Who hasn’t heard the ole words of wisdom? It costs much less to retain a customer than acquire a new one. While both are important in their respect, helping businesses beat the new competition and stay relevant in a rapidly evolving market, putting together a customer retention strategy has high-reaping rewards.

Let’s look at how you can get started with tracking and building marketing strategies to improve this metric.


Customer retention is defined as a company or a brand’s ability to retain customers over time. It is a metric calculated based on customers acquired and maintained over a defined period such as annually, monthly, etc.

A few intervening steps in the calculation of customer retention rate and help you understand it are:

  • Consider a length of time, for example, quarterly.
  • Use the following formula to calculate %

Once you’ve determined your company’s customer retention rate, consider performing a factor analysis to identify reasons for churn. Why are they leaving? What makes them stay?

The myth that it costs more to acquire customers than retain them has long been debunked in 2003 in a book called Loyalty Myths, yet you’ll see it hammered over and over again in business blogs. The reality is far more complex. Customers today are a broad mix of spending habits and demographics. While it is profitable to focus marketing efforts on high spenders, an effective customer retention strategy needs to be multi-pronged, targeting all customer buckets.

Here are a few strong benefits of building an airtight customer retention strategy:


1. Loyal customers are more profitable

A business that rewards loyalty will have customers who spend 67% more on average with them than new ones. They’ll be more open to trying out something new done by your brand, not as susceptible to price changes compared to new ones, and they’ll stick out for the long term.

It also ensures your brand beats out the new competition by building strong brand affinity based on the pure patronage of loyal customers. Think about the brands that have persisted over the years, and then think about those who fizzled out as soon as they arrived?

2. Grow your word-of-mouth referrals

Do not underestimate the power of word-of-mouth. People might be in and out of isolating lockdowns, but virtual social interactions are higher than ever. On average, word-of-mouth drives $6 trillion in global revenue and is responsible for 13% of all sales.

Moreover, high-spending generations like Millennials and GenX are more likely to discover brands through recommendations from friends and family.

Take Starbucks Rewards Program, for example, which attributed 40% of its total sales in 2018 to the app-based loyalty program. The investment made in building a customer loyalty program has boosted repeat purchases and average spending amount among both regular and occasional customers.

Have you recently opened a real estate firm? Set up a referral program to incentivize financial advisors to recommend your services to first-time homebuyers who come to them looking for mortgage approvals.

3. More customers will explore your brand

Existing customers are 50% more likely to try newly launched products and services than new customers. You have acquired their trust in your brand, and they are willing to bet their hard-earned money on anything fresh you’re doing.

They are more likely to feel excited and unique to be given exclusive access to new products. Engage them in ways that will make loyal customers feel rewarded for their willingness to stick with a brand. In a world where people are looking for the next new thrill, it takes a lot to keep customers around.

4. Retention is cost-effective

While the adage has been debunked more than once, the underlying element still holds true. Retention is more cost-effective and economically viable in the long term compared to acquisition.

However, it may not be easy to hack.

Depending on your industry of choice, a tactic may work or not. Consider a car dealership, for example, you want to get a new car every three years because you like to change things up occasionally. What’s going to make you choose one car dealership over another other than the brand of car they sell? Stellar customer service? Attractive discounts? Freebies? Exclusive customer events?

The list is endless. While a clothing retailer can get away with sub-par customer service, a car dealership will certainly not be able to.

Now that we know why we need to steer our attention to customer retention, here are a few proven and tested best practices to get your small business started on this journey.


1. Highlight case studies

Testimonials and case studies can help you determine whether your prospect and you are a great fit to begin with. Prominently feature case studies and testimonials on your website to make it easier for prospective customers to understand what kind of customers they cater to.

Case: Ahimsahome.com is a company that sells steel utensils specifically designed for children and certified by reputed Pediatricians. The brand is bringing the ancient wisdom of serving food in metal containers to the plastic-dominated Western market.

To drive the effectiveness of using utensils, Ahimsahome has included various scientific case studies and a section dedicated to reviews and feedback on product pages. Backing their product with evidence and positive word-of-mouth, they’ve demonstrated a strongly convincing way to introduce a new concept to a market and ensure their loyalty.

Creating a website that is easily navigable and accessible can go a long way in helping your star customer find what they want with as little friction as possible, as Ahimsa has shown here.

2. Set the right expectations

Avoid miscommunicating, overpromising, or completely omitting what customers should expect from your brand. If you offer a generous 90-day return policy, commit to it. It can easily make customers upset and switch to a competitor.

