customer retention strategies

The Last Customer Retention Strategies You’ll Ever Need

Customer retention is the ability of a business to keep existing customers and continue to generate revenue from them. Customer retention strategies are a vital aspect of any business, as they can significantly impact its profitability and growth.

Check out: Our customer retention email templates.

Retaining existing customers is often more cost-effective than acquiring new ones, for several reasons:

  • Customer acquisition can cost five times more than retaining an existing one.
  • The probability of selling to an existing customer is between 60% and 70%, while the probability of selling to a new customer is only between 5% and 20%.
  • Existing customers are more likely to try new products, spend more, and refer others to the business.
  • Increasing customer retention by 5% can increase profits by 25% to 95%.

Here are some additional benefits of a customer retention strategy:

  • Increased customer lifetime value: The longer a customer stays with your business, the more money they will spend with you over time.
  • Reduced marketing costs: You will spend less money on marketing and advertising to acquire new customers if you can retain your existing customers.
  • Improved brand reputation: Happy customers are more likely to recommend your business to their friends and family, which can help to improve your brand reputation.
  • Increased employee morale: When customers are happy, they are more likely to be positive about your business, which can boost employee morale.

Customer retention is a key factor in creating a loyal and satisfied customer base, which can lead to increased revenue and reduced costs for the business. Customer retention can be improved by various strategies, such as:

Understanding what motivates and delights your customers can build long-term relationships and increase their lifetime value.

Understanding customer retention

Customer retention rate is a metric that measures the percentage of customers who continue to use a product or service within a defined period. It helps a business monitor its:

A high customer retention rate indicates that customers are sticking with the product, which often goes hand-in-hand with a high acquisition rate. These two factors combined set the business on an overall growth trajectory. Conversely, a low customer retention rate can signal problems that need to be addressed.

The formula used to calculate the customer retention rate is as follows:

Retention rate = { (E – N) / S } x 100


  • E is the number of customers at the end of the period.
  • N is the number of new customers acquired by the business over the period.
  • S is the number of customers at the beginning of a period.

For example, if a business has 100 customers at the start of the month, 120 customers at the end of the month, and 30 new customers acquired during the month, then its customer retention rate for that month is:

Retention rate = { (120 – 30) / 100 } x 100

Retention rate = 90%

This means that 90% of the customers who started the month with the business remained with it by the end of the month.

Customer onboarding for a lasting impression

A strong onboarding process for new customers is essential for improving customer retention.

Some tips for creating an effective onboarding experience are:

  • Define your customer segments and personas. Different customers may have different needs, goals, expectations, and preferences. You should tailor your onboarding process to suit each segment and persona and provide them with relevant and personalized content, guidance, and support.
  • Set clear and realistic expectations. You should communicate the value proposition of your product or service and what the customers can expect from it. You should also set milestones and success criteria for each stage of the onboarding process and track the progress and feedback of the customers.
  • Provide multiple channels of communication and support. You should offer various ways for the customers to interact with you, such as email, phone, chat, video, social media, etc. You should also provide proactive and timely support, such as welcome messages, check-in calls, follow-up emails, surveys, etc. You should also encourage the customers to ask questions and share their feedback.
  • Create engaging and interactive content. You should use various content formats, such as videos, tutorials, webinars, blogs, podcasts, etc., to educate and entertain the customers. You should also use gamification elements, such as badges, points, rewards, etc., to motivate and incentivize the customers. You should also use social proof elements, such as testimonials, reviews, ratings, etc., to build credibility and trust.
  • Optimize and iterate your onboarding process. You should measure and analyze the performance and impact of your onboarding process using retention metrics such as: activation rate, retention rate, churn rate, customer satisfaction score (CSAT), net promoter score (NPS), and other customer service stats. You should also conduct user research and testing to identify the pain points and opportunities for improvement. You should also implement feedback loops and best practices to refine and enhance your onboarding process continuously.

There are a number of tools and resources that can help you create an effective onboarding process. Here are a few examples:

One of the benefits of using workflows, follow-up emails, and self-service knowledge bases is that they can automate and streamline your onboarding process.

Workflows are sequences of actions that are triggered by certain events or conditions. For example, you can create a workflow that sends a welcome email to new customers when they sign up for your product or service.

Follow-up emails are messages sent to customers after a certain period or after a certain action. For example, you can send a follow-up email to an existing customer who has completed a tutorial or a survey.

TextExpander is a powerful workflow tool that can help automate email messages, replies, and follow-ups. Use one of our TextExpander templates for ideas.

