What is Customer Retention Marketing? - 10 Strategies That Work in 2023

Shahin Hoda 14  mins read Updated: February 23rd, 2024


While businesses tirelessly innovate to attract new customers, leveraging vibrant campaigns and modern outreach, it's equally vital to note that acquiring a new customer is 6 to 7 times costlier than retaining an existing one. Indeed, with nearly 65% of an organisation's business hailing from its current buyers, customer retention is not just a strategy but a necessity.

What is Customer Retention Marketing?

Understanding the customer experience journey is central to customer retention. This journey encompasses every interaction a customer has with your brand, from assessing product quality to engaging with brand communications.

The influx of new customers certainly signifies growth and validates a brand's market stance. However, the art of customer retention is what truly guarantees sustainability, loyalty, and profits. As we delve into the customer retention marketing strategies in the coming sections, you'll learn how to simplify the process of keeping your customers engaged and loyal. Embark on this journey to ensure a vibrant and sustained relationship with your customer base.

What is Customer Retention Marketing?

Customer retention marketing is a strategy that focuses on making current customers happy and encouraging them to keep buying from your business. It's all about building a strong and lasting relationship with customers so they continue to choose your brand over others. It represents the special effort a business invests in to ensure first-time buyers become regular customers, fostering a bond based on trust and value. Dave Irwin, president of Polaris I/O, highlights that focusing on existing customers already familiar with your business can be a more straightforward growth path, particularly during challenging times.

It is also important to understand that retention marketing stands apart from customer acquisition and lead generation. While customer acquisition revolves around attracting new customers and lead generation focuses on grabbing potential customers' attention, customer retention takes a different route. Stacy Kemp of Deloitte articulates this by noting it is about "pursuing customers who are sitting on the edge of their loyalty."

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    Why is Customer Retention Marketing Important?

    Acquiring new customers is more than just building initial trust. Steve Gershik emphasises that the true challenge and the undeniable value lie in the journey that follows. So, what makes this journey so crucial? Let's delve into three key reasons:

    The Costly Pursuit of New Customers: Acquiring a new customer can be expensive. The Harvard Business Review estimates it's five to 25 times pricier than retaining an existing one. Beyond the obvious costs of marketing campaigns, there's the significant investment of time and resources. Still, the efforts can go in vain since 94% of businesses prefer buying from sources they've trusted before.

    Viewing Through the Audience's Lens: Let's understand this through a bank analogy. After opening an account due to promising financial solutions, the bank offers personalised advice and perks, making you feel valued. Even when another bank offers a slightly better interest rate, your trust in the bank keeps you loyal. This highlights the power of customer retention marketing.

    A Holistic Approach to Customer Experience: Customer retention marketing isn't just about transactions. It's about the entire customer journey. From ensuring satisfaction to building a sterling brand reputation, this strategy involves setting thoughtful goals and crafting experiences that meet and exceed those benchmarks, fostering greater customer loyalty.

    With this understanding of the significance of customer retention marketing, it's also pivotal to grasp how we measure its success. One primary metric stands out: the Customer Retention Rate. Let's explore what this rate signifies and how it's calculated.

    What is Customer Retention Rate?

    The Customer Retention Rate (CRR) represents the percentage of existing customers who stay loyal to an organisation over a specified timeframe. To simplify, if you started with 100 customers at a month's outset and 90 remain active with your services by month's end, your CRR for that month stands at 90%. This figure measures a business's prowess in retaining its current clientele.

    Why is the Customer Retention Rate Important?

    1. Diagnostic Insight

    Gauging your CRR grants a clearer perception of organisational performance. Recognising the number of returning customers provides diagnostic insights into effective strategies and potential areas for enhancement. That's how you identify both successful and lagging aspects of your customer retention strategy.

    2. Predictive Power

    Grasping your CRR empowers companies to forecast forthcoming performance. A consistently high rate over multiple periods signifies stable growth, while volatile rates might indicate a need for urgent action.

    3. Setting Benchmarks

    Recognising your prevailing retention rate enables companies to establish a benchmark. Subsequently, endeavours can aim at sustaining or elevating that rate. This rate becomes a tangible objective for internal teams.

    4. Marketing Efficiency

    The CRR can highlight marketing efficiency in a competitive marketplace. A superior retention rate indicates successful endeavours in understanding and appeasing the existing clientele.

    5. Budgeting and Spending

    Both for startups and seasoned enterprises, a solid CRR clarifies budget distribution. If a sizable segment of your customers returns, it permits allocating more resources for new customer acquisition, harmonising retention and acquisition dynamics.

