16 Customer Retention Strategies to Boost Your Customer Lifetime Value

December 1, 2022

Rachel Go

Customer retention strategies customer retention strategies

Customer retention—the number of customers who stay with your business over a measurable time frame—may seem like just another metric to track.

However, it’s a key measurement you should pay attention to because it can help you achieve long-term sustainable growth.

Keeping customers is as important as finding new ones.

We’ll discuss further the significance of customer retention below. Then, we’ll show you how to measure it and share some strategies to help you maximize its potential.

In this article, we’ll explain:

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Why customer retention is so important

Mastering customer retention can be a game-changer for any brand.

Loyal customers help to promote your brand, returning customers tend to spend more, and retaining a customer is cheaper than acquiring a new one.

Retention is cheaper than acquisition

Customer retention is more cost-effective than customer acquisition. People who’ve shopped with your brand are easier to convince and more likely to make a repeat purchase.

Invesp has the numbers to back this up, stating the probability of selling to new customers is 5% to 20% while selling to existing ones has a 60% to 70% chance.

customer retention stat customer retention strategies
Image: Invesp

Higher retention yields a greater return on acquisition spend

According to a study on customer retention, higher retention increases revenue.

A Sailthru report found that an increased spend in retention resulted in an almost 200% higher likelihood of increasing market share.

Those figures easily support your return on acquisition spend getting a massive boost as well. That means you can afford to spend more and be more creative to acquire customers.

And, as they stay with your company longer, you can capitalize on your nurtured relationships and increase customer lifetime value (CLV), which is how much they’ll spend throughout their time with you.

Loyal customers are more likely to share your brand

“We learned that word-of-mouth is still one of the most powerful marketing tools. By making the customers happy, they’ll be more likely to tell their friends and family about you.”

— Jamie Irwin, Director & Founder of Straight Up Search

Word-of-mouth marketing and retention are closely linked.

People who’ve had positive experiences with you can quickly become your brand’s most vocal ambassadors. Yotpo revealed 60% of customers who are loyal to a brand talk about it with family and friends.

word of mouth marketing stat customer retention strategies
Image: Invesp

It’s a powerful form of marketing, too, with 88% of consumers placing the greatest trust in recommendations from people they know.

Word-of-mouth impressions can also produce five times more sales than paid ones.

Increase your average order values

As previously mentioned, retained customers are more likely to make repeat purchases.

A study by Bain & Company found that, in the apparel industry alone, the amount an average repeat customer spends grows the longer the shopping relationship continues.

Research by Gallup has also shown that, compared to average customers, loyal ones are 23% more likely to spend on your brand.

This makes marketing more efficient and increases your average order value (AOV)—the amount a customer spends on each transaction.

How to calculate customer retention rate

We’ve clearly displayed the value of customer retention, so now you can measure it to maximize its potential:

  1. Establish the time frame you want to examine
  2. Determine how many existing customers you have at the start of the period (S)
  3. Find the total number of customers you have at the end of it (E)
  4. Identify how many new customers were added throughout (N)
  5. Plug those figures into this formula:

[(E – N) ÷ S] x 100 = customer retention rate

As an example, let’s say you want to calculate your retention rate for 2021 and have established the following figures:

  • Number of customers on January 1, 2021: S = 2,000
  • Number of customers as of December 31, 2021: E = 2,150
  • Number of new customers gained throughout 2021: N = 450

The calculation will look like this: [(2,150 – 450) ÷ 2,000] x 100 = 85%. The resulting percentage represents how many customers you retained over that time frame.

Other useful customer retention metrics

To improve your customer retention rate, you’ll need to understand other key metrics that contribute to strategies for higher profitability.

Churn rate

Your customer churn rate tells you the percentage of people who’ve stopped being your customers over a given period of time.

Its formula is as follows:

[(# of customers at the start – # of customers at the end) ÷ # of customers at the start] x 100 = churn rate

A high churn rate can be due to bad customer experiences or consumers finding a better alternative, among many other possibilities.

Your objective is to keep it as low as you can.

Repeat customer rate

The resulting percentage for this calculation indicates how many customers are willing to make a second purchase.

It shows whether or not your retention strategies work and only needs two variables from a specific time frame:

  • Number of repeat purchasers: Customers who bought more than once
  • Number of unique customers: Individual customers who made a purchase

Then, simply divide the first figure by the second:

# of repeat purchasers ÷ # of unique customers = repeat customer rate

Purchase frequency

This formula reveals how often customers return to buy from you (remember to use the same period of time as your previous calculations):

# of orders placed ÷ # of unique customers = purchase frequency rate

Average order value

We previously explained how AOV shows the amount a customer spends per transaction.

