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10 Proven Customer Retention Strategies

A woman thinking of customer retention strategies while sitting in front of her laptop.

In the bustling world of business, it's no secret that attracting new customers can be quite a challenging task. In fact, it often takes a jaw-dropping five to twenty times more resources just to lure in a fresh face, compared to keeping a loyal customer in the fold. Yet, for some puzzling reason, customer retention often takes a backseat to the irresistible appeal of new shoppers.

Let's cut straight to the chase: while casting a wide net may work wonders on the open seas, when it comes to the business world, leaning exclusively on one-time clients is like trying to stay afloat with a leaky boat.

To navigate your business toward smoother waters, we're here to spill the beans on 14 must-know customer retention strategies that are primed to work their magic.

What Is Customer Retention?

A woman holding her credit card and shopping online on her laptop.

Customer retention is all about keeping your existing customers happy and loyal for the long haul. It involves building and nurturing long-term relationships with customers to encourage repeat business, reduce customer churn (the rate at which customers stop doing business with a company), and ultimately increase the lifetime value of each customer.

The end goal is to make sure your customers keep choosing your brand over others, stay satisfied, and contribute to your company's long-term success and profits.

Remember, a loyal customer who keeps coming back throughout the year is worth more than lots of one-time buyers who vanish after a single purchase. So, focus on making your current customers happy and loyal, as they often bring more stability to your business than constantly chasing new customers.

Why Is Customer Retention Important For Your Business?

A mini trolley with some cash in it.

Look around your room, and you'll probably see products from major brands. But did they get so big by just relying on one-time customers? The facts say no. Research by Frederick Reichheld of Bain & Company shows that a mere 5% increase in customer retention can lead to profits jumping by 25% to a whopping 95%!

As Yoav Vilner, an advisor and external CMO, told Forbes, running a startup marketing agency taught him a valuable lesson. He discovered that focusing on keeping and nurturing existing clients brings a much better return on investment compared to constantly chasing new ones. You've got a dedicated team in place, and you don't have to start from scratch. Plus, when clients pay monthly, they get used to it, and you can offer more services because they trust you. Vilner makes it clear that getting that first dollar from a new client is much harder.

And if that isn’t convincing enough, here are more reasons to why customer retention is crucial:

Sustainable Revenue: Retained customers make repeated purchases, which contributes to consistent revenue streams. They often spend more over time, increasing their lifetime value to the business.

Cost Efficiency: Acquiring new customers is typically more expensive than retaining existing ones. Customer retention can save on marketing and acquisition costs.

Word-of-Mouth and Referrals: Loyal customers are more likely to recommend your business to others, providing a valuable source of free advertising through word-of-mouth and referrals.

Brand Loyalty: Satisfied customers are more likely to stick with your brand, even in the face of competition. This brand loyalty can act as a buffer against market fluctuations.

Feedback and Improvement: Existing customers provide valuable feedback, helping you identify areas for improvement, product development, and enhanced customer service.

Reduced Churn: Focusing on customer retention can reduce customer churn, which is the rate at which customers leave your business. High churn can be detrimental to long-term success.

Competitive Advantage: A loyal customer base can be a unique selling point and a competitive advantage, setting you apart from businesses that struggle with retention.

Know Your Customer Retention Rate

To make smart business strategies, you need to know your Customer Retention Rate (CRR). CRR shows how many of your existing customers you keep over a certain time.

Here's how to calculate CRR: CRR = [(E - N) / S] x 100. E is the customers at the end of the period, N is the new customers you got, and S is the starting customers.

For example, if a company started with 80 customers, got 20 new ones, and ended with 60, the CRR would be [(60 - 20) / 80] x 100, which is 50%. Smaller businesses usually aim for at least 20%, while bigger companies might want to keep it above 79%.

Once you know your CRR, it's easier to plan long-term strategies to improve it.

10 Proven Customer Retention Strategies

Two individuals thinking of customer retention strategies in their office.

Craft an Exceptional Onboarding Experience

This is very important. When a customer makes their initial purchase, your business faces a crucial opportunity to craft a memorable first impression. It's essential to guarantee that your onboarding process is well-honed and polished.

Customers tend to remember any hiccups in their initial onboarding experience, such as mishandled information or the absence of a designated point of contact to guide them through the beginning.

Even though your business can address these issues, they might still leave customers feeling dissatisfied.

PRO TIP: An effective onboarding process should feature streamlined workflows with carefully timed email notifications, follow-up messages, access to a self-service knowledge base, and celebratory messages to both excite and impress new clients.

View Customers as Individuals, Not Data Points

While AI technology is advancing and deploying chatbots may seem cost-effective, the truth remains: customers often express dissatisfaction with AI chatbots. A frequent grievance is that these bots lack a deep understanding of the customer.

AI typically responds to keywords and predefined scenarios, missing the mark on delivering the personalized, human touch that customers crave. They can't provide the empathy that a human interaction offers.

In this light, it's essential to recognise that customers are not just data points; they are individuals with unique needs and emotions. While data analysis can offer theoretical insights, the most accurate understanding of customer satisfaction or dissatisfaction comes from direct, empathetic interactions.

Customers want to connect and feel genuinely heard. Treating them as individuals rather than faceless figures on a screen can work wonders in encouraging repeat business.

Offer Speedy Delivery and Hassle-Free Returns

A woman on an e-commerce site on her smartphone

In the world of e-commerce, two major concerns that resonate with consumers are delivery and the return process. How you handle the final leg of the delivery journey can set you apart from the competition and help retain your customers.

