Business Growth

What is Customer Retention? 8 Best Strategies [+Apps]

Oleksii Kovalenko · Updated

Walt Disney said it best—

“Do what you do so well that they will want to see it again and bring their friends.”

The great entrepreneur recognized that customer retention begins with a genuine relationship.

His strategy worked perfectly.

Disney built the largest media empire in the world by moving beyond mediocre repeat-purchase strategies.

The best part?

His customer retention strategy will work for your business, too.

In this guide:

  • What customer retention is and why it matters for your business.
  • 8 customer retention strategies to build authentic relationships.
  • The best customer retention software on the market.

Looking for other business growth strategies? Here are some more helpful guides:

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Customer Retention Definition

Customer retention refers to activities and actions companies and organizations take to reduce the number of customer defections. In other words, it helps companies retain as many current customers as possible, often through customer loyalty and brand loyalty initiatives.

Customer retention involves strategies designed to ensure that existing customers stay with the business and continue to get value from its products and services. A customer retention strategy can become a foundation for better customer relationships.

Why is Customer Retention Important?

Imagine walking into a coffee shop to get your morning cup of steaming cappuccino.

The barista recognizes and greets you by saying:

“Good morning! Do you want your usual?”

That’s thoughtful, agree?

And welcoming.

And familiar.

Some might even say “comforting.”

Who wouldn’t love hearing this every day?

From the business side, satisfied customers take less time to serve, need no acquisition spending, and are less sensitive to price changes.

That’s the importance of customer retention strategies—they can reduce your spending and increase sales.

Now, let me give you some drtails on the long-term benefits of consumer retention:

  • Less spending on customer acquisition. Acquiring a new customer can be up to five times more expensive than retaining an existing one (Invespcro)
  • More word of mouth advertising. About 86% of loyal customers will recommend a business to family and friends (KPMG)
  • Increased profits. An increase in client retention by 5% can enhance profits by over 25% (Bain)
  • Improved online reputation. Over 37% of customers will only post online reviews if they are “extremely satisfied” (Swansea University)

Bottom line— 

The longer customers stay with a company, the more business, positive reviews, and word of mouth advertising they bring.

You might be asking yourself:

“So, how to make customers loyal? I’m not a king or a queen.”

That’s right—

Your customers are the kings and queens. 

And making them feel like that is the goal of the most effective customer retention strategies. Let’s see how your business can start doing that.

Customer Retention Strategies

So, how to build authentic, lasting customer relationships? And even reach a “royalty” level of customer satisfaction?

Here are eight strategies to increase customer retention.

1. Make a Good First Impression

As they say—

You’ll never get a chance to make the second first impression.

Customers form first impressions of a business based on its website in less than a fifth of a second. If they decide to buy, their experience with the first purchase will either confirm or refute their initial feelings.

If your business wows them, they will be more likely to return and recommend you to their family and friends.

Try these strategies to make a good first impression and improve client retention:

  • Great website visitors with a warm welcome message.
  • Optimize your checkout process for easier shopping (enable guest checkout option, add trust signals like secure online transactions, etc.)
  • Add a website live chat widget to answer FAQs about product availability, shipping, returns policy, etc.
  • Add self-service portals like a knowledge base as an extra support option.

Investing in multiple customer service channels is essential for a positive first customer experience: Seven Types of Customer Service

2. Provide Easy and Fast Returns Policies

“Fast product returns… Isn’t that a bit counterproductive?”

Quite the contrary–

Easy product returns should be a core part of your customer retention plan.

Why?

Because 92% of customers will buy again if a brand offers “no-questions-asked,” easy returns. Many of your potential customers read your return policy before deciding to make a purchase, so a friendly policy will attract more repeat business.

A pie chart with customer retention statistics

Best practices for eCommerce return policies:

  • No urgency. A stress-free period for making returns is 40 days (but could be even longer).
  • Clarity. Use straightforward, conversational language and short sentences so customers could understand the policy easily.
  • Special conditions. Make it clear which items can’t be returned, e.g., sale items.
  • Timeline. Set clear time expectations, e.g., “Products may be returned within 30 days of purchase.”

Customer segmentation reduces product returns. One technique is to avoid sending product promotions to customers who have returned similar items before. More details: Customer Segmentation.

3. Prioritize Customer Communication 

Regular communication is key to successful customer retention.

A channel for direct communication with customers is the best source of knowledge about their needs, preferences, and ways to serve them better.

What direct communication channels do businesses use? Live chat, chatbots, and email marketing. We’ll use them, too, but we’re going to do it better. 

As Walt Disney said himself, “I’m doing this because I want to do it better.”

Take live chat as an example.

A pie chart showing the importance of live chat for customer retention

Although thousands of online shops have live chat apps, only 8% use them correctly. The rest run into implementation problems, respond to customer messages slowly, or simply lack good customer service skills.