Simply follow the below formula and use the same time frame as your earlier computations for an accurate value:

Total earned revenue ÷ # of orders placed = AOV

Customer lifetime value

CLV was also touched upon earlier in this article.

It helps you understand the worth of each customer. Computing CLV requires you first to find your purchase frequency and AOV.

Then, multiply the two numbers together:

Purchase frequency x AOV = customer lifetime value

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16 Customer retention strategies for a higher CLV

Now that you can accurately measure customer retention, here are some tips to help you earn the most value from that baseline number.

1. Offer subscriptions

Subscriptions are one of the best ways to turn one-time customers into recurring ones.

They encourage shoppers to sign up for regular deliveries of your products, whether in the form of a subscription box with curated goods or replenishment of a particular product.

paulas choice subscription customer retention strategies
Image: Paula’s Choice

Skincare brand Paula’s Choice does an excellent job of nudging shoppers to sign up for auto-replenishment by placing the option right above their “ADD TO BAG” CTA.

They provide different delivery frequency options and offer a bonus of 15% off and free shipping when shoppers opt for a subscription.

#cta-paragraph-pb#Learn how Copper Cow built a dedicated subscription education page and doubled conversion rates.

2. Facilitate smooth customer onboarding

“Our most impactful customer retention strategy this year has been optimizing and personalizing our onboarding processes to eliminate any frustration or friction that our customers may have when using our services for the first time….

Focusing on improving our onboarding has helped us improve our customer retention rate by 28% since the end of last year.”

— Mark McShane, Managing Director of Sheffield First Aid Courses

Onboarding is the process of introducing customers to your product or service and is the time when you set them up for future success.

It teaches users how to most effectively use your product or service to its fullest potential and to fulfill their goals.

Onboarding is critical in retaining customers since 86% say they’ll stay loyal if onboarding and education are provided consistently.

Meanwhile, 74% go elsewhere if the process is complex.

xero video onboarding customer retention strategies
Image: Xero

The online accounting software Xero simplifies onboarding by presenting an animated “Getting Started” video after signing up.

They take advantage of people’s preference for video over text and put their creativity to work to make an informative yet engaging introductory video.

3. Ensure accessible support

“Over this last year, we’ve doubled our first contact resolution rate to reach 70% in a bid to boost the efficiency of our customer support function. As a result, our customer turnover has reduced by 20% over the same period, indicating that our customers will stay loyal to us if we provide high-quality customer support.”

— Michael McCarty, CEO of EDGE Fall Protection

Quickly addressing customer issues is tantamount to a superb experience.

HubSpot reports that 90% of customers rate an “immediate” response to their questions as essential or very important, and 60% define that as 10 minutes or less.

They also found that 93% of consumers are likely to make a repeat purchase with businesses that deliver excellent customer service.

So, provide support across various channels like live chat, social media, and email, and ensure you’re available throughout the day.

dinovite support customer retention strategies
Image: Dinovite

For instance, the pet nutrition brand Dinovite employs this tactic effectively, making their customer service team available across multiple communication channels for easy access.

4. Provide seamless returns

“We’re improving our customer service systems … so they don’t feel like they’re being bounced around people or departments when they need help. We also have a robust returns program that makes it simple to return defective products.”

— Sarah Jameson, Marketing Director of Green Building Elements

McKinsey & Company reported 33% of repeat customers would abandon a retailer if their return experience was difficult.

Given this impact on consumer fealty, making the return process as frictionless as possible should be a priority.

Exceeding expectations also endears customers to your brand: It earns their loyalty, as well as boosts your brand.

The pet brand Chewy displayed their excellence in this area by going above and beyond for a grieving pet owner who wanted to return some unopened dog food.

tweet chewy customer success customer retention strategies
Image: Twitter

5. Leverage personalization across your channels

“One way to stand out from our competitors, we get personal with our customers. We send them hand-written notes, offer them exclusive deals and discounts, and make an effort to really get to know them.

We retain customers by building loyalty. We offer loyalty programs, give rewards for referrals, and show our customers that we value their business.”

— Jamie Irwin, Director & Founder of Straight Up Search

Personalization is vital to delighting consumers.

Epsilon research shows 80% of buyers are more likely to purchase from brands that provide personalized experiences.

Start by offering curated recommendations or content, then expand from there.

Businesses that execute this tactic will earn 40% more revenue on average than those that don’t.

The personal styling brand Stitch Fix is one example of maximizing the power of personalization.

stitch fix style quiz customer retention strategies
Image: Stitch Fix

Upon entering their site, customers can take a style quiz to help Stitch Fix understand their sense of style.

Based on their answers, customers are then presented with stylist-approved product recommendations.

