If you’re looking to get into digital marketing, the most important skills to learn involve retaining customers and building loyalty. With a more thorough understanding of what customer retention means and why it matters in the world of marketing, you’ll be better poised for success in this rewarding field.
What Is Customer Retention?
Customer retention refers to a brand’s ability to keep existing customers coming back time and time again. It’s a very measurable and trackable metric; simply divide your total number of lifetime customers by the number of customers still active with your brand. From there, you’ll be able to determine your brand’s retention rate.
Value of Customer Retention
Although a 100 percent retention rate would be great, in the real world, a brand’s retention rate will vary widely depending on the industry. Of course, some of this will vary based on your industry or other factors.
Why does customer retention matter so much, anyway? Well, consider the simple fact that it’s much less expensive to keep an existing customer than it is to bring in a brand-new customer. Specifically, it can cost anywhere from four to five times more to acquire a new customer than it can to keep an existing customer coming back. With this statistic alone in mind, it’s easy to see the value of customer retention.
However, customer retention also helps to build brand loyalty. The more customers continue to engage with and buy from your brand, the more loyal and committed they may become.
Importance of Customer Feedback in Customer Retention
Of course, you can’t expect high customer retention rates to happen effortlessly. At the very least, brands need to offer excellent products and services to keep customers coming back.
One of the easiest and most effective ways to make sure those goods and services are meeting (or exceeding) customer expectations? Gathering feedback. Taking the time to ask for feedback in the form of surveys and other methods is a great way to identify areas of improvement.
Meanwhile, customers appreciate knowing their feedback is valuable; when you take the time to ask customers for feedback and actually make changes based on that feedback, your customers are more likely to give your company another shot regardless of what their initial experience was.
Various Customer Retention Metrics
Digital marketers wanting to improve customer retention rates for their clients need to understand the metrics that go into creating a solid customer retention strategy. Some of the most key metrics you’ll want to measure include:
- Repeat customer rate – This refers to the proportion of customers who have made a minimum of two purchases from the company within a given period of time.
- Purchase frequency – This metric is a measurement of the number of times a customer makes a purchase from the company within a specified timeframe.
- Customer lifetime value (CLV) – This metric refers to the total amount of earnings a customer is expected to generate for the business throughout the entire span of the relationship.
- Net promoter score (NPS) – This is a measurement of a customer’s loyalty from a score of -100 to +100, with +100 being the most loyal. There are various factors that go into calculating NPS, from the percentage of promoters and the percentage of people who would recommend a business based on survey data.
Customer Retention Strategies
Now that you have a better understanding of what customer retention entails, why it matters so much in a marketing campaign, and what metrics can be used to assess customer retention, there are some strategies of note. These are practices that experienced digital marketing professionals use to improve customer retention and brand loyalty, ranging from actual loyalty programs to email and social media campaigns.
Loyalty Programs
These days, many businesses use loyalty programs as a means of rewarding members for being repeat customers. There are numerous ways in which a loyalty program can be structured, but most of them follow some sort of points system where users get a certain number of points for every dollar they spend with the brand. From there, points can be exchanged for discounts on future purchases or other special promotions.
Loyalty programs are an ideal way to boost customer retention because they give repeat customers an incentive to come back. Plus, they can also drive additional purchases and bring in new revenue while keeping customers engaging with the brand. In some cases, a loyalty program may even help bring in new customers. This is especially common with loyalty programs that offer a special discount for first-time purchases.
Email Campaigns
Another effective strategy for building customer loyalty and retention is the use of email campaigns to drive repeat purchases. Businesses can use their email subscriber list to send out notifications regarding special discounts and promotions as they occur. This, in turn, can drive repeat purchases.
Of course, not all email campaigns need to be promotional in nature. Sending out a weekly or bi-weekly newsletter with useful and engaging information can help keep your business in the front of your customers’ minds. This way, when they do need to make another purchase, they’ll be more likely to turn to your brand. In addition, the useful information provided in your email newsletter builds your brand’s reputation and increases loyalty.
Social Media Engagement
Social media can be an especially powerful tool when it comes to building customer retention. There are a variety of effective ways brands can use social media to drive repeat sales, such as announcing special sales and promotions to existing followers and customers. Likewise, holding contests and other interactive engagements on social media can keep your audience connecting with your brand in a creative way.
Exceptional Customer Retention Examples
There are plenty of ways to optimize a brand’s customer retention rate, but it can also be helpful to look at some real-world examples of brands that have been especially successful in building loyalty and maximizing retention rates.
- Amazon Prime – By being among the first brands to offer free two-day shipping with a membership, Amazon Prime is a “prime” example of a company that has built a huge following of repeat customers. According to eMarketer, Amazon has an estimated 200 million Amazon Prime Members in the US as of 2023
- Starbucks Rewards – The Starbucks Rewards program is another excellent example of a loyalty program that drives repeat sales and additional purchases. Specifically, this program works by offering one star for every dollar spent at Starbucks, with members being able to earn different membership tiers based on the number of stars they collect.
- Apple’s Ecosystem – Apple’s wide ecosystem of products has driven loyalty and spiked customer retention over the years, especially when you consider that many of these products are compatible only with other Apple products.
- Zappos – The Zappos brand got their customer loyalty program right when they decided to offer free expedited shipping and other perks to members of their VIP program.
- Costco – If you live near a Costco, you might even have a membership of your own. By paying an annual or monthly fee, customers gain access to all the discounted items the store has to offer, including substantial savings on fuel.
How to Build Your Own Customer Retention Strategy
So, what steps can a beginning digital marketer follow to build their customer retention strategy for a brand?
- Understand your customers – This is the first step in most marketing strategies. Taking the time to do audience research will help you understand what your customers are looking for in a product/service and what they value most in their favorite brands.
- Set clear retention goals – There’s no point in launching a customer retention plan without first setting clear, measurable goals. This might include reaching a specific customer retention rate or improving other key performance indicators, such as customer lifetime value or repeat customer rate.
- Analyze customer journey – Building a customer retention plan also means getting to know your customer’s typical journey from the earliest stages of discovery to the final purchase.
- Build a customer-centric culture – At the heart of just about every company that has found success in optimizing brand loyalty and building retention is a customer-centric culture where all decisions are made for the good of the company and its customers.
- Enhance customer service – Part of building a customer-centric culture is ensuring your brand’s customer service team is top-notch. If a customer has a question, a problem, or a simple comment, it is critical that they can get assistance from a knowledgeable and friendly service professional who makes them feel heard and valued.
- Utilize multiple communication channels – Last but not least, customers should be able to reach your brand from more than just one communication channel. Being available via live chat, social media, email, and telephone helps ensure your brand is inclusive and accessible to a wide range of customers.
Learn More About Customer Retention Strategies with JWU’s Online Digital Marketing Programs
Building customer loyalty isn’t something you can do overnight, even as a digital marketing professional. Over time, however, you can build the skills and strategies needed to drive loyalty and retention with confidence.
Looking to take your digital marketing knowledge to the next level? Johnson & Wales University is proud to offer a Bachelor of Science in Digital Marketing & Social Media that can be completed online. In this program, you’ll learn the foundational skills you need to succeed in the dynamic field of digital marketing with a focus on social media. Plus, we offer frequent start dates so you can get started right away. Learn more about this program or get started with your online application today. For more information about completing your degree online, complete the Request Info form, call 855-JWU-1881, or email [email protected].