While some customers are content to wait for weeks to receive their orders, there's a segment of buyers who seek immediate gratification. Offering the choice of expedited delivery, with products arriving in a matter of days instead of weeks, can be a compelling reason for customers to return to your business. They know they can count on your company for faster service compared to your competitors.

Yet, there will be instances when customers need to return or replace a product. Streamlining this process not only provides peace of mind to your customers but also encourages them to revisit your e-commerce store. Hence, ensuring that the return procedure is straightforward and fair is crucial to your business.

When customers have confidence that your commitment to their satisfaction extends beyond the point of purchase, they are more likely to trust you with future transactions, knowing that you value their experience over their money.

Regularly Seek Customer Feedback

Don't hesitate to inquire about your customers' satisfaction, even if the responses might not always be what you hope for. Surprisingly, it's often the negative feedback that carries more weight. Unhappy customers are unlikely to return to a business. Therefore, asking them about their concerns before they leave can be valuable in identifying areas that need improvement, ultimately making customer retention easier.

One practice to avoid is relying on a single survey or poll indefinitely. As times change, so do the needs and desires of customers. It's important to periodically ask questions and compare the latest feedback to previous responses to keep up with evolving customer expectations, which brings us to our next point.

Motivate Referrals from Customers

A woman referring a brand to her friend

Encouraging your happy customers to recommend your business to others is a great way to bring in new clients.

When people love your products or services, they often tell others without any prompting. They want their friends and colleagues to enjoy what they've experienced.

To make this referral process even more effective, you can offer rewards or incentives for successful referrals that result in new business. There are tools like Referral Candy, Ambassador, and Referral Rock that can help with this. Using referral coupons can also help you figure out which customers have the most impact on growing your business.

Essential VIP Benefits

According to Forbes, Virginia Lee, the Executive Vice President of ShopShops, highlights the significance of offering special perks to VIP customers. They run a dedicated WeChat group for their VIP clients to keep communication open. This group serves as a platform for collecting feedback and granting VIPs early access to shopping events, exclusive discounts, and other benefits.

Lee also emphasises the importance of creating a sense of shopping with a trusted friend, even in the virtual world. She underscores the value of regular communication in establishing and nurturing these customer relationships. With a substantial 65% of a company's business stemming from existing customers, directing efforts toward enhancing the experience for those who already support your business is a wise investment that pays off.

Offer "Buy Now, Pay Later" Choices

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The surge in the "buy now, pay later" model's popularity in recent years doesn't come as a surprise. In fact, a survey from 2021 revealed that 76% of consumers are more inclined to shop at places where they have the option for payment plans.

For instance, customers can now book their dream vacations through Expedia, who can conveniently split their travel expenses using services like Affirm, or online shoppers who frequent popular fashion brands like ASOS and use Afterpay to manage their purchases.

This is an affordable and clear way to shop, and its rising popularity hints that customers might favor businesses that provide these flexible payment choices.

Here are some well-known "Buy Now, Pay Later" services and websites:

Afterpay: Offers installment payment plans for online and in-store purchases.

Klarna: Allows customers to shop online and pay later or in installments.

Sezzle: Offers interest-free installment plans for online shopping.

Affirm: Provides flexible payment options for online purchases.

Quadpay: Splits purchases into four equal installments.

PayPal Credit: Offers financing options for PayPal users.

Splitit: Allows customers to pay in monthly installments using their existing credit card.

ZipPay: Provides interest-free, flexible payments for online shopping.

Laybuy: Offers interest-free installment payments for online and in-store purchases.

Openpay: Allows customers to buy now and pay later in installments

Distribute a Business Newsletter

A company newsletter serves as an uncomplicated and budget-friendly method for keeping your customers engaged, as it can bolster your company's image and recognition.

Despite its simplicity, newsletters have the power to keep your brand top of mind each time your customers check their email.

PRO TIP: You can streamline the process by utilizing email automation to effortlessly send out updates and special offers to all your customers simultaneously.

Mastering Inventory Management

Now, you might be wondering, what does inventory management have to do with my customers? After all, it's the behind-the-scenes work while customer interactions happen on the frontlines.

The importance of inventory management extends well beyond just retaining customers. It significantly influences the overall customer experience, as well as the efficiency of your supply chain and your bottom line.

For instance, failing to restock a popular item in a timely manner can lead to stockouts, which, in turn, might prompt shoppers to turn to your competitors for a similar product. If they find satisfaction with your competition, you may have just lost a customer.

While backorders can be a solution to retain customers, it's crucial to maintain open communication during the waiting period so customers are informed about the status of their orders.

Even in the best of circumstances, supply chains can encounter disruptions. However, employing intelligent, data-driven inventory management practices can shield your stock from unexpected shocks and play a vital role in preserving your loyal customer base.

Create an Enjoyable Unboxing Experience

Explore methods to make the unboxing process fun! This can range from using attractive, branded packaging to including inserts with visuals and text that reflect your brand's character, as well as providing coupons for future purchases or exclusive benefits.

Another approach to enhance the unboxing experience is by adding a personalized thank-you card, complete with your customer's name

Furthermore, user-generated unboxing videos are an excellent means to enhance the visibility of your e-commerce business.

Final Words

Now that you have a range of effective customer retention strategies at your disposal, the question here is: Which ones will you select?

Remember, not every strategy fits every business, but when you prioritize the needs of your customers, they'll be more likely to return to your business. Contented customers are repeat customers, while dissatisfied ones tend to look elsewhere.


Well, aren’t we glad you asked! We at DigiCom are obsessive data-driven marketers pulling from multi-disciplinary strategies to unlock scale. We buy media across all platforms and placements and provide creative solutions alongside content creation, and conversion rate optimizations. We pride ourselves on your successes and will stop at nothing to help you grow.


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