results.
Talk to our communication experts today. Optimize your customer loyalty program, turning them into a seamless and efficient process, driving higher customer satisfaction, loyalty, and revenue.
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