Market leaders personalize live chat widgets (e.g., give them brand colors), reply immediately to any questions, engage shoppers with proactive support, and skyrocket lead generation and sales.

Example— 

Kelly, the owner of Care Package Depot, answers live chat queries herself to show her business’s commitment to superb customer service.

A live chat widget example

The effort pays off nicely—live chat gives her 140+ quality leads weekly.

So, use live chat the right way and address all time-sensitive problems and questions. That’s an excellent way to make every visitor feel like a royalty.

This is how setting communication as a priority gives a good chance to outcompete many companies—without a huge marketing budget.

Here’s how to use live chat the right way and to sell more than 92% of businesses: Live Chat: The Ultimate Guide For Businesses.

4. Start a Loyalty Program

The key to a truly successful customer loyalty program?

Knowing what can make your customers return to your business.

This might sound simple, and many businesses choose not to research what makes a retained customer a loyal one. So they choose mediocre, “collect-points-to-get-a-random-product” loyalty programs.

That’s a risky client retention strategy—

Factors like rewards and points matter to only 37% of customers, say customer retention statistics (KPMG research). To secure brand loyalty and increase customer lifetime value, you might want to focus on more meaningful areas of loyalty.

Have a look at the results of a KPMG study below. You’ll find some things we’ve talked about already (product returns and customer service). We’re on the right track!

An infographic about factors that improve customer retention
Source: KPMG International customer loyalty survey

These findings matter beyond a customer retention program.

By focusing on each area, you can build a truly customer-centric business (this type of company could be 60% more profitable than product-centric). This means being customer-oriented and committed to customer success in every way.

Try the latest tactics to improve the customer experience. Chatbots, for example, assist with easy shopping and fast support: How To Increase Customer Loyalty With Chatbots can tell you more.

5. Gather Customer Feedback

Finding a way out of a dark room.

That’s how trying to sell without any customer knowledge can feel like. Gaining those insights will be like getting yourself a 30,000 lumen flashlight—you’ll clearly see how to get where you want.

Inquire into customer experience and preferences to get a clear view.

This strategy will provide the information you need to know how to improve your marketing strategy, client retention, and satisfaction (i.e. find your way out of that dark room).

Try these tactics to give your customers a voice:

  • Customer surveys. On-site surveys can assess customer satisfaction with their website experience, collect product feedback, etc.
  • Google Analytics. Check visitors’ actions to see the most popular pages and those with the highest bounce rate.
  • Feedback chatbots. Collect feedback from website visitors on content, customer support, preferences, etc.
  • Email and contact forms. Get feedback on orders, products, shopping experience, customer service, and overall satisfaction with your brand. 

These four feedback channels can provide quantitative and qualitative insights to improve customer loyalty in many ways.

Listen to customer feedback on an ongoing basis, and you’ll understand their expectations and experiences with your company better.

Measure customer satisfaction to see if your retention strategy is working. Get started with the right metrics: 6 Steps to Measure Customer Satisfaction [Metrics, Pros & Cons]

6. Offer Pleasant Surprises

Have you heard about “The Disney Difference?

It’s a strategy Disney used to make a greater impression on customers compared to other theme parks such as Universal and SeaWorld.

Disney offered extras, from mouse-shaped caramel apples to next-level customer service, to surprise their guests and create a truly unique experience.

This strategy can work for your client retention, too. And there’s no need to reinvent caramel apples—there are plenty of other options for delighting customers.

Apply these tactics to create “your own brand difference:”

  • Appreciate. Send handwritten thank-you notes with every order
  • Support. Reply to every customer service inquiry to never leave a customer without an answer.
  • Reward. Offer birthday and anniversary gifts such as thoughtful extra freebies and discounts.
  • Celebrate. Share a customer’s post about your business/product and thank them for their support.

Surprises like these show appreciation, exceed customer expectations, and motivate them to stay with the brand.

Here’s an example—

Holo Taco, a nail polish seller, has added a free “mystery” product to every order as a Christmas surprise.

An example of effective customer retention strategy from Holo Taco

There’s a small bonus apart from the surprise offer itself:

The customer doesn’t know which product they might get.

Oh, the anticipation!

Do you know what it takes to create that special bond with your customers? Check out 7 Ways to Build Strong Relationships With Customers to get tips.

7. Share Valuable Content

Content is a huge part of the customer retention process because it nurtures both new and returning customers.

Content can:

  • Help first-time consumers get off to a great start with tips and tricks
  • Engage potential customers by showing them the advantages of your product
  • Update shoppers on the new product features and events in your company

Best content for better consumer retention? Try these:

  • Case studies. Show examples of how other folks benefited from using your products
  • Customer testimonials. These work like customer reviews: increase consumer retention through trust and credibility
  • How-to blog articles and videos. Help customers benefit from your products with instructions and videos
  • Social media posts. Share blog content, case studies, and testimonials with your social media followers to keep them engaged.

