What Is the Customer Retention: Definition, Examples & Strategies

A high customer retention rate is one of the signs of a successful marketing strategy. Working with regular customers, you can sell more and spend less, generating more profit. Let's figure out why this metric is so important, how to improve it, and how to bring the expertise of successful companies into your business.

Meaning of Customer Retention

Customer retention means maintaining a regular customer base. In trade and traditional services, it means repeated customer requests during the reporting period. 

Each company can establish its own loyalty criteria. For example, in real estate, the second customer’s request will be considered a close relationship, while in the sale of household goods, it can be regarded as a close relationship only after 10–20 purchases. 

We should also consider how to define customer retention in the SaaS industry. Here, it means maintaining a subscription in the current period and renewing it in the next one. A customer is considered loyal as long as they use the paid version of the product and do not plan to cancel it.

To give a complete definition of what is customer retention, we should also consider the reverse metric - churn. It shows the number of customers the company loses during the reporting period. The higher the churn rate, the lower the retention rate, and vice versa.

Why is Customer Retention Important

The central importance of customer retention lies in the relative ease of working with the existing customer base. According to the online publication Review42, working with new customers is much more expensive:

• the cost of selling a product is 5 times higher;
• building loyalty requires 16 times more spending;
• the conversion rate of advertising campaigns is 3–14 times lower.

Of course, this affects the financial results of the business. According to Annex Cloud experts, a 5% increase in customer retention in e-commerce increases profitability by 25-75%. Therefore, in 2023, 82% of American companies made efforts to maintain a loyal customer base. They used a variety of customer retention solutions, including price factors, personalization, and improved service. 

It's important to understand that this metric is closely connected with other business success factors and does not exist in an information vacuum. The importance of customer retention can also be evaluated from the customer satisfaction standpoint. If customers stay loyal, they like the company's offer, but if they leave, you should find the problem and fix it as soon as possible.

Benefits of Customer Retention

Increasing profitability is just the tip of the iceberg. E-commerce customer retention optimizes other business processes as well. Let's talk about them in more detail.

Increase the effectiveness of marketing campaigns

Loyal customers are willing to consider additional offers from the company. They are more likely to participate in promotions that involve cross-selling and upselling. This allows you to increase revenue while minimizing the cost of advertising campaigns.

Brand protection and promotion

One of the key customer retention benefits is that loyal customers will be helpful for the company's marketing department. According to Texas Tech's surveys, 83% of satisfied customers eagerly recommend the purchased product to their friends and defend the brand in disputes.

Getting honest feedback

Loyal customers sincerely strive to improve the product and increase the quality of service. They are much more likely to provide feedback and talk about problems in more detail. By listening to their opinions, you can get invaluable information to improve your business efficiency. 

With the help of Claspo widgets, you can conduct surveys directly on your website. Then, transfer the answers to your ESP or CRM for audience segmentation and build personalized communication based on the received feedback.

Improve brand reputation

One of the advantages of customer retention is that loyal customers are more likely to leave reviews on the website and external platforms and share user-generated content (UGC). This improves overall brand perception and makes it easier to expand your audience.

Examples of customer retention

According to Survey Sparrow, the top 5% of e-commerce companies have an average customer retention rate of 94%. This is a serious competitive advantage that allows you to maintain leadership positions even during structural changes in the market and global crises. Let's look at ways to improve customer retention.

The Honest Kitchen

This American manufacturer of balanced pet food relies on user-generated content.  The company motivated its customers to share their pet stories and photos by offering bonuses as a reward. When a new user registered on the site, they immediately saw reviews selected by breed, age, and health condition of a pet. This is one of the best practices for customer retention - within a few months, the churn rate was halved.

Calm

The developers of a meditation app were quickly losing subscribers. After conducting an in-depth analysis of user behavior, they noticed that those who used the reminder function were less likely to abandon the app. In this example of customer retention, it was enough to put a reminder button on the home screen to reduce churn by three times within 6 months.

Elph ceramics

This company sells ceramic products offline and online. Previously, each sales channel used a separate database - there was no data exchange between them. To improve customer retention rates, the company created a centralized CRM that stored information about all customers. It made it possible to launch more effective advertising campaigns that increased the retention rate by 30% within a year.

