How to develop successful customer retention strategies and programmes

Customer retention is the key to higher profits for your business. Existing customers bring in most of your revenue, and these same customers will bring in the majority of your future revenue too. But many organisations do not think that customer retention should be their marketing team’s main focus. In fact, only 18% of businesses claim that retention is their prime marketing focus, whereas more than double that number, 44%, claim that acquisition is their top priority. However, the same study states that well over 70% of businesses say they know that customer lifetime value is crucial to their operations.

Perhaps the term “existing customer” lulls businesses into a false sense of security. It assumes their loyalty is stable and unwavering, but your competition is willing to do all it takes to become an industry leader. With the increased visibility of consumer reviews driving a booming competitor analysis market, you’d better bet that there are businesses out there ready to take advantage of your complacency.

Even your most contented customers have a constant stream of information, offers and deals working away at their loyalty. We know that companies consistently prioritise acquisition over retention, so you can be certain that there are plenty of competitor marketing tactics working away at your faithful customer core.


What is a customer retention strategy programme and why it is important?

The best way to combat this is to put some love into your customer retention strategy.

Think about your customer segments and how you can use different methods to retain each group. How diverse is your customer base in terms of its identity? How do they access your products? What social media do they use? What channels do they prefer? Do you regularly collect, and listen to, customer reviews? You should have a plan for reaching every single one of your customers to make them feel good about the relationship they have with you. Are you able to guarantee that each of your customers is:

  • Thanked for their purchases?
  • Given useful information that helps them use what they’ve bought?
  • Asked to review their purchases?
  • Acknowledged when it’s their birthday?
  • Offered deals that only loyal customers get?
  • Invited to join an online community?
  • Asked to be a brand ambassador?
  • Rewarded for referring a friend?
  • Shown the ethical difference their purchase might make?

If you can’t answer yes to the majority of these points, then you don’t have a retention strategy, or programme. You might have retention activity, but a strategy or a programme is consistently agreed, planned, resourced, costed, and measured activity that involves senior input and decision making. It’s as fully accountable to facts and figures as any other activity in marketing (but more on the mathematics of this later). Meanwhile, let’s look at some of the key areas that customer retention strategies can grow out of, and some great examples of companies doing retention justice.

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What makes your customers loyal to your brand?

Depending on the brand, product and an individual’s priorities, there are some broad areas where good performance generates loyal behaviour.

1. Customer service

Good customer service is one of the most important things you can invest in. Many consumers will happily pay more for exactly the same product if the customer service is known to be good. Even if there is difficulty with the product (malfunction, wrong thing delivered, confusion with instructions), good customer service means that you are not condemned to a poor review. A well-trained customer service team absolutely has the capacity to turn a gnawing frustration into a genuinely satisfying human encounter. This is as true for online as offline and, despite our reputation for first-class online customer feedback management, Feefo can also help you collect in-store feedback too.

Customer service reputation is big business now, with subscription services like Which? offering awards to great examples of customer service across the marketplace. 2021 is the year of Marks and Spencer, as the retailer placed in the Institute for Customer Services' top five customer service rankings twice for both its clothing and homestyle outlets and its food stores.

2. Product

Sometimes product innovation can play an important part in a successful customer retention strategy. There are plenty of big-name companies out there that have adapted to what their consumers want. Innocent Drinks received thousands of requests from existing customers and people who wanted to enjoy its products but did not like or couldn’t eat bananas. When they marketed the new product on Twitter, they made it clear that it was the result of consumer input, positioning the brand as one that took feedback seriously. Feefo’s Insight Tags feature allows you to track what topics your customers are talking about – it may be that they have potentially successful suggestions for your existing products or even a new one altogether.

Customer retention through product can simply be a matter of quality and value. If you look at the top 50 products on the Which? list for 2020, it ranges from cars to cameras and kettles. Products are evaluated on how their design deals with everyday problems and how much value they present. Prices start at £12 for an Asda kettle that, according to Which?, looks good and works quickly and reliably for its small cost. At the top of the list is Apple’s wireless AirPods. Apple products and wireless/cordless products feature heavily on the list, but the reviews focus on the initial market scepticism consumers held towards the AirPods because they weren’t trusted to stay inside the ear of the wearer. However, Apple proved consumers wrong, and headphone tangles became an inconvenience of the past.

3. Company values

For some consumers, service and product are only part of the picture. Amongst younger consumers especially, a company’s ethics are a big motivator. They expect a lot from big brands and won’t be easily placated with a marketing campaign that doesn’t reflect true engagement on behalf of the brand.

TOMS, Netflix and Ben & Jerry’s are all examples of businesses that go beyond surface-level campaigns to fulfil their social missions.

TOMS channels one third of its total profits into “grassroots” efforts to improve people’s lives – from their famous “one for one” pair of shoes donated for every pair bought, to environmental and racial justice. The brand gives to organisations already working at a community level as the brand believes those groups are best placed to know the needs of the community they serve. Accountability to consumers is clearly a big priority, with the latest annual impact report on its not-for-profit work front and centre on the TOMS homepage.

Netflix combines the nature of their product as a media platform to provide increased exposure for Black filmmakers. The brand has a collection devoted to Black Lives Matter, and 2% of its total cash holdings are to be channelled into supporting the black economy to develop. That’s a total of $100 million, so not exactly a cosmetic gesture.

Ben and Jerry’s has been mentioned here before – the organisation has proven its commitment to the LGBTQ+ rights through a long history of activism on the matter. It was the first company in Vermont to offer equal benefits to same sex couples. This was in 1989 at the height of the AIDs crisis when sadly this wouldn’t have been a celebrated decision. Ben and Jerry’s has also come under fire from the right-wing Twittersphere more recently, as the brand criticised Home Secretary Priti Patel for suggesting that the Royal Navy should be used to turn away refugees in inflatable dinghies and send them to France. Some customers will turn away from a company that takes a controversial stance, but many will see it as a reason to stay.