Self-service knowledge bases are online repositories of information that customers can access anytime and anywhere. For example, you can create a knowledge base that contains FAQs (frequently asked questions), guides, tips, troubleshooting steps, etc.

These tools can help you:

  • Save time and resources. Using these tools, you can reduce your onboarding process’s manual work and human errors. You can also scale up your onboarding process without compromising quality or consistency.
  • Increase customer engagement and satisfaction. You can provide timely and relevant information and support to your loyal customers. Using these tools, you can also increase the interaction and feedback between you and your customers.
  • Improve customer retention and loyalty. You can increase your customers’ value and benefits from your product or service. Using these tools, you can also reduce the friction and frustration that your customers may encounter during their onboarding process.

Read: Find out how TextExpander can be your single source of truth.

Personalization and tailored solutions

Personalization is the process of creating customized experiences for customers based on their individual needs, preferences, and behaviors. Personalization can help businesses build trust, loyalty, and satisfaction with their customers, as well as differentiate themselves from their competitors.

Personalized recommendations and services can have a positive impact on customer loyalty. Customers who receive personalized recommendations and services may feel more valued, understood, and engaged by the business. They may also perceive the business as more relevant, helpful, and convenient for their needs.

Personalized recommendations and services can also increase customer retention, cross-selling, upselling, and referrals.

Some examples of how businesses can tailor solutions to meet individual customer needs:

  • Using customer data to personalize marketing campaigns, such as sending targeted offers, coupons, or discounts based on previous purchases, browsing history, or preferences.
  • Grouping similar customer personas together and creating personalized content, such as videos, blogs, podcasts, or webinars, that address their specific pain points, goals, or interests.
  • Personalizing email marketing by using the customer’s name, location, or other relevant information, and sending timely and relevant messages based on their behavior, such as cart abandonment, product reviews, or feedback surveys.
  • Getting creative with customer support strategies, such as using chatbots, live chat, or social media to provide quick and personalized responses to customer queries or issues.
  • Sending greeting cards, thank-you notes, birthday wishes, or anniversary reminders to customers to show appreciation and recognition.
  • Offering custom and unique solutions that solve a specific problem for the customer or provide a specific feeling or benefit that the customer desires.

Building trust and reliability

Trust is the foundation of any successful customer relationship. Trust is the belief that a business will act in the best interest of its customers, deliver on its promises, and provide high-quality products and services. Trust can increase customer satisfaction, loyalty, retention, and referrals, as well as enhance the reputation and credibility of a business.

Some strategies for building and maintaining trust with customers are:

  • Be transparent and honest. Customers appreciate businesses that are open and truthful about their products, services, policies, and practices. Businesses should communicate clearly and consistently with customers and avoid false or misleading claims. Businesses should also admit their mistakes and take responsibility for fixing them.
  • Provide value and quality. Customers trust businesses that offer products and services that meet or exceed their expectations. Businesses should understand the needs and preferences of their customers and deliver solutions that solve their problems or fulfill their desires. Businesses should also ensure their products and services are reliable, safe, and secure.
  • Listen and respond to feedback. Customers trust businesses that care about their opinions and experiences. Businesses should solicit feedback from customers through various channels, such as surveys, reviews, ratings, testimonials, etc. Businesses should also acknowledge and act on their feedback and show appreciation for customers who share their thoughts.
  • Build relationships and loyalty. Customers trust businesses that treat them as valued partners, not just transactions. Businesses should personalize their interactions with customers, and use their names, preferences, history, etc., to create relevant and engaging experiences. Businesses should also reward loyal customers with incentives, such as discounts, coupons, freebies, etc.

Some examples of businesses that have successfully built trust with their customers are:

  • Amazon: An e-commerce giant that has built trust by offering a vast selection of products, fast and reliable shipping, and excellent customer service.
  • Away Luggage: A travel brand that has disrupted the industry by offering stylish, high-quality luggage at affordable prices, and by providing exceptional customer service.
  • Casper: A mattress company that has built a loyal following by offering high-quality products, a seamless online shopping experience, and exceptional customer service.
  • Glossier: A beauty brand that has built a loyal following by creating products that are simple, effective, and fun to use.
  • Sephora: A beauty retailer that has built a reputation for offering a wide range of high-quality products and exceptional customer service.
  • The Ritz-Carlton Hotel Company: Known for providing a warm, welcoming, personalized experience at every level, from executives and managers to housekeeping and wait staff.
  • Trader Joe’s: A grocery chain that is known for its friendly and helpful staff, and for offering high-quality products at affordable prices.
  • Warby Parker: An eyewear company that has disrupted the industry by offering stylish, affordable glasses and a seamless online shopping experience.
  • Wegmans: A grocery chain that regularly wins the Temkin Experience Rankings and tops lists of most loved companies because of its focus on creating happy, engaged employees.