    To sum up, the Customer Retention Rate is more than a mere statistic. It acts as a reflection of a company's effectiveness in preserving relationships and consistently offering value. It is a crucial metric steering both tactical choices and strategic adaptations in our contemporary competitive landscape.

    How to Calculate Customer Retention Rate?

    The Basics of CRR:

    The Customer Retention Rate (CRR) offers a glimpse into the percentage of customers an enterprise retains over a specified duration. 

    Calculating it is simple, and here's the formula:

    CRR = (Number of Customers at End of Period- Number of New Customers Acquired During Period)/Number of Customers at Start of Period *100

    How to Calculate Customer Retention Rate


    Take ABC Bank as a hypothetical case study. Let's say they commenced the quarter with 1,000 B2B clients. By its conclusion, their client count rose to 1,050, with 60 of those being new acquisitions within the quarter. Plugging these figures into our formula, we get:

    CRR = (1050-60)/1000 * 100 = 99%

    This demonstrates that ABC Bank achieved a 99% retention of its customers during that quarter.

    Net Dollar Retention vs. Customer Retention Rate

    Before diving deeper, let's establish the distinction between these two metrics. These are often misunderstood or used interchangeably, but they cater to different facets of business analysis. While CRR is a broad metric resonating across various sectors, NDR finds its roots primarily in the SaaS universe.

    CRR focuses on the percentage of retained clients, ignoring revenue changes. On the other hand, NDR, primarily used in the SaaS sector, considers revenue retained from existing customers, accounting for factors like upsells and downsells.

    In essence, while CRR offers a straightforward measure of customer retention, NDR provides a more nuanced view of customer value over time, considering the financial dynamics involved. Both are vital in assessing the health of a company's customer relationships, especially in industries like SaaS, where monitoring both metrics gives a comprehensive view of performance.

    11 Benefits of Customer Retention Marketing

    Having delved into the intricacies of customer retention metrics, let's turn our attention to the multitude of benefits derived from an emphasis on customer retention marketing.

    1. Promotes Sustainable Growth

    The focus on retention goes beyond mere words; it's a tangible strategy promoting sustainable growth. Studies have shown that a mere 5% increase in customer retention can double a company's revenue.

    2. Reduces Acquisition Costs

    Prioritising retention has noteworthy financial outcomes. Cutting down on acquisition costs allows businesses to expand their profit margins.

    3. Augments CLV

    Enhancing customer retention directly uplifts the Customer Lifetime Value (CLV), fostering a prolonged and profitable relationship based on deepened trust.

    4. Drives Referrals and Boosts Loyalty

    With customer retention marketing, businesses can tap into one of the most cost-effective growth avenues through referrals. Loyal customers not only enhance revenue streams but also lead to more predictable revenue, helping foster a circle of trust and customer loyalty that can stand the test of time.

    5. Mitigates Churn Impact

    Tackling churn head-on ensures the consistency of recurring revenue. Retaining customers is often simpler than rolling out new sales campaigns.

    6. Offers Valuable Insights

    Knowledge remains the cornerstone of business innovation. Interactions with your long-term customers are a treasure trove of insights, helping businesses sync with market demands.

    7. Facilitates Better Product Development

    Authentic innovations stem from genuine customer feedback, guiding product evolution to match the market's rhythm.

    8. Safe Innovation Space

    With loyal customers forming the foundation, businesses have a conducive environment for innovation. Since loyal customers are 23% more likely to spend, companies can confidently experiment with new offerings.

    9. Free Advertising via Word-of-mouth

    The power of organic word-of-mouth remains unmatched in today's attention economy. Retained customers amplify a brand's voice, and with 86% of them advocating for brands they love, the impact is monumental.

    10. Recession Shield

    Gartner's research suggests that the fear of a recession is the top challenge and a business concern in 2023. In this backdrop, a strong customer retention rate acts as a protective barrier, helping to maintain revenue streams even in downturns.

    11. Boosts Workplace Morale

    Beyond financial metrics, customer retention's ripple effect touches an organisation's very heart. When employees see their efforts translating to enhanced customer loyalty, morale soars, fostering a positive work environment that attracts top talent.

    To sum up, customer retention marketing transcends being a strategy; it's a guiding ethos, fostering a business environment conducive to sustainable growth and profitability, underscoring its central role in forging a successful business pathway.