Going back to the example of a car dealership, as a new customer, you might expect to be offered freebies and an attractive discount on your new car. If you’re an existing customer who has bought from the dealership a couple of times in the past few years, you’d be expected to be prioritized over new ones and treated as such with ‘white glove’ customer service.

Expectations are different for new and existing customers, so set them accordingly.

Product demo videos are a simple and cost-effective content vehicle to communicate various use cases and the benefits of your offerings. They can help explain complicated features in a way your target customer understands.

3. Communicate results consistently 

You’ll secure a customer’s loyalty if they believe your company is consistently delivering results for them. If they can easily support their view with facts and data, it’ll be that much challenging for them to switch.

This means get your number game in order by ensuring you’re closely tracking and monitoring key metrics which directly relate to your goals of improving customer retention and acquisition.

Transparency is key. Share how your team progresses with each objective by using a dynamic project management tool to empower clients with knowledge and visibility. Who knows? They might be hyping you up to your next client!

4. Proactively ask for feedback 

So, do you have a concerning customer retention rate? What do you do first?

There are several directions you can go, but first, you need to find out why your customers are leaving? It could help identify flaws and gaps in the delivery of your services. Once you know, you can start working on bridging them for the next batch of customers.

Gather regular feedback from customers and your entire servicing team. Focus on finding the ‘wow’ moment – the moment customers realize and internalize the value of a product or service. It inspires customers to stick with you and invest in your offerings.

User testing and competitor research are the two most effective ways you can fulfill a quest of finding the ‘aha’ or ‘wow’ moment. They help delve deeper into what makes customers stay while others switch. See how they are interacting with your product. Does it meet their needs? Does it need more features? Is the market even ready for it?

EdTech tools were the sole domain of virtual universities and look at them now post-pandemic.

5. Create a CRM strategy

Even though many people claim they love surprises, they really don’t. The reality is they only trust a few people to surprise them the right way.

Similarly, customers know what to expect from their beloved brands and trust them to deliver on it time and again. Consistency fortifies trust.

Building a seamless customer experience is the rallying point of boosting loyalty. Set a process for onboarding new clients and customers. Assign them relationship managers and send them welcome packages to make them feel at home with your brand.

A watertight CRM strategy takes into consideration the needs of both customers and the team managing it.

To keep your team on track to achieve its loyalty objectives, centralize all sources of data by using a customer data platform. It helps cut down on time pooling reports allowing the team more time to spend on analysis and insight gathering.

Use a ticketing system to flag problems early on and proactively manage change by ensuring customers are building relationships with multiple members of your team.

6. Use reciprocity to increase loyalty

Non-profits use this tactic effectively to fuel holiday giving. Reciprocity creates a feeling of obligation in the person, which in turn wants to instinctively repay with a similar act of kindness. It increases loyalty.

Two main kinds of reciprocity are:

Surprise reciprocity: An example of this is sending a coupon offering a discount on the next purchase or a free drink as a celebratory gesture in response to an NBA team’s win. Amazon has nailed this by providing customers impromptu gift cards a few days after big-ticket purchases. This helps drive repeat spending behavior and keeps them within the app.

Trumpeted reciprocity: Reward customers by showing them you’re going above and beyond. Airlines do this perfectly by offering free upgrades, and hotels do this by providing complimentary late checkout, saving you cash. If it isn’t hurting your profit margin, it pays to go above and beyond occasionally to reward great customers. You gain their loyalty while they receive an excellent service experience.

It could also be as simple as sending personalized messages appreciating the customer for doing business with you. Include a note about other products they might like based on their recent purchase – a classic cross-selling tactic! Etsy sellers have been doing this for eons.

Pro Tip

If you’re using an email marketing platform to send customer appreciation notes, ensure you’re not committing these subject-line writing mistakes.


Customer relationship building and customer retention go hand in hand in contributing to your business’s overall growth. Retaining existing customers fuels brand affinity and super boosts profit margins, creating an easily recognizable brand and trusted for its offerings. Once you have laid the foundation of loyalty and rewards programs, it is easier to sustain a customer retention strategy than re-focus efforts towards acquiring new customers.

Why Customer Retention is So Important for ROI, Customer Loyalty, and Growth - pin

Author’s Bio:

Mark Quadros is a SaaS content marketer that helps brands create and distribute rad content.  On a similar note, Mark loves content and contributes to several authoritative blogs like HubSpot, CoSchedule, Foundr, etc. Connect with him via LinkedIN or twitter.

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