Customer Experience
Customer Retention: Importance + Proven Retention Strategies

Customer Retention: Importance + Proven Retention Strategies

Feb 08, 2024
15 min read

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8000+ teams use Hiver to delight their customers!

Show of hands – who wants to grow their business?

It’s a no-brainer, right?

And you probably intend to be in business for the long haul.

In order to do so, obviously, you need customers.

But what might not be so obvious is that you not only need to grow your customer base but also serve your existing ones well and keep them happy. Logically, you likely know this. But are you truly emphasizing customer retention in your customer service strategy?

After all, repeat sales are a business’ lifeblood. Your best customers will buy from you again and again — and you don’t need to spend more money to attract them.

When you focus on customer retention, you can form long-lasting relationships, increase your profits, boost loyalty, and benefit from more referrals from happy customers.

If you want your company to benefit from better customer retention, read on.

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Table of Contents

What is customer retention?

Customer retention refers to the ability of a business to keep its existing customers over a period of time. It is a critical aspect of a company’s overall marketing and growth strategy. Customer retention efforts focus on maintaining a positive and ongoing relationship with customers after their initial purchase or interaction with the business.

It’s about meeting customer expectations and building loyalty that encourages them to return to purchase your products or services over and over.

That loyalty, in turn, means that over the span of their relationship with you, you’ll be able to offer them greater value — and they will reward you by spending more, more often. As a result, you’ll increase each customer’s lifetime value (CLV),the total revenue you’ll earn from them during your business relationship.

In the end, it’s all about building trust.

And it’s important:

According to research from Harvard Business School, increasing customer retention rates by just 5% can grow a company’s profits by 25-95%.

It makes sense because companies are 40%more likely to convert customers who have already purchased from them than they are to convert new customers, and existing customers likely make up 65% of your business. 

Most businesses place a lot of emphasis on acquiring new customers. And that’s obviously important. 

But customer acquisition is only the first step.

New customer acquisition creates your business foundation, while your retention strategy helps you foster relationships and maximize revenue for each customer. 

You Might Also Like: 11 Excellent Customer Engagement Strategies

What is A Customer Retention Program?

A customer retention program is a structured set of strategies, tactics, and initiatives implemented by a business to maintain and strengthen relationships with its existing customers. The primary goal of such a program is to encourage customers to continue doing business with the company over the long term, rather than switching to competitors. Customer retention programs are an essential part of a company’s overall marketing and growth strategy.

Here are some key elements and features commonly found in customer retention programs:

  • Loyalty Programs: Loyalty programs are a popular component of customer retention programs. They reward customers for their repeat business with incentives such as discounts, exclusive offers, points, or cashback rewards.
  • Personalization: Tailoring the customer experience to individual preferences and needs through personalized recommendations
  • Value Addition: Continuously adding value to the customer’s experience through product improvements, additional features, or enhanced services can keep customers engaged and loyal.
  • Engagement Initiatives: Implementing engagement initiatives like contests, events, or user-generated content campaigns can foster a sense of community and loyalty among customers.

How to calculate your Customer Retention Rate?

The Customer Retention Rate (CRR) represents the percentage of customers your company is able to retain over time. It accounts for the number of new customers your company attracts as well as the number who churn — meaning those who stop purchasing, cancel their contracts or subscriptions, etc.

You can calculate your customer retention with this simple formula:

Customer retention formula
The formula to calculate customer retention

To illustrate:

Let’s say you started January with 900 customers. During the month, you acquired 280 new customers and lost 100 old customers.

Your CRR will be:

# Customers at End of Period = (900 customers on January 1 + 280 new customers – 100 lost customers) = 1080

((1080-280)/900) X 100 = 88.9%

A “good” customer retention rate will vary by industry,but if yours is increasing over time, you are on the right track.

Why is customer retention important?

There are many excellent reasons to focus on customer retention:

  • It’s up to five times cheaper to retain your current customers than it is to acquire new ones.
  • The probability of making a sale to an existing customer is 60-70% .
  • Retaining your current customers increases word-of-mouth recommendations and loyalty.
  • Existing customers are more likely to spend 30% more on a new product than a first-time customer.
  • A higher customer retention rate leads to greater profits and lifetime customer value (LCV).
  • Long-term customers can provide useful data and feedback for future brand campaigns and strategies.

Customer retention can suffer when you attract new customers and grow quickly but struggle to implement a strong customer service strategy as a foundation to support that growth.

The good news is that you’ve already done the hardest work by attracting those new customers. Once customers have purchased from you the first time, it is much easier to keep them happy.

Let’s look at some of the top ways you can do just that.

Ten actionable customer retention strategies

There are many excellent customer retention strategies you can use to encourage engagement with your existing customers and increase profitability with every transaction. This isn’t a comprehensive list, but you can use these proven strategies as a strong jumping-off point.

1. Provide value with every interaction throughout the customer lifecycle

The best way to keep your customers returning, again and again, is to keep them happy at every stage of the customer journey. That means you need a plan — a strong customer service strategy. Without one, too many opportunities to delight your customers are likely to fall through the cracks.

