6 Effective Strategies to Increase Customer Retention

Implementing a few simple customer retention strategies can help you improve your bottom line by bringing in repeat business and saving on marketing costs.

As a business owner, it’s easy to become preoccupied with attracting new customers to your business. More customers means more sales and more sales means more income. But there’s an easier (and cheaper) way to increase your revenue: customer retention.

Focusing on turning one-time buyers into repeat customers has many benefits. It’s easier to drive returning clients towards a conversion than first-timers. They also tend to spend more when they make a purchase. On top of that, they make excellent brand ambassadors.

As with any other big reward, there are other big risks in increasing customer retention. Rather than wasting time and money on strategies that don’t grow your base of loyal customers, follow our simple guide to customer retention.


What Is Customer Retention?

Customer retention is one of the best things you can do for your business. It centers around getting one-time buyers to become repeat customers and increases the amount of income you can expect to earn from their purchases.

To put it more formally, customer retention refers to a business’s ability to increase its repeat customer rate and increase their customer lifetime value. 

The inverse of customer retention is churn. This is the rate at which customers stop interacting with a brand or buying its products. In other words, it’s the number of customers you lose over a certain period of time.

High customer retention (and therefore low churn) is a great indicator that your buyers are satisfied with both the offerings and customer experience your business provides.

Why Is Customer Retention So Important?

We’ve already mentioned that customer retention is a great way to measure how happy your buyers are with the goods, services, and customer experience your business is creating. In addition to this, it increases your return on investment (ROI), encourages customer loyalty, and helps to attract new customers.

Better still, encouraging existing clients to purchase your products for a second, third, fifth, or tenth time is far easier and cheaper than acquiring new customers.

There are plenty of stats to back this up. According to research from American Express, acquiring a new customer is six to seven times more expensive than retaining an existing one. Plus, repeat customers buy more and spend more than their newly acquired counterparts. And they’re more likely to encourage their friends and family to buy your products.

All in all, this means that you get more value out of every marketing dollar you spend. In fact, management consulting firm Bain & Company found that a 5% increase in customer retention can boost revenue by as much as 95%.

How Do You Calculate Customer Retention?

A higher customer retention rate means more income and fewer expenses, which equals greater profitability for your business.

While you should aim to retain as many customers as possible, you also want to set realistic goals that are reflective of the age and size of your business, as well as the industry you operate in. 

For example, professional services companies usually retain about 83% of their clients for long periods. The nature of these businesses means that a close relationship is essential for producing good work. Retailers, on the other hand, operate in a much more competitive market and should expect a retention rate of around 65%.

Although setting goals for customer retention can be tricky, working out customer retention is simple. To calculate your customer retention rate (CRR), you’ll need to know: 

  • S: How many customers you have at the start of a period
  • E: How many remained at the end of the period; and 
  • N: The number of customers you acquired during the period

Then you can plug these values into this simple formula:

CRR = E-NS  100

Let’s look at an example. At the start of a month, you have 96 customers (S). During the course of the month, you lose 26 customers and gain 32 (N), leaving you with 102 customers at the end of the month (E) and a retention rate of 73%.

CRR = 102–3296  100

CRR = 73%

6 Customer Retention Strategies

Customer retention is easy when you know what to do. To help you create a strategy that will see your buyers coming back for more and more (and more!), we’ve broken down six of the most effective tactics to build great customer relationships.

1. Connect with Your Customers

It’s likely that the products or services you offer your customer are being sold by at least a few other businesses. So how do you encourage shoppers to continue buying from your brand rather than your competitors’?

You could add a bunch of bells and whistles to the goods or services you offer. Or you could focus on making an emotional connection with your customers. Research published in the Harvard Business Review shows that buyers who have an emotional connection with a product or brand will spend 52% more with that business than those who don’t.

One way to create that connection is by leveraging your brand values. Showing customers that you care about the same things that they do – whether it’s sustainability, saving money, or giving back – will motivate them to buy your products. What’s more, the positive feeling that this evokes will keep them coming back for time and time again.

2. Exceed Expectations

Selling fantastic goods and services at affordable prices is a great way to attract buyers, but you’ll need to do more if you want to turn those once-off clients into repeat customers. Your secret weapon here is customer service.

Going above and beyond (or, as they say in customer service, overdelivering) is the best way to delight your consumer and ensure that their experience with your brand sticks in their mind. This means your product will be the first one they think of the next time they’re in the market.

There are a couple of ways to achieve this, most of which revolve around understanding your customer’s needs and expectations. When it comes to products, you can throw in surprise gifts or other benefits to sweeten the deal. For customer service, do your best to offer seamless service across all of your channels. 

Some of the factors that negatively affect your customer’s experience are out of your control (think a courier losing a client’s package or infrastructure failures resulting in missed deadlines). With a solutions-oriented service strategy, you can maintain your customer’s confidence and encourage them to buy from you again.