6. Create a loyalty program

“Customers want more than just a transaction nowadays—they want security, dependability, personalization, to be valued, and to be treated as more than just a sale.

Our loyalty program allows us to anticipate and meet all these needs that our customers demand be met if they are to continue being repeat buyers. [It’s] seen our average customer retention rate grow by 25% since its rollout.

Moreover, our net promoter score has improved by 10% as our customers are more likely to refer our brand to others because of its good loyalty program.”

— Lisa Richards, CEO & Creator of The Candida Diet

With customers able to earn rewards from frequent purchases, loyalty programs are a great way to improve their retention.

After signing up for a paid loyalty program, 62% of consumers spend more money on a brand. Moreover, 68% are willing to pay more for products to maximize points.

farfetch rewards customer retention strategies
Image: Farfetch Access

For example, the luxury fashion platform Farfetch has found success through their attractive Access loyalty program.

Customers are automatically enrolled after their first purchase, and rewards—from exclusive discounts to personal styling, free shipping, and more—become more exclusive as the tiers increase.

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7. Incentivize referrals

Referral programs motivate customers to promote your brand to their family and friends.

They provide dual benefits by rewarding those loyal to your brand and helping you acquire new customers.

What’s more, customers acquired through referrals have a 37% higher retention rate.

The mattress brand Casper executes a top-notch program, targeting both their loyal customers and anyone they refer.

casper referral customer retention strategies
Image: Casper

They present referrers the opportunity to earn a $100 Amazon gift card while their friends can redeem a 20% discount.

This easily delights two parties in one go to nurture an existing customer relationship and foster new ones.

8. Consistently educate customers

Regularly providing customers with educational material shows you’re invested in their long-term success.

This can take the shape of informative content like blogs and videos or self-service solutions like a knowledge base and community forum.

These resources expand their knowledge of your offering and can solve customer concerns without them needing to contact you.

One great example of this strategy is Mint, an online banking service that helps people manage their finances.

mint finance blog customer retention strategies
Image: Mint Blog

Their blogs and videos focus on finance, teaching customers how to manage money efficiently. And they even provide free budgeting tools.

Mint continuously engages their customers with their content marketing to provide positive experiences free of charge.

#cta-paragraph-pb#Creating a stunning blog that is regularly updated can provide real value for your existing customers. Shopify has many great blog themes and it’s easy to build a unique blog template with Shogun Page Builder to use for every post.

9. Make shipping convenient

Convenience is a major contributor to ecommerce success, especially with shipping.

It also impacts consumer loyalty: 94% of people said they would choose to buy from a brand based on available delivery options, and 84% stated they wouldn’t return after one poor experience.

amazon same day delivery customer retention strategies
Image: Amazon

Amazon is a paradigm of consistent convenience, as their Prime members enjoy free same-day delivery, among other perks.

Regular users can access the service too, but at an additional cost.

Tip: Invest in omnichannel fulfillment that provides a uniformly high-quality shipping experience, no matter where your customers shop.

10. Express your appreciation

“We strive to make our email marketing messages as interesting as possible. Emails, whether sent before or after a purchase, can aid in the development of a positive relationship with our customers… We usually send a “thank you for your buying from us” email to new customers a week after their first purchase.”

— Sarah Jameson, Marketing Director of Green Building Elements

Thanking customers makes them feel like they matter and shows you value their continued patronage.

One way to secure their loyalty is to express your appreciation concretely—not only through messages but small gifts as well.

The apparel brand Bombas, for instance, sent customers a generous discount for helping them reach a milestone of three million sock donations, which they achieved thanks to shoppers’ purchases.

bombas email marketing sale customer retention strategies
Image: Really Good Emails

This recognizes the customer’s contribution and encourages them to spend more due to the discount’s limited nature.

11. Collect and incorporate feedback

“We discovered that social media is the ideal place to collect customer feedback, via their complaints, queries, suggestions, and comments about our services…. Implementation of this feedback is key, as many customers will take to social media to appreciate that we listened to them and did as they asked.

The result is heightened trust between our customers and us, as well as a boost to our reputation. Collecting feedback in this way and implementing it has reduced our customer churn rate by 9% over the last three quarters …”

— Nathan Sanders, CEO of Plumbing Navigator

Actively gathering feedback shows you respect customers’ opinions.

Additionally, making changes based on their complaints and recommendations validates how they feel and improves their future experiences.

Some common ways of collecting feedback are:

  • Surveys
  • Social media
  • User tests
  • Focus groups

Other companies provide opportunities to leave feedback after interactions, such as calls or live chat sessions.

Slack, a company that provides a digital HQ to make work collaboration easier, relies on feedback to fine-tune their platform.

slack homepage customer retention strategies
Image: Slack

They focus on maximizing real-time feedback to improve constantly and dedicate themselves to supporting customers as they adapt to their product.