That’s significant because, in a study by PwC, 73% of participants responded that customer experience influences their purchasing decisions. 

CX influences customers' purchasing decisions
A large number of customers agree that CX influences their purchase decisions

So make sure that you are creating memorable experiences that keep your customers coming back. Get everyone involved. Establish your customer service vision and goals, map out your customer journeys, and involve everyone in optimizing each step. Finally, make sure you have a reliable way to collect feedback so you can measure your results and continually improve as needed.

2. Make your interactions tailored and personal

You may be familiar with the 4P’s of marketing.But the product, price, placement, and promotions are no longer the only reasons consumers buy. According to HubSpot research, 93% of customers will purchase again from companies that provide excellent quality customer service.

“Quality” in this case means understanding, having empathy, listening, holding real conversations, and creating memorable experiences. Customers want to feel good about the companies they buy from.

But providing excellent customer service can be time-consuming and costly, right? That’s why every business can benefit from customer service automation. Better efficiency will allow you to serve more customers faster. But automation can also let you do this without losing the personal touch:

  • Automatically route e-mails to the correct representative.
  • Provide an important first impression.
  • Reduce overall turnaround time for responses to issues.
  • Make customers feel valued and important.
  • Make your teams more efficient and happy.

Most of all, you can include personalization, which can lead to a 202% better email performance.  

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3. Give your churning customers special treatment

Customer churn is the rate at which your customers stop doing business with you. It’s a hot topic because reducing churn will dramatically accelerate your revenue growth.

Assume that your company generates monthly recurring revenue of $15,000. To that, you add an additional $2,000 every month. If today you have a customer churn rate of 3%, you’ll end up generating around $2.6 million over the next 5 years. Not bad!

Next, let’s say you lower your churn by 10%, to 2.7%. This now gives you an extra $100K in revenue. And if you’re able to reduce your customer churn by 30%, your revenue can go up to 3 million dollars. This is the power of reducing your customer churn.

So get proficient at reading the signs that your customers are about to leave. Maybe they have not opened their e-mails for a while, placed an order, or logged into the system. Or perhaps they had a poor customer service experience. They could have submitted support tickets or even complained publicly on social media. If you take a proactive approach, you can increase customer happiness and prevent many of your customers from churning.

Reasons for customer churn
Some of the most common reasons why customers churn
reducing customer churn

4. Reward your brand advocates

Word-of-mouth recommendations are still very powerful. Some of your customers will love you so much that they will tell everyone they know about your products or services. These super fans are called brand advocates. Their actual value to you is five times their lifetime customer value (LTV),according to Zuberance. That’s because they’re not only spending from their own wallets but are also referring you to their families, friends, and followers.

Word of mouth recommendations
Majority of buyers trust recommendations from friends and family

You can’t directly create brand advocates, but you can create conditions that encourage and reward them:

  • Be a part of the social conversation.
  • Give gift card, rewards and prizes that are personalized and relevant to their interests.
  • Donate cash or in-kind contributions to their favorite charities. 
  • Create exclusive offers, hold special events, grant them early access to new offerings, give them public shoutouts and VIP services.
  • Involve them in your new product planning processes.
  • Feature them in case studies and testimonials and podcasts. 

5. Solicit and implement customer feedback on a routine basis

Gathering customer feedback isn’t just a nice thing to do. It’s quickly becoming a business imperative.

The Harvard Business Review found that simply asking for customer feedback is enough to keepcustomers from churning — even when they don’t provide feedback.

Collecting feedback about customers’ experiences with your product or service can help product, customer success, customer support, and marketing teams understand what’s working and where there is room for improvement. You can collect feedback proactively by using a poll maker, customer surveys, interviews, interactive flipbook forms, or by asking for reviews.

Start with a clear goal. Do you want to build better products? Are you seeking input on new features? Do you want to get to the root of recent complaints? Once you know your reasons for gathering feedback, it will help you decide which methods to use.

Customer feedback importance
Importance of collecting customer feedback

6. Resolve customer issues and queries in a timely manner and to the best of their expectations

Research shows that about 60% of consumers won’t return to a brand after only a single poor customer service experience. But the situation isn’t hopeless. 67% of customers will stay if their issue is resolved during their first support interaction. So while your business can’t afford to make many mistakes, you can turn situations around if you fix them immediately. 

No one likes to deal with irate customers, but problems are inevitable. Your team can learn to embrace difficult situations and turn them around. Customers whose problems have been resolved to their satisfaction often become more loyal than they were before, thanks to theService Recovery Paradox.

Recommended reading

Remember that your customers are not random ticket numbers, they are people. You will succeed as long as you listen and put conversations and caring first. Empower your teams to offer creative solutions, and proactively work to reduce customer complaints before they happen.

Service recovery paradox
The service recovery paradox

7. Create a loyalty program

Depending on your industry, bringing in new customers can cost anywhere fromfive to 25 times more than selling to your current customers.