Collecting and Using Customer Feedback

Customer feedback is essential for improving the customer experience. It is the best way to understand what customers want and need and how to improve your products or services to meet their expectations.

There are many benefits to collecting customer feedback. For example, customer feedback can help you:

  • Identify areas where you can improve your products or services
  • Understand what customers want and need
  • Build trust and loyalty with customers
  • Improve your customer service
  • Increase sales

There are many different methods of collecting customer feedback. Some of the most common methods include:

  • Customer service: Customer service is a great opportunity to collect customer feedback. When customers contact you with a problem, take the opportunity to ask them for their feedback on how you can improve your products or services.
  • Social media: Social media is a great way to collect customer feedback. You can monitor social media for mentions of your products or services and ask customers to share their feedback directly with you.
  • Surveys: Surveys are a great way to collect feedback from many customers. You can use surveys to ask customers about their satisfaction with your products or services, their needs and wants, and their suggestions for improvement.
  • User testing: User testing is a great way to get feedback on the usability of your products or services. You can watch customers use your products or services and ask for feedback.

There are many ways that businesses can use customer feedback to enhance their products or services. Here are a few examples:

  • Build trust and loyalty with customers. When customers feel that their feedback is valued and that their needs are being met, they are more likely to be loyal to your business.
  • Identify areas to improve your products or services. For example, if you receive feedback that customers are having trouble using a particular feature of your product, you can use that feedback to improve the design or functionality of the feature.
  • Improve your customer service. You can use customer feedback to identify areas where your customer service can be improved. For example, if you receive feedback that customers are having trouble getting in touch with customer service, you can use that feedback to improve the customer service process.
  • Increase sales. You can use customer feedback to identify opportunities to increase sales. For example, if you receive feedback that customers are interested in a new product or service, you can use that feedback to develop the product or service and launch it to market.
  • Understand what customers want and need. For example, if you receive feedback that customers are looking for a new feature in your product, you can use that feedback to prioritize the development of the feature.

By following these tips, businesses can use customer feedback to enhance their products or services and improve the customer experience

Read: 5 Customer Success Software Picks to Maximize Customer Retention

Effective Customer Communication

Proactive customer communication is a key factor in customer retention. Proactive customer communication is the act of reaching out to customers before they contact you, anticipating their needs, expectations, and concerns, and providing them with relevant information, solutions, or offers. Proactive customer communication can help businesses:

  • Build trust and loyalty: By communicating proactively, businesses can show their customers that they care about them, value their feedback, and appreciate their business. Proactive communication can also help businesses establish a positive and consistent brand image, and create a lasting impression on customers.
  • Increase satisfaction and engagement: By communicating proactively, businesses can enhance customer satisfaction by meeting or exceeding customer expectations, resolving issues before they escalate, and delivering value-added services or offers. Proactive communication can also help businesses increase customer engagement by creating opportunities for interaction, collaboration, or advocacy.
  • Reduce churn and increase retention: By communicating proactively, businesses can reduce customer churn by preventing dissatisfaction, frustration, or confusion that may lead to customer defection. Proactive communication can also help businesses increase customer retention by strengthening customer relationships, increasing customer loyalty, and encouraging repeat purchases or referrals.

One of the best ways to implement proactive customer communication is to maintain a customer communication calendar. A customer communication calendar is a plan that outlines the frequency, timing, content, and channel of communication with customers. A customer communication calendar can help businesses:

  • Align and coordinate communication: Businesses can align and coordinate their communication efforts across different departments, teams, or platforms. A customer communication calendar can also help businesses ensure consistency and coherence in their communication messages, tone, and style.
  • Measure and improve communication: Businesses can measure and improve their communication effectiveness and efficiency. A customer communication calendar can also help businesses track and analyze their communication results, such as open rates, click-through rates, response rates, conversion rates, etc.
  • Organize and prioritize communication: Businesses can organize and prioritize their communication activities based on their goals, objectives, and resources. A customer communication calendar can also help businesses avoid over-communicating or under-communicating with customers, which may cause annoyance or neglect.