    9 Important Customer Retention Metrics 

    Understanding customer retention metrics is paramount since nearly 65% of an organization's business comes from existing customers. These metrics not only help gauge the satisfaction and loyalty of your existing customer base but also provide insights on how to increase customer retention.

    With that in mind, this section highlights important customer retention metrics, decoding their essence, significance, and the math behind them. It helps you measure customer retention effectively and determine where your business stands.

    1. Customer Retention Rate

    The Customer Retention Rate measures the ability of a business to retain its customers over a set timeframe. It is a pivotal metric showcasing how well a business can retain customers. At its core, it reflects the effectiveness of your retention initiatives.

    Understanding this rate is pivotal, as it directly signifies the success of your customer nurturing strategies. If the rate is high, it means your strategies are on point and are helping increase customer retention; if it's low, there's room for improvement.

    Formula: (Total # of Customers at the End of the Period - New Customers Acquired) / Customers at the Start of the Period

    2. Customer Attrition Rate

    This metric denotes the percentage of customers who ceased their association with your brand within a specified period.

    Monitoring this rate is crucial because high attrition often rings alarm bells about underlying issues, whether in customer service or overall experience.

    Formula: (Y/X) * 100 = Z, where Y represents the number of customers lost, and X signifies the initial number of customers.

    3. Customer Lifetime Value

    CLV represents the net profit associated with a customer throughout your business relationship. Recognising this value is beneficial as it offers insights into the long-term worth of a customer. For example, if a subscription business sees a high CLV, it means that its customers tend to stay subscribed and active for many years.

    By focusing on strategies to retain customers, you can potentially enhance the CLV, aiding in budget allocation, forecasting, and strategising.

    Formula: Customer Lifetime Value = Customer Value * Average Customer Lifespan (where Customer Value = Average Purchase Value * Average Number of Purchases)

    4. Loyal Customer Rate

    This rate is the ratio of repeat customers to the total customer base. It is the customers who buy again from you within a given time range. It essentially indicates the effectiveness of your strategies to retain customers within a period.

    A decent rate signifies that your retention efforts are bearing fruit, fostering stronger brand loyalty and rapport with your retained customers.

    Formula: Number of Repeat Customers / Total Customers

    5. Repeat Purchase Ratio

    This ratio indicates the fraction of your customers who are coming back for more — a direct reflection of post-purchase satisfaction with your product or service. Utilising customer feedback can be an excellent way to improve this metric, as it can provide insights into the customer's preferences and needs.

    Its relevance is paramount; a high ratio is a testament to effective post-purchase strategies and overall customer satisfaction. Consider a business selling coffee. If their repeat purchase ratio is high, it can mean that their customers are continually coming back for their unique blend, a testament to the quality and uniqueness they offer.

    Formula: Number of Returning Customers / Number of Total Customers

    6. Time Between Purchases

    It calculates the average duration between subsequent buys by your repeat customers. This metric gives a lens into customer purchase behaviours, enabling tailored engagement strategies to reduce this time frame and boost sales. Employing strategies to retain customers can potentially reduce this timeframe, offering a great way to understand the overall strengths and weaknesses of your offers in the marketplace.

    One of the most popular ways to reduce the time between purchases is using email marketing. Sending timely reminders, offers, or updates on new products can engage customers effectively, encouraging them to purchase sooner than they might have otherwise.

    Formula: Sum of Individual Purchase Rates / Number of Repeat Customers

    7. Product Return Rate

    This rate quantifies the percentage of products that customers send back post-purchase. Product returns are always damaging and demoralising. The idea is to keep this number as low as possible.

    A heightened rate here can highlight potential issues in product quality or mismatched customer expectations, underscoring areas for improvement.

    Formula: Number of Units Sold That Were Later Returned / Total Number of Units Sold

    8. Revenue Churn

    It measures the revenue percentage that slips through the cracks over a specified span. In simpler terms, revenue churn means losing money. This can happen when someone cancels an order, chooses a cheaper plan, or entirely stops doing business with you for some reason.

    A firm grasp on this metric is essential, as it gauges the vitality of revenue streams and the potency of monetisation methodologies.

    To calculate revenue churn, you need to understand MRR. Think of MRR as the money a business can expect to get every month from its customers. For example, if you pay a monthly fee for a streaming service, that fee contributes to the company's MRR. It helps businesses predict their earnings and see how stable their income is.

    Formula: [(MRR at Start of Month - MRR at End of Month) - MRR in Upgrades during Month] / MRR at Start of Month

    9. Customer Churn

    This represents the proportion of customers who bid adieu within a given year.

