What are customer retention strategies?

Customer retention strategies are the methods companies use to retain their customers, users, or subscribers. Retention is often cheaper than acquisition (bringing on new customers) and involves keeping customers happy through relationships, great customer service, incentives, and more. Customers may want to stay or churn for a variety of reasons, which typically fall into one of four categories.

How can I retain my customers?

There are many ways to retain customers but at the end of the day, customers will remain customers for as long as they see value. How customers define that value varies dramatically from business to business, person to person, and even day-to-day. Customers (both B2B and B2C) live multifaceted lives and the value they see in, say, a ride hailing app is very different from what they find in a video streaming service, and those values fluctuate throughout the day.

To retain customers, it can help to first calculate your customer retention rate. This shows you where you stand. If your rate is lower than expected, you can look deeper into your customer data to understand why that is and how you can help customers see more value. This is known as improving your customer experience.

Consumers judge their customers experience based on four factors:

  1. Your product or service: Are your products effective? Do they solve an important problem or meet a genuine need?
  2. Your delivery: Is your product easy to use? Is it well-designed? Is it attractive? Is your team helpful? Is support simple?
  3. Their perception: Does your product exceed expectations? How do customers feel when interacting with your team or your product?
  4. The competition: How does your product, delivery, and perception compare to the customer’s alternatives? How easy is it to switch?

Improving your customer experience in any of the above areas can help increase customer retention. To develop a winning customer retention strategy, however, identify your biggest areas of retention opportunity and focus there.

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Identify customer retention issues automatically with product analytics: Product analytics software is designed to keep a finger on the pulse of your customers experience and it can suggest top retention opportunities.

Analyzing your customer data can help identify retention opportunities. Customer retention data comes in two varieties: quantitative, such as measuring numerical retention rates with product analytics, and qualitative, drawn from subjective sources like user feedback. Most companies use both to identify retention opportunities.

To gather quantitative retention data, companies may calculate their retention rate as a benchmark and then run tests to see what combinations of marketing and product changes lead to higher retention. They may look at their oldest customers to identify factors that those users share and they may measure customer happiness statistically, such as with a Net Promoter Score® (NPS) or customer satisfaction score (CSAT).

Questions to ask with quantitative retention data:

  • What is our current customer retention rate?
  • What features, factors, or behaviors are correlated with high retention?
  • What causes customers to churn?
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For help calculating NPS or CSAT, read What are app analytics metrics?

To gather qualitative retention data, companies typically reach out directly to their customers for feedback. They may use surveys, user interviews, and anecdotes from customer service teams.

Questions to ask with qualitative retention data:

  • What specifically do users like or dislike about the product?
  • What are users’ chief complaints?
  • What would make users love it even more?

By answering these questions you’ll better understand what factors lead to both customer retention and customer churn, and can employ customer retention tactics to improve your rate.

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Customer retention software can dramatically improve retention ratesMany companies use product analytics software to automatically track, tag, and organize their data so that they can clearly see what factors lead to customer retention and to test features to improve it.

7 Customer retention strategies:

There are a great number of strategies at your disposal for increasing retention. The most successful companies use not one, but several:

  1. Improve your customer experience: According to Gartner, 89 percent of companies now expect to compete for customers primarily on the basis of their customer experience. This means that they seek to deliver customer value while being seamless, simple, and enjoyable to engage with. To improve your customer experience, use customer feedback, data, and interviews to inform how your product is built, delivered, and perceived. For many companies, product analytics can offer data-driven suggestions.
  2. Invest in your customer service: Customers are never evaluating your product more thoroughly than when they have a problem. It’s in these critical support moments that their loyalty is won or lost and as a result, many companies increase retention by directing resources to provide better customer service.
  3. Proactive retention: Get ahead of potential customer problems by proactively reaching out to make sure customers are satisfied. You can perform this in either an automated fashion or through customer success teams. Some companies run “surprise and delight” campaigns where they offer discounts, perks, or additional services to create goodwill.
  4. Track customer happiness: Customer happiness is positively correlated with customer retention. Many companies determine which of their customers are currently happy by measuring CSAT, NPS, and other scores that are predictive of retention. Low scores can direct product marketing and customer success teams to focus their efforts on fixing underperforming features and retaining unhappy customers.  
  5. Build relationships: Customers who feel personally connected to your business are more likely to stay. Companies may choose to foster relationships with customers through storytelling, social media interaction, events, partnerships, account relationships, and more.
  6. Create barriers to churn: When customers consider alternatives to your service, they consider the cost of switching. Switching may take them time, be expensive, or be difficult and by designing your product so that it’s relatively inconvenient to switch away from, you may increase retention. Take, for example, a software service that doesn’t allow customers to export their data to another vendor or which requires long-term contracts. This added friction may marginally boost retention rates.
  7. Loyalty programs: Customer loyalty programs are shown to have a dramatic impact on customer retention. The Temkin Group finds that loyal customers are 5 times more likely to repurchase, 5 times more likely to forgive mistakes, 7 times as likely to try new offerings, and 4 times as likely to refer other customers. Loyalty programs often take the form of memberships that confer discounts, such as Amazon Prime or airline frequent flyer programs.

With concerted effort, trial and error, and a focus on improving your customer experience, you can increase customer retention and realize the economic benefits of keeping your customers happy for the long-term.

Want to retain customers automatically? Learn more about Customer Funnels.