What You Need to Know About Customer Retention
Customer retention is key to long-term business success. If acquisition is the engine that drives marketing and business growth, then customer retention is the effort that fuels marketing and business sustainability.
For insights on this important topic, including an overview of why customer retention matters and some of the most effective ways to improve customer retention rates, we turned to two experts Salim Hemdani, CTO at Likewise, and Jenn Horner, Senior Director of Relationship Marketing Strategy at Merkle, who spoke about the ins and outs of modern customer retention at FORGE 2022, our annual customer engagement conference.
Why Customer Retention Matters
“Retention is revenue,” says Salim. “No company can survive without revenue.”
Achieving strong retention outcomes can help companies spend less on customer acquisition costs, and it also helps validate whether businesses have products and services customers actually want to keep using.
Among the many other reasons customer retention is important, with rising advertising costs, it’s more cost effective and profitable to retain existing users and customers than it is to have to go out and acquire new ones. In fact, researchers have found that improving customer retention by just 5% could lead to a jump in profits by as much as 25 to 95%.
How to Improve Customer Retention
Increasing customer retention is a common goal among industry leaders—but it’s getting harder in our hyper-competitive world. To make the most of your customer retention efforts, you need to fully understand and leverage key drivers that influence how loyal customers are and how long they stick around.
#1: Make sure you have the customer data you need
“Your marketing strategy can only be as good as your data,” says Jenn. “And if you don’t have the right data, you don’t have access to that data, or you’re not using that data correctly, you’re going to have a really hard time with your retention strategies.”
As you think about your own customer data strategy, Jenn recommends finding out the answers to these questions:
What data do you need to improve your customer retention?
How can you collect this data?
How can you use this data in ways that improves the customer experience while respecting customer privacy?
Brands need to use A/B testing and leverage the data from these marketing experiments to see what’s helping increase retention to guide efforts moving forward. Marketers also need the right customer data to power personalization, a strategy that can help improve customer retention.
#2: Use that customer data to improve your customer segmentation and personalization efforts
“If you’re collecting any information on your users you should absolutely be leveraging it to enhance their experience,” says Salim.
That can pay off in a big way. Jenn’s team at Merkle helped one of their clients create targeted messages and offers for four key segments during the holidays, an effort that resulted in a 290% increase in revenue during the busy shopping season.
#3: Understand how different marketing channels help improve customer retention
At Likewise, Salim’s colleagues use a cross-channel approach, including email, push notifications (app and web), SMS, and in-app messaging to drive engagement and retention. When the company first added SMS to the company’s marketing mix, they saw immediate results: They found users who receive SMS campaigns within 24 hours of downloading the app are 20% more likely to re-engage compared to those users that don’t receive an SMS message.
“Having a solid marketing strategy that orchestrates experiences across all channels and establishes firm prioritization of messaging, content, channel, and cadence also helps—something I think Braze is particularly great at helping to facilitate,” says Jenn.
If customer retention is a key priority for your organization, be sure to get your copy of our guide: Modern Customer Retention: What You Need to Know, to find out the most impactful retention strategies to use to ensure your company’s long-term success.