Consistently addressing complaints is also an effective method of earning customer loyalty.

70% of dissatisfied customers are willing to shop with businesses again if their issues are resolved.

12. Simplify your website navigation

“I found that it’s essential to provide customers with a great experience from the moment they land on the website. You have to make sure the site loads quickly and is easy to navigate… Additionally, it’s important to streamline the checkout process so that transactions go smoothly and don’t take up too much time.”

— Sully Tyler, Founder & CEO of Sully Tyler

No one enjoys navigating a clunky website that makes it difficult to find the information or products they’re looking for.

Your site’s ease of use affects your retention rate because a smooth and easy UI can be a deciding factor in whether your visitors sign up for your newsletter, purchase a subscription, or take some other desired action.

One example of simplifying website navigation is making sure you have a logical top menu structure.

For a clothing company, that might mean segmenting men’s, women’s, and children’s lines in your menu or homepage. For a skincare retailer, it might mean separating brands by pages available on the menu.

Your website is your gateway to capturing customer information—not just for a sale, but also to keep them coming back.

13. Send engaging newsletters

Marketing emails like newsletters keep customers in the know about your brand. They can also be a vehicle of continuous support, engaging content, and rewards.

invision blog post customer retention strategies
Image: Really Good Emails

For example, the visual collaboration platform InVision leverages newsletters to curate educational content that guides designers toward long-term success with the brand’s products and services.

Newsletters can also reward readers by alerting them of limited-time deals.

This creates a sense of urgency while presenting an enticing opportunity to save money on products that typically cost more.

namecheap newsletter customer retention strategies
Image: Really Good Emails

Namecheap, a company that provides affordable domain registering, hosting, and managing services, adopted this approach, showcasing monthly product deals and promotions to their subscribers.

Sprinkling deals into newsletters can keep existing customers returning for more.

14. Nurture a community

Building a community around your products or services can attract potential customers who want to enjoy similar benefits and share related interests with like-minded individuals.

More importantly, it helps existing customers form connections, further enriching their experience with your brand.

Nike’s Run Club is a prime example of a strong consumer community.

Using its app, runners can connect with friends and others in their neighborhood or anywhere else in the world for accountability partners, running advice, and more.

nike run club customer retention strategies
Image: Nike Run Club

Members can also create challenges and experiences, then share them with family, coworkers, or other club members to strengthen the sense of community among Nike runners.

15. Encourage positive change

Consumers nowadays are more socially and environmentally conscious.

They make sure their purchases support a good cause or have as little negative impact on the earth as possible—so much so that 55% of buyers are willing to pay more for products and services that positively change the world.

You can foster loyalty by building an eco-friendly or charitable platform, such as adopting practices that leave less of a carbon footprint or donating a portion of sale proceeds to a specific cause.

Ethical practices are so influential that 90% of people are likely to switch to brands they believe support a good cause.

tamga designs customer retention strategies
Image: TAMGA Designs

Image: TAMGA Designs

Take TAMGA Designs as an example: This sustainable clothing brand hopes to inspire change within the fashion industry, so they conduct business through an ecologically responsible supply chain, using materials that have a minimal environmental impact.

#cta-paragraph-pb#Many brands codify their do-good bonafides into their mission statements, which tell their existing and potential customers who they are and why shoppers should support them.

16. Be persistent

Inevitably, some customers will leave your website before completing a purchase.

When this happens, remember your objective is to win them back for the long term, not just one transaction.

To change their mind, you can, for example, include an incentive in a cart abandonment email offering the shopper a deal they can’t refuse.

Your profit from the purchase may be lower, but you could secure a potentially loyal customer, which is the more valuable trade-off.

columbia personalization customer retention strategies
Image: Really Good Emails

Columbia Sportswear employs the same tactic, presenting price drops to prospective buyers who’ve abandoned their carts.

Implement smart customer retention strategies to supercharge your CLV

Customer retention can significantly affect your business’s long-term profitability.

Once you calculate this crucial number and understand its supporting metrics, you can maximize retention by embracing powerful strategies that inspire loyalty.

The tactics we’ve presented will guide you toward that end, helping you improve not only your customer retention but also your brand’s growth.

 

#cta-visual-pb#<cta-title>Build a better Shopify store<cta-title>Try Shogun for free and start building out your perfect store to create a totally unique customer experience.Start building for free

Rachel Go

Rachel is a remote marketing manager with a background in building scalable content engines. She creates content that wins customers for B2B eCommerce companies like MyFBAPrep, Shogun, and more. In the past, she has scaled organic acquisition efforts for companies like Deliverr and Skubana.

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