There are various channels that businesses can use to communicate proactively with customers, such as:

  • Email: Email is one of the most widely used and effective channels for proactive customer communication. Email can help businesses send personalized, timely, and relevant messages to customers, such as welcome emails, newsletters, product updates, tips and tricks, surveys, testimonials, etc.
  • SMS: SMS is another popular and efficient channel for proactive customer communication. SMS can help businesses send short, concise, and urgent messages to customers, such as appointment reminders, order confirmations, delivery notifications, feedback requests, etc.
  • Social media: Social media is a powerful and interactive channel for proactive customer communication. Social media can help businesses share valuable content with customers, such as blog posts, videos, podcasts, infographics, etc. Social media can also help businesses engage with customers by responding to their comments, questions, reviews, or mentions.
  • Chatbots: Chatbots are an innovative and convenient channel for proactive customer communication. Chatbots can help businesses provide instant and automated responses to customers’ queries, requests, or complaints. Chatbots can also help businesses offer personalized recommendations, suggestions, or offers to customers.

Check out: 10 Powerful Customer Experience Scripts

Some examples of how businesses can use these channels to communicate proactively with customers are:

  • Netflix, a streaming service that sends personalized emails to customers based on their viewing history, preferences, and ratings. Netflix also sends product updates via email to inform customers about new features, shows, or movies that they may like.
  • Domino’s, a pizza chain that sends SMS messages to customers to confirm their orders, update them on the status of their delivery, and thank them for their purchase. Domino’s also sends SMS messages to offer customers discounts, coupons, or freebies.
  • Starbucks, a coffee company that shares engaging content with customers on social media platforms such as Facebook, Twitter, Instagram, YouTube, etc. Starbucks also interacts with customers on social media by replying to their comments, questions, reviews, and mentions.
  • Sephora, a beauty retailer that uses chatbots to provide customer service and support on platforms such as Facebook Messenger or Kik. Sephora also uses chatbots to offer customers personalized beauty advice, product recommendations, and makeup tutorials.

These are just some examples of how businesses can use proactive customer communication to retain their customers and create a better customer experience. Proactive customer communication is a strategy and a mindset that businesses should adopt to foster long-term customer relationships.

Creating a Community and Inspiring Loyalty

Forming a community around a product or service is a valuable strategy for businesses to increase customer retention, loyalty, and advocacy. A community is a group of people who share a common interest, passion, or goal, and who interact with each other regularly through various channels.

A community can provide customers with many benefits, such as:

  • A sense of belonging and identity: Customers can feel that they are part of something bigger than themselves and that they have a voice and a role in the community. They can also express their personality and preferences through their participation and contribution.
  • A source of support and learning: Customers can get help and advice from other customers or experts in the community, and learn from their experiences and feedback. They can also share their own knowledge and skills with others, and gain recognition and appreciation.
  • A platform for engagement and co-creation: Customers can interact with the business and influence its decisions and actions. They can also collaborate with other customers and create new value and solutions for the product or service.

Businesses can foster a sense of loyalty and belonging among customers by creating and managing a community around their product or service. Some of the ways businesses can do this are:

  • Define the purpose and vision of the community: Businesses should have a clear and compelling reason for creating a community, and communicate it to their customers. They should also align the community’s goals and values with their brand’s mission and vision.
  • Choose the right platform and tools for the community: Businesses should select the most suitable channel and medium for their community, such as online forums, social media groups, blogs, podcasts, webinars, or events. They should also provide the necessary tools and features for the community members to communicate, collaborate, and create, such as chat, video, polls, surveys, or gamification.
  • Invite and onboard the right customers for the community: Businesses should identify and target the most engaged and loyal customers for their community, and invite them to join. They should also provide them with a smooth and easy onboarding process, such as sending welcome emails, offering tutorials, or assigning mentors.
  • Encourage and reward customer participation and contribution: Businesses should motivate and incentivize their customers to be active and involved in the community, such as asking questions, answering queries, sharing stories, giving feedback, or making suggestions. They should also recognize and reward their customers for their participation and contribution, such as sending thank-you notes, offering discounts, giving badges, or featuring testimonials.
  • Monitor and moderate the community: Businesses should keep an eye on the activity and sentiment of the community, and intervene when necessary. They should also ensure that the community is safe, respectful, and inclusive for all members, and enforce the community rules and guidelines.