    With an average organisation losing around 10-25% of its customers each year, monitoring this metric is indispensable. It's a barometer of customer satisfaction levels, indicating whether they find value in the relationship or seek alternatives.

    Formula: (Number of Customers at Start of Year - Number of Customers at End of Year) / Number of Customers at Start of Year

    These metrics are the beacon lights on a business's path, ensuring one remains attuned to customer sentiments and behaviours, enabling dynamic, responsive customer retention strategies.

    10 Strategies to Improve Customer Retention with Examples

    Understanding the immense value of customer retention is the first step, but to truly harness its power, one must delve deeper into its underlying drivers. For instance, leveraging direct customer feedback can provide actionable insights into what works well and what doesn't, allowing businesses to tailor strategies that foster loyalty. Another significant way to increase customer retention is by focusing on providing exceptional customer experience to every existing customer. Let's explore how these two concepts intertwine and why this connection is crucial.

    The Interplay Between Customer Retention and Experience

    Exceptional customer experiences are at the heart of successful and effective customer retention. From each touchpoint in the customer journey to the emotions evoked during interactions, customer experience spans beyond just products or services to include pivotal facets like customer support. The proof? The CX Trends 2023 report highlights that 81% of industry leaders prioritise customer experience more than ever.

    Qualtrics also underscores the significance of a positive experience, noting that it not only propels purchasing but also magnifies customer referrals. Such experiences establish bonds transcending mere transactions, paving the way for lasting loyalty. The Harvard Business Review further reinforces this, stating that businesses offering consistent positive experiences see a remarkable 140% increase in customer spending. This emphasises the importance of marrying customer experience with retention for both growth and profitability.

    Given this compelling interrelation, businesses must adopt practical strategies to optimise both customer experience and retention. Below, we explore various customer retention strategies that have proven successful for different industry giants.

    1. Launch Unique, Problem-Solving Products or Services

    Avoid products that try to cater to every need. Instead, focus on offerings that address specific problems. For instance, Canva emerged as a disruptor in the saturated graphic design market. Canva's customer retention strategy centred around launching unique, problem-solving products has significantly bolstered its standing in the industry. Unlike Adobe Illustrator, Canva provides user-friendly templates, attracting not just professionals but beginners, too. This emphasis on simplicity and targeting a particular issue has solidified Canva's position in the industry, earning a devoted customer base.

    2. Become a Part of Your Customer's Lifestyle

    Embedding a product or service into users' daily lives is a potent method to encourage loyalty and long-term retention. It's not just about providing a solution but forming a bond where consumers feel incomplete without your service. The Cash App exemplifies this. The financial app has become the go-to solution for a spectrum of users for daily financial transactions, whether tipping a service professional or settling a debt among friends. By intertwining themselves with daily routines, businesses can become not just a choice but a preference, which boosts retention. This customer retention strategy ensures that your product or service is neatly integrated into the lives of your customers.

    3. Offer Incentives at Key Moments

    In today's saturated markets, even the most loyal customers might consider alternatives, often lured by novelty or occasional dissatisfaction. In such moments, timely offers or incentives can be pivotal in retaining them. Adobe exemplifies this strategy within its arsenal of customer retention strategies, stepping in with a timely intervention and offering a 2 to 4-month free usage period as the subscription expiration date approaches.

    This gesture accomplishes multiple objectives. First, it addresses the immediate financial concern, making it easier for users to continue without feeling the pinch. Secondly, it conveys that the company values its long-term relationship with the customer more than short-term profits. This tactic halts immediate churn and allows customers to continue seeing the value in Adobe's offerings. Adobe's strategy underlines the importance of timing, understanding the customer psyche, and reaffirming the product's value in customer retention efforts. Timely intervention with offers or incentives is a customer retention strategy that can be adeptly leveraged to maintain your user base, especially if you run a subscription business.

    4. Educate Your Customers

    Offering continual learning opportunities can help customers find sustained value in your offerings. HubSpot's approach is a perfect illustration of this strategy. Through HubSpot Academy, users are given free training and certification courses. As they grow their skills, they understand the platform's full potential, ensuring they stay loyal. HubSpot's approach showcases one of the most basic customer retention strategies that not only helps keep customers but also encourages them to explore deeper functionalities of the service offered.

    5. Harness the Power of Social Proof

    Personal recommendations often carry more weight than traditional marketing methods. Highlighting genuine customer stories and reviews can foster trust and loyalty. For example, Codecademy leverages social proof excellently in its customer retention strategies by sharing genuine success stories of users. With 93% of consumers relying on online reviews before making a purchase, such stories not only attract new customers but also reinforce the trust of existing ones, ensuring they remain loyal.