Take a look at the example below—

The above-mentioned Holo Taco has a blog full of how-to videos to engage repeat customers as well as promotional videos to impress newcomers.

Holo Taco video examples
Source: Holo Taco

How to create such great content for improving customer retention?

Value.

It’s the key to making content one of your best customer retention techniques.

To find valuable content topic ideas—

Go through customer engagement data and feedback and create more content around the preferences.

Customer testimonials are priceless for client retention but challenging to get… Encourage customers to leave more reviews: 7 Tips to Get More Business Reviews

8. Study Customer Complaints

The way you handle and learn from customer complaints affects customer loyalty.

The average churn rate in retail is 22%, which only proves that getting this one right is crucial.

How?

First things first—

Slash your response time.

Research proved that immediate responses to complaints improve both customer satisfaction and retention.

This Harvard Business Review study results should be particularly interesting—

Customers whose complaints are handled within 5 minutes go on to spend almost $20 more on future purchases.

A chart showing the impact of fast responses on customer retention
Source: Harvard Business Review

So—

The response time to customer complaints can really make a difference for your customer retention plan.

Live chat is the fastest way to communicate, so using this nifty communication app can cut your response time to less than a minute (but keep in mind that as with all good things, it requires your commitment).

Next—

It’s how you handle the complaints that matters (so your customer retention rate stays intact).

Here are customer service essentials to keep in mind while handling complaints:

  • Get information. Find out the reasons and details for their poor experience
  • Empathize. Listen and never interrupt to avoid adding to customer frustration
  • Check for persistent issues. If this issue has happened before then you might be dealing with something that requires urgent attention.

Every customer complaint is a chance to learn and improve client retention, so treat it accordingly. Keep detailed records to see patterns and discover improvement opportunities.

Need a live chat app for your Shopify store? Here’s how to Add a Live Chat to a Shopify Store in 3 Minutes.

Customer Retention Measurement

All’s fine and dandy, but how to measure all this?

Customer retention rate is the number of customers a business retained within a specific period compared to the number of customers it had at the beginning.

To measure the customer retention rate, multiply the difference in customer numbers at the beginning (CS) and the end (CE) of the tracked period by 100.

Customer Retention Formula

Customer retention rate = ((CE-CN)/CS) x 100

Here’s an example—

If a business had 100 customers at the beginning of a period (CS), acquired 50 customers (CN) but ended the period with 120 customers (CE), then

((120-50)/100) x 100 = 70%

What is a good customer retention rate for your business? Well, you should strive to retain 100% of your customers.

Is it possible?

The average customer retention rate in online retail is 63%, so you can surely keep yours higher—especially if you apply the retention strategies.

Best Customer Retention Software Tools

Customer retention software helps businesses increase customer acquisition and retention, as well as minimize churn. It can help automate time-consuming processes and make it easy to keep watch over your customer base.

This customer retention technology stack is popular in eCommerce:

  • Tidio. Understand customer website behavior by tracking their visits, communicate via live chat to minimize response time, and use chatbots for support automation.
  • Salesforce. The best CRM customer retention option for businesses. Salesforce tracks customer metrics, provides buying history, and segments consumers.
  • Qualaroo. A customer retention system that allows getting more valuable insights with automated customer surveys, exit interviews, and feedback pop-ups.
  • Wistia. Create marketing videos to showcase your products and services, improve onboarding, and enhance content engagement.
  • ReviewTrackers. Monitor, manage, and get notified of client reviews from social media. Understand customer experiences, discover issues, and respond quickly.

Customer retention software will help you monitor customer retention metrics, stay connected with shoppers, and manage your growing client base.

Looking for tools to increase Shopify sales? Here are 19 Best Shopify Apps that will Increase Your Sales, for free.

Key Points

Customer retention is the ability of companies to retain consumers. Customer retention tactics are essential to all businesses because they measure both customer satisfaction and retention.

Your business needs carefully planned customer retention strategies to keep your customers happy and return for more.

Consider these consumer retention tips:

  • Make an excellent first impression with an optimized website
  • Allow easy and fast product returns
  • Prioritize customer communication 
  • Start a loyalty program
  • Collect customer feedback
  • Share pleasant surprises
  • Create valuable content
  • Study customer complaints. 

Closing up with these words from the great Walt Disney,

“The way to get started is to quit talking and begin doing.”

Turn your website visitors into delighted customers.

Set up the Tidio live chat app in 5 minutes and watch your sales grow.

Learn About Live Chat

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Oleksii Kovalenko

Oleksii is a UX writer and copywriter interested in eCommerce. He writes content about customer support, email marketing, blogging, user interface designs, and brand building.

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