3. Focus on Feedback

A great customer experience is one of the best ways to encourage repeat business. Key to creating this positive relationship is knowing how your buyers feel about your offering. 

Understanding what your clients like or dislike will help you to identify how you can improve your products or service to better meet their needs. Fortunately, gaining insight into your performance is easy to do. All you need is a bit of feedback.

You can collect this feedback using surveys. Asking your buyers to share their thoughts about products they’ve purchased or the service they’ve received will help you to root out pain points. Plus, it will show them that you care and make them feel valued, which will encourage them to buy your products and services again.

4. Improve Your Payment System

We’ve already mentioned that a seamless experience across all of your platforms will help to increase customer retention. One area where this is especially true is your payment system.

There are few things more frustrating than arriving at a checkout page only to realize that the brand you’re buying from doesn’t accept the payment method you want to use. The best case scenario is that you’ll have to search for a different credit card. The worst? You can’t purchase the products you want.

As a business, you need to choose a secure payment system that allows you to accept a variety of payment methods. With Pay.con you can let your customers pay with their favorite payment methods.

Our platform is completely secure, so your customers can have complete peace of mind that their details remain private during transactions. On top of that, you can customize your checkout page to match the rest of your site to create a seamless experience. This will make your clients feel confident that they’re buying from a reputable seller.

Click here to create your Pay.com account now.

5. Create a Customer Loyalty Program

It’s clear that customer experience is critical for retention. Thankfully, there’s a tried-and-true way to improve it: setting up a customer loyalty program. 

Customer loyalty programs incentivise your buyers to purchase your products using various perks. Whether you offer a free gift for making a purchase over a certain value, provide discounts for frequent orders, or give rewards for referrals, these schemes are proven to improve the customer experience.

This shouldn’t come as too much of a surprise. Everybody likes free stuff. So when you give your clients the opportunity to get more out of their transaction at no extra cost, they’re more likely to shop with your brand than a competitor.

Like other technical aspects of your business, it’s important to create a customer loyalty program that operates seamlessly and gives your customers what they need. A bit of research and planning will go a long way to ensure your loyalty program does what it’s intended to do.

6. Keep In Touch

Consumers have thousands of demands on their attention. In fact, it’s estimated that the average adult sees anything from 6,000 to 10,000 ads per day. So you shouldn’t take it for granted that your brand will stay top of mind for your customers, even if they are loyal.

Here, you can use digital marketing to keep your brand on customers’ radars. Newsletters are still one of the most effective remarketing tools and are indispensable for this purpose. Create a weekly or monthly email to promote new products, special offers, and share customer reviews.

No email list? No problem. Set up a social media account on the platforms your target audience is most likely to use and encourage your existing customers to follow you. A regular posting schedule and a few ads should help you to grab your customers attention without coming off as too pushy.

Text message marketing is another interesting option to explore.

The Bottom Line

Customer retention is great for business. Building a loyal base of clientele who repeatedly buy your products reduces the amount of money you need to spend on marketing. Plus, repeat customers make bigger purchases and are likely to promote your business to their friends and family.

While the customer retention rate you aim for will depend on the type of business you run, the industry you operate in, and the maturity of your enterprise, you should always aim for the highest percentage possible.

There are a few ways to do this, but your main focus should fall on creating a seamless customer experience. 

At Pay.com we’re focused on helping you provide the best possible shopping experience for your clients. Our easy-to-use platform allows you to accept a wide variety of payment methods so that you can give your customers what they want. 

Plus, our infrastructure is customizable and adheres to stringent global security standards. This will give your clients the peace of mind that they’re interacting with a reputable business, helping to build trust in your brand and turn one-time buyers into loyal customers.

Click here to get started with Pay.com now!


What's the best way to accept payments from customers?

Pay.com is the best way to accept payments from customers because it offers a wide variety of payment methods. Better still, our easy-to-use Pay Dashboard allows you to add or remove payment methods in just a few clicks. You can easily give your customers all the options they want.

Click here to create an account now!

What are the top 3 keys to customer retention?

The top three keys to customer retention are customer experience, connection, and incentives. These three elements go hand in hand. Incentives, like rewards programs, help to foster a great customer experience. A great customer experience, in turn, helps to build a connection with your client base. All of which helps to increase brand loyalty and customer retention.

What are the benefits of customer retention?

The biggest benefits of customer retention are a higher return on investment and more loyal customers. Encouraging clients who have already bought from your brand to make another purchase is more cost effective than acquiring new customers. Plus, repeat customers buy more and are more likely to promote your brand or products to their friends and family.

What is a good customer retention rate?

The customer retention rate you should aim for will depend on the type of business you run, your industry, as well as the length of time you’ve been operating. Retention rates vary from as low as 65% for retail businesses to as high as 85% for professional services enterprises.

Meet the author
Nicole Forrest
Nicole Forrest is a writer and editor who has been using storytelling to help build brands for more than a decade. With a special interest in fintech and a passion for creating compelling content, she focuses on making complex topics easy to understand.
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