That’s why building customer relationships and inspiring loyalty is one of the most important things your business can do.

Repeat customers spend more, more often. A study fromBain & Company showed that the average return customer spent 67% more in months 31–36 of their brand relationship than they did in their first six months.

And the lifetime value of customers with an emotional connection to your brand is four times higher than average. 

Don’t leave loyalty to chance. Instead, create a customer loyalty program and automate it. Your customers will be happier, they’ll stay longer, they’ll refer more people and you’ll be more profitable.

8. Help customers achieve their goals by providing them the necessary tools and resources

Some of the best customer service happens when customers never need to reach out to you at all. Customers want to be empowered to solve their problems quickly, without having to reach out to you or wait for a response. As a matter of fact, a survey by Microsoft found that 90% of respondents said they expected organizations to offer a self-service online portal.

That’s why you need a knowledge base, a central online database or library of product, service, and company information that’s easily searchable and accessed by customers and employees alike. Knowledge bases often include information such as FAQs, product documentation, and help, as well as plans and pricing.

Your knowledge base must be easy to search and written in non-technical language. Not only do knowledge bases improve your team’s productivity by handling all of the most common and repetitive questions and problems, but they also make your customers happy. It’s a win-win solution.

9. Set clear expectations and follow through on your promises

Many customer complaints can be avoided simply by setting clear expectations and making good on your promises. Regular, clear communication is key, not just between the company and your customers, but also among all the departments involved in your customers’ experience.

Whatever you do, make sure that you set and communicate challenging but realistic goals, involving everyone who has a stake in delivering. Don’t make promises you can’t keep and don’t promise for other departments if you have no control over the outcome. Never overpromise or under-deliver. Always be authentic.

Finally, carefully track customer satisfaction metrics including your Net Promoter Score (NPS) and Customer Effort Score (CES) so that you can be proactive and re-engage customers before they leave for your competitors.

Customer service metrics to help improve customer retention
A few customer service metrics to help improve customer retention

10. Meet customers where they want

In today’s always-on online business environment, there are many places where your customers expect to engage with you. That’s why more than ever, you need an omnichannel customer support strategy.

It sounds like a lot of effort, but it is worth it. Customers who engage in omnichannel experiences spend 4% more in-store and 10% more online. 

Fortunately, you don’t need to be everywhere. That’s a common misconception (and impossible for most organizations). You don’t need a strategy to support all possible channels where customers could reach you.

Instead, meet your customers at the top touchpoints that matter most to them.

How do you find out what those are? Ask. Survey your customers. Then learn how to optimize each of your chosen support channels

5 Examples of Customer Retention

Here are five real-life examples of customer retention strategies implemented by various companies.

1. Loyalty Programs: Starbucks Rewards

Starbucks offers a loyalty program called Starbucks Rewards, where customers earn points for every purchase. These points can be redeemed for free drinks and food items. By rewarding frequent customers, Starbucks encourages them to continue choosing their coffee shops over competitors.

Starbucks Loyalty Program
Starbucks Loyalty Program

2. Customer Support: Zappos

Zappos is known for its exceptional customer service, including a 24/7 customer support hotline and a generous return policy. In fact, Zappos has a customer retention rate of 75%. 

The company achieves this by prioritizing customer satisfaction and support. 

A good example of this is how Zappos offers a 365 day return policy with free two way shipping. This way customers have a good year to assess the fit and function of their purchases and return it without any hassle.

3. Exclusive Content: Spotify

Spotify offers a free tier with ads and a premium subscription without ads. The platform uses AI to deliver highly personalized experiences to users. They leverage user insights to understand customer preferences and deliver unique recommendations based on their listening habits.

This gives users an incentive to stay subscribed.

4. Gamification: Nike Run Club

The Nike Run Club app gamifies running and fitness, allowing users to set goals, compete with friends, and earn virtual badges for achievements. This engagement tactic keeps users motivated to continue using the app and buying Nike products.

Nike's Gamification
Nike’s Gamification

5. Tiered Membership Levels: Hilton 

Hilton Honors, Hilton’s loyalty program, offers different membership tiers with increasing benefits like free nights, room upgrades, and late checkouts. The more a customer stays with Hilton, the higher their tier and the more incentives they receive, encouraging continued loyalty.

Hilton Rewards Program
Hilton Rewards Program

Keep your best customers around for the long haul

There’s no better way to ensure the growth and profitability of your business than to thrill the customers you already have, to inspire them to stick with you over the long term, and refer their friends. 

If your customer retention efforts have taken a backseat to new customer acquisition, there’s no better time than now to turn that around. Start measuring and tracking your CRR and use these ten strategies to keep your best customers happier, longer.

You’ll see the difference in profitability, customer loyalty, and happiness.

Leanne Regalla is a B2B conversion copywriter who helps SaaS, tech, and supply chain companies to build leads, trust, and industry authority. Visit her website at or connect with her on LinkedIn.

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