Some examples of companies that have successfully built communities around their brand are:

  • Airbnb: Airbnb is an online marketplace that connects travelers with local hosts who offer unique accommodations around the world. Airbnb has fostered a vibrant community of travelers and hosts who share their stories, tips, recommendations, or reviews on its platform. Airbnb has various ways for its community members to connect with each other and with the company, such as Airbnb Experiences, Airbnb Adventures, Airbnb Open Homes, and Airbnb Community Center. Airbnb also empowers its customers to co-create new experiences with them through contests or challenges.
  • Lego: Lego is a toy company that has created a global community of Lego fans who share their passion for building with Lego bricks. Lego has various platforms and programs for its community members to interact with each other and with the company, such as Lego Ideas, Lego Life, Lego VIP, Lego House, and Lego Masters. Lego also encourages its customers to co-create new products with them through crowdsourcing campaigns.
  • Nike: Nike has built a strong community around its brand by encouraging customers to share their stories and by sponsoring athletes and teams.
  • Starbucks: Starbucks is a coffee company that has created a loyal community of coffee lovers who enjoy the Starbucks experience. Starbucks has several channels and initiatives for its community members to engage with each other and with the company, such as Starbucks Rewards, Starbucks Stories, Starbucks Foundation, and Starbucks Reserve. Starbucks also invites its customers to give feedback and suggestions on how to improve its products and services through surveys or social media.

Rewarding Customer Loyalty

Customer loyalty programs are marketing strategies that aim to reward and incentivize customers who purchase or engage with a brand regularly. They are effective in retaining customers because they:

  • Increase customer satisfaction and trust: Customers feel valued and appreciated when they receive rewards and benefits from the brand. They also trust the brand more when it delivers on its promises and offers consistent quality and service.
  • Enhance customer loyalty and advocacy: Customers are more likely to stay loyal to the brand that rewards them and less likely to switch to competitors. They are also more likely to recommend the brand to friends and family, generating positive word-of-mouth and referrals.
  • Boost customer spending and retention: Customers are more likely to spend more with the brand that offers them rewards and incentives, especially if they can redeem them for products or services they want or need. They are also more likely to return to the brand for repeat purchases, reducing customer churn and increasing lifetime value.

Businesses can reward and incentivize customer loyalty in various ways, depending on their goals, target audience, and industry. Some of the common types of customer loyalty programs are:

  • Points-based programs: Customers earn points for every purchase or action they make with the brand, and can redeem them for rewards such as discounts, free products, or gift cards. For example, Starbucks Rewards allows customers to earn stars for every dollar they spend at Starbucks, and use them to get free drinks, food, or merchandise.
  • Tier-based programs: Customers progress through different levels of loyalty based on their spending or engagement with the brand, and receive different benefits and perks at each level. For example, Sephora Beauty Insider has three tiers: Insider, VIB, and Rouge, each offering exclusive rewards such as birthday gifts, free shipping, or early access to sales.
  • Social media programs: Customers earn rewards for interacting with the brand on social media platforms such as Facebook, Twitter, or Instagram, such as liking, sharing, commenting, or posting content related to the brand. For example, TOMS Rewards allows customers to earn points for following TOMS on social media, writing reviews, or uploading photos with TOMS products.
  • Paid programs: Customers pay a fee to join a premium loyalty program offering exclusive benefits and privileges unavailable to regular customers. For example, Amazon Prime charges customers an annual or monthly fee for free shipping, streaming services, discounts, and other perks.

These are examples of successful customer loyalty programs that have helped businesses retain and grow their customer base. However, there is no one-size-fits-all solution for creating a customer loyalty program. Businesses must understand their customers’ needs, preferences, and behaviors and design a program that suits their brand identity and value proposition. They must also monitor and measure their program’s performance and adjust it accordingly to keep it relevant and attractive to their customers.

Customer Retention Strategies Matter

There are many reasons why a customer retention strategy is so important. It is much more expensive to acquire new customers than it is to retain existing ones, and it can cost up to five times more to acquire a new customer than it does to retain an existing one.

Retained customers are more likely to spend more money with your business. This is because they are already familiar with your products or services and they trust you.

Retained customers are more likely to refer their friends and family to your business. This is a great way to acquire new customers without having to spend any money on marketing.

Some key ways you can increase customer retention:

  • Monitor your customer retention rate
  • Optimize your onboarding process
  • Personalize the experience
  • Build trust with your users
  • Gather and use customer feedback to improve the experience
  • Communicate effectively with your customers
  • Build a community around your products and services
  • Implement loyalty programs to encourage repeat business

Businesses can inspire customer loyalty and profitability by implementing effective customer retention strategies. This means that customers will be more likely to continue doing business with your business for the long term. This will lead to increased sales and profits for your business.

In addition, customer loyalty can also lead to positive word-of-mouth marketing. This means that customers will tell their friends and family about your business, which can help you acquire new customers.

Customer retention strategy is an essential part of any successful business. Businesses can inspire customer loyalty and profitability by implementing effective customer retention strategies. This will increase your business’s sales and profits in the long run.