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So, what activities can you plan into your strategy to keep customers coming back?

Loyalty programmes

There are all sorts of different loyalty programmes, so make sure your priorities are clear. What exactly are you trying to get out of it? A loyalty programme that is designed to increase brand awareness and engagement is different from one designed to drive up the number of annual purchases of an existing customer. Loyalty programmes can be expensive, but the benefits are clear. Sephora is an international cosmetics retailer, and its Beauty Insider programme has 25 million sign-ups. These same individuals account for a staggering 80% of Sephora’s annual income.

Marketing campaigns that stand out

Creative campaigns help your brand stand out, but that type of creative thinking is often reserved for acquisition campaigns. LEGO is a company that is constantly innovating and communicating clearly with existing customers so that they know they are part of something bigger and more important. For example, LEGO has just released its first Braille Bricks product to support children with vision impairments to learn to read braille through play.

Become a thought leader in your field

It is unusual now for an organisation not to put itself out there and try and be a guiding example for others to follow. A brand should want to be the industry benchmark for their product – whether that’s cat food, agile marketing, eco-packaging, or sound systems – and show others how to propel their businesses forward. That might mean sometimes brands need to provide nuts-and-bolts ‘how to’ content for less experienced businesses and other times more philosophical think-pieces for those companies who have been around for a while.

Email marketing

No customer retention programme would be complete without mention of a well-planned and well-segmented email strategy. Email is cheap, easy to personalise and track. Most of all, tools exist that will enable you to create an entirely automated system whereby emails can be sent only if a customer takes a certain action.

Emails represent a high return on investment; some sources cite that for every $1 spent on emails there will be a $42 return. That’s why SMEs rely on email as the main channel for 80% of their customer retention activity. As email has been used for such a long time, there are some solid facts and figures around which approaches are most successful – so you’re not grasping in the dark.

As email is free, it’s a great medium for testing. If you notice a particular theme is coming up in your customer feedback, why not think of a way to address it through email? And if it doesn’t work, no money has been wasted!

Customer communities

For your biggest, geekiest fans, an online community might be the way forward. This can be the perfect way to engage those customers who are really invested in your brand as part of their identity. LEGO, again, has really understood its cult appeal to so many. LEGO Ideas allows enthusiasts to give feedback on proposals for new models, rate their favourites, and submit their own ideas to be reviewed in turn.

Online communities are a great way to positively channel strong feeling towards a brand – as there is some evidence to suggest that this level of engagement can turn sour if there isn’t a healthy outlet for it.

Engaging content

While not everyone is going to have that “viral” moment, it is important to entertain your loyal customer base. Consumers are beginning to expect entertaining content across all the channels they use. That might be social media and there are certainly plenty of examples of brands killing it on Twitter, but the odd slick tweet doesn’t cut it anymore. The age of “event” adverts is still with us – think how many people look forward to the annual John Lewis advert. Consumers are starting to expect that on a smaller scale more frequently as brands compete for attention.

A good advert from a well-known brand can rack up millions of views, but there are other ways to entertain. Nearly 60% of people have listened to a podcast and brands are hopping on the bandwagon to market and to entertain with some quality material. This toothpaste brand has cleverly created a series of four-minute-long podcasts for consumers to listen to as they brush their teeth.

Happy employees

Your employees are all representatives of your brand and its values. Unfortunately, for many businesses, this is seen just as an issue of training staff to do and say the right things, with little attention to the working conditions of employees. However, showing that you value and respect your staff, care about their wellbeing, and want them to make progress in their careers, is a company value. It’s just the right thing to do, but it also will benefit your business in the long run too. A happy employee is an ambassador for your brand, and they will work better and harder if they feel secure and valued in their work.

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Time for the facts and figures

It’s important that you can track and evaluate how effective your customer retention strategies are, and that all starts with your customer retention rate (RR).

Retention rate calculation

You’ll need some key pieces of information:

  1. CE: This refers to the number of customers at the end of a fixed period of time
  2. CN: The number of customers acquired during a fixed period
  3. CS: The number of customers at the start of a fixed period

These three units can be fed into a formula to find your customer retention rate (RR) in the form of a percentage:

RR = ((CE-CN)/CS) x 100

The higher the RR, the better, unless some other figures are out of line...

Another metric to take into account is Lifetime Customer Value – this is the net amount of money a consumer spends with you over time. If the retention costs do not leave you with a healthy profit margin here, then you may be investing in keeping the wrong type of consumer. Some customers are worth more than others, as some are harder and more expensive to keep. This is why some degree of customer churn isn't the end of the world. It wouldn’t be profitable, or even possible, to try and keep every single existing customer onside. 

How often should this be checked?

The majority of businesses will re-calculate their RR after regular fixed periods, some every six weeks and some every quarter with a bi-annual review. Highly attuned companies, however, will look at their key figures on a daily and weekly basis, addressing any emerging trends quickly and aggressively.

Conclusion

Customer retention should be at the heart of your marketing strategy and the strategy you develop should be reviewed frequently. Done properly, it will improve your profits and reduce your dependence on new acquisitions.

The term “existing customers” is not particularly helpful as it implies that your customers are just sitting there, waiting until they decide to buy from you again. That’s not the case, they are surrounded by marketing messages begging them to make a different decision and it’s your job to make sure they don’t work. Show your customers that they are appreciated. Spend a little money on them and make them feel special. These approaches are tried and tested and the efforts you make will be effective.


Net Promoter® and NPS® are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.


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