    6. Prioritise Stellar Customer Support

    In an era dominated by aggressive marketing, customer support often takes a back seat. However, accessible and efficient support is a cornerstone of customer retention. With the myriad communication channels available, companies must be responsive across all platforms, from email and live chats to social media and phone calls.

    Being attentive to customer needs and addressing concerns promptly can foster long-term loyalty. Rather than solely focusing on acquiring new customers, businesses should invest in nurturing and assisting existing ones.

    7. Simplify the Repurchasing Process

    Encourage repeat purchases by offering existing customers exclusive discounts and a streamlined buying experience. For instance, in today's fast-paced environment, customers should be able to easily modify their membership plans or make repeat orders without hassle. Regularly revising and improving this process ensures that businesses can retain a dedicated customer base.

    8. Craft Compelling Referral Programs

    Turning customers into brand advocates is the pinnacle of customer retention. A well-crafted referral program forms a cornerstone of an effective customer retention strategy, turning customers into staunch advocates for the brand. Successful referral programs, like the one offered by cloud service Vultr, can be immensely rewarding for both the business and the customer. When existing customers are incentivised to spread positive word-of-mouth, it not only brings in new clients but also reinforces the loyalty of current ones.

    9. Implement Automation-Driven Email Marketing

    Engage inactive customers with automated email campaigns designed to reignite their interest. These emails, often detailing how to utilise purchased products or offering personalised consultations, can be pivotal in re-engaging customers. Such activation emails have historically shown higher open and click-through rates, making them a crucial tool in a company's retention arsenal.

    10. Continuously Track Churn Metrics

    Before implementing any retention strategy, it's imperative to understand current retention rates clearly. Monitoring churn — the percentage of customers who stop using a product — gives businesses insight into their performance. Recurly says the average churn rate for B2B businesses is 4.91%. That's a good number for you to compare. Companies can measure their churn using the formula: (lost customers/total customers) x 100 = churn rate.

    For instance, if a company begins the month with 100 customers and loses 20 by its end, its churn rate is 20%. This metric offers a clear starting point for companies to assess and improve their retention strategies. Understanding the existing churn rate is fundamental in shaping a potent customer retention strategy; it offers a clear benchmark to evaluate the success of your retention efforts.

    The Symbiosis of Account-Based Marketing and Customer Retention

    "Why address Account-Based Marketing (ABM) in a discussion about customer retention?" you might wonder. It's because both strategies fundamentally focus on understanding and meeting specific customer needs. Their end goal? Building and nurturing lasting customer relationships through successful strategies, some of which can be devised using an ABM strategy template.

    ABM allows a focus on select high-value accounts, customising marketing efforts to their unique needs and capturing the benefits of Account-Based Marketing. It's like having a spotlight on a few star clients, ensuring they consistently feel valued. Conversely, customer retention marketing casts a broader net. Its objective is to ensure that every customer remains satisfied and loyal regardless of their account size, thereby encouraging repeat business.

    Marrying the targeted approach of ABM with the holistic philosophy of customer retention can be transformative, especially in B2B settings. A harmonious relationship with even a single client can significantly impact business prospects. In essence, both strategies underscore the importance of cultivating relationships. The interplay between Account-Based Marketing and customer retention strategies creates a fertile ground for nurturing lasting relationships with high-value clients.

    Final thoughts

    As we wrap up this post, we've journeyed together through the complex world of Customer Retention Marketing. We've unpacked its critical metrics, shed light on pivotal strategies, and unearthed the close connection with Account-Based Marketing.

    It is a good practice to consistently re-evaluate and refine your approaches to align with your evolving business goals. As you venture deeper into refining your customer retention strategies, always keep a blend of Customer Retention Marketing and ABM at the core of your approach. In fact, the intersection of Customer Retention Marketing and ABM is a potent space. It's in this space that xGrowth truly thrives.

    At xGrowth, we've married the prowess of both these strategies to deliver stellar results, utilising well-curated methods derived from top Account-Based Marketing examples. A recent standout achievement includes booking 15 meetings with C-level and C-1 level executives across the APAC region in the financial sector. Alongside, we paved the way for 12 promising opportunities with top financial institutions in Australia and New Zealand.

    We do more than just plan strategies; we help build success stories. Let's dive in and create success together. Build ABM Strategy with xGrowth.

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