Dave

This personal budgeting app was having trouble building a loyal customer base. Its developers saw that people who added regular expenses stayed with them longer. In this customer retention example, simplifying the interface and adding integration with paid services proved effective. The company received a serious increase in KPIs - retention increased by 3.3 times!

5 Strategies to Increase Customer Retention

In the above examples, companies managed to enhance customer retention with relatively simple but very effective tools. Usually, the solution lies on the surface - it is enough to find the cause of the outflow and a way to reduce it. Let's talk about effective customer retention strategies.

1. Create accounts

Many users don't want to log in for anonymity and cybersecurity reasons. They have that right, and the company should provide the possibility to make purchases without registration, but creating accounts is one of the strongest customer service retention strategies. They can be used to send newsletters and make personalized recommendations. To motivate users to register before making purchases, you should use the following tools:

• offer personal coupons, bonuses, or discounts for the first order;
• emphasize a high level of security and protection of personal data;
• provide an opportunity to unsubscribe from mailings and notifications.

With Claspo, you can easily create widgets that describe the benefits of registration and take users to a form-filling page. Besides, you can add custom data input fields directly to your widget and collect email addresses, phone numbers, and other information about your audience, bypassing the account creation stage. 

Since Claspo integrates with various ESPs and CRMs, all data is instantly transferred to the chosen platform to build further communication with potential and existing customers.

2. Discounts for repeat purchases

A very simple but effective way of increasing customer retention is with discounts for repeat purchases. People don't like losing a benefit, even a hypothetical one. If you give customers a coupon or promotional code for a discount, many of them will want to turn it into real money. To do so, they will be forced to return and place another order. 

To add extra motivation, you could set a limited period of discount validity. But you need to take into account the peculiarities of the product life cycle. A coupon for purchasing a new car within 3 months will not be useful, but it will be very effective for maintaining the purchased car at an official service center.

Claspo allows you to add a unique promo code to your widget and show it only to a selected audience segment: for example, those who came to your website from a specific email campaign, advertisement, communication channel, and so on.

In addition, you can use one of our many countdown timer templates or easily drag and drop this component into your layout in the editor. Finally, Claspo also offers you a unique relative timer that starts a countdown for each user individually when your widget is displayed to them. So, your limited-time deals can reach a large audience and consequently bring you more sales.

3. Improving the quality of service

According to PWC surveys, 70% of consumers are ready to make a repeat purchase after receiving quality support. And almost the same number of them permanently abandon a brand because of a negative experience. Therefore, it is worth adopting the following customer retention strategies to retain them:

• Reduce the response time to a request. Add a website widget with clickable buttons for all available communication channels and help visitors contact you conveniently and in the shortest possible time.

• Offer compensation for inconveniences.
• Inform about new products or new opportunities via email or text message.
• Personalize requests.
• In case of a serious problem, send a real gift with a handwritten apology letter.

4. Choose the best contact time

To use this strategy for improving customer retention, you need to create customer profiles. What do they do, what is their typical day and week schedule, when are they ready to receive messages... HubSpot research shows that the best time to send emails is 9-12 am on Tuesday or Thursday. 

Again, you should take into account the specifics of the product's life cycle. If it's a durable product, you should pause before offering to make another purchase. The best time for upselling is from 2 weeks to 1 month after the last transaction, and for selling a new replacement product - from 1 to 6 months.

5. Creating loyalty programs

To improve user retention, you need to reward users for their activity. Bonuses should be offered not only for purchases but also for the following actions:

• creating an account;
• providing contact information;
• filling out survey forms;
• subscribing to official social networks and channels in messengers;
• posting user-generated content;
• recommending a product;
• attracting new users, etc.

At the same time, the loyalty program should be personalized. Make personalized offers based on customers' needs and desires, congratulate them on their achievements, and give them gifts for important dates.

How to Increase Customer Retention with Claspo

Claspo is a platform for creating website widgets that can help you retain customers in several ways:

• Motivate account creation,
• Collect personal data to enrich a profile,
• Provide personal discounts and promo codes,
• Conduct satisfaction surveys,
• Offer quick access to customer support,
• Promote your social networks and strengthen your online community.

Whichever way you choose, creating a Claspo widget will take just a few minutes, even without experience or technical skills. Our library contains over 700 ready-made templates for various purposes that can be easily customized in an intuitive editor. Start with a free plan with access to all advanced features and see the first results without spending a penny.