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Digital Guide

A Guide to Customer Retention

What is Customer Retention?

Customer retention refers to a company’s ability to keep their customers coming back to use their product or service over a certain period of time. A high retention rate means that customers are happy with what they are getting from a business and tend to return. Of course on the other hand, a low retention rate indicates that customers are not satisfied with what they have received and will look elsewhere.


Why is Customer Retention so Important for Businesses?

Retaining customers is much better for businesses in the long run and brings in more of a return than constantly churning through customers. For starters, it doesn’t cost as much money to keep a customer than it does to acquire new ones.

A company with a high retention rate is also highly likely to garner a lot of loyal customers. You aren’t just another website or store to them. It is highly likely you will build a great relationship with them.

These customers are also likely to become brand advocates, spreading the word about your product or service. This would then lead to new customers who have been referred to you by your loyal customers who trust your brand enough to tell other people to get on board with it.

Finally, customer retention also leads to an increase in profits for your business. Loyal customers generally make regular purchases, tend to spend just over 30% more money, and are also 50% more likely to try out new products.


Why and How to Keep Your Customer Churn Rate Low

Keeping your rate of customer churn as low as possible works wonders for your business. A low rate would indicate that you are certainly doing something right and that your customers appreciate and love the work that you do, or the service you provide.

This also means that these people are pretty likely to become loyal customers. Having a loyal customer base is seriously valuable. Much more valuable than constantly having new customers in and out the door who don’t return for repeat purchases. 

The loyal base of customers will increase your revenue and ensure that it’s flowing at a steady rate.

Developing your first time customers into returning, and even loyal customers, doesn’t just happen overnight as we know. It takes time and effort to build trust between you and your customer. By constantly giving them a personalised experience with your brand, it gives them more of a reason to come back to you rather than go elsewhere.

If you haven’t already, here are some things you can introduce to ensure that your customers’ experience is the best one possible and keeps them coming back to you.


Using data to your advantage

The data you collect is what should drive your communication strategies. The data gives you vital information about your customer and their journey with your brand and their buying habits.

You should study your data and let it educate you about your customers. You can then use it to make well informed decisions on how to best communicate with them, leading to a more solid relationship with them.



Not every customer wants or expects the same thing from your business. Some people love your business because of the products you sell or the service you provide. Others might be involved in your brand because of the community you have created and want to be part of that.

If you treat all of your customers the same way then odds are you won’t appeal to the majority of them as you won’t be serving their needs. 

Segmenting your customers into particular groups depending on their wants, needs, and interests will allow you to develop relationships with all of your customers in a way that resonates with them. 



Choosing the right channel

One man’s meat is another man’s poison. That’s right, the old saying applies to customer communication as well.

Not every channel suits every customer. Some people check their emails on a regular basis while some rarely even look at them. 

It’s important that you don’t put all your eggs into one channel and hope that every customer sees your message. 

Using your data to identify what communication channel works best for a particular customer, or group of customers, will lead to a better interaction rate with your brand. 

Furthermore this means that your customers will have a much higher chance of seeing your messages, keeping your name top of mind for them.


Personalising the messages

As mentioned earlier, not all customers want the same thing from your company. This means that you shouldn’t be showing them all the same thing.

For example, for retaining customers for eCommerce, some customers might use your website to look only at your shoes. It would be far more beneficial to message these customers about promotions you might have for shoes, as opposed to hats or coats.

You are much more likely to get better interaction and purchase rates if you are sending them messages that are relevant to them.

Once again, this leads to a better experience for the customers, strengthening your relationship, leading to a lower churn and higher return rate.



A/B testing

A/B testing is an incredibly important aspect of creating campaigns that work for your customers. It is essentially the practice of creating two versions of the same campaigns with minor changes to see which one works best.

Understanding what makes your customers tick and leads them to click is valuable information that you can certainly use to your advantage for future campaigns or messaging.


Customer Engagement Channels for Retention

Choosing the right communication channel and knowing how to get the best out of it will lead to better customer engagement. Using it well on a consistent basis will lead to a higher chance of customer retention and loyalty.

Below is some information on the channels that the Xtremepush platform provides and why you should be using them.

We’ll cover three channels to use for web engagement, and then three other channels to use for app engagement.


Web push notifications

Web push is an increasingly important channel for many brands, engaging both “anonymous” website traffic and existing customers with timely, personalised messages.

Have you ever been browsing a website that you like and a prompt appears asking you to “Allow Notifications”? That’s an opt-in message, the first stage in a web push engagement strategy.

Once you have a user’s permission, you can then send them web pushes at any time, even as they browse another website.

If you have a website that’s converting well then you should strongly consider web push as an engagement channel. Each message can be deep-linked, directing the recipient to any page you like.

We’ve written elsewhere in greater depth about web pushes so if you want to learn all there is to know about them, from set-up to practical use cases, we recommend you take a look at that article.

If you are already sending web pushes, then check out this guide we’ve written on creating the perfect web push for eCommerce brands.



On-site Messages

You are probably familiar with the classic “web pop-up”. They are a common sight on many websites, serving a variety of purposes. They are used to share “similar content” in the middle of a browsing session, promote flash sales or grow an email subscription list. 

Up until a few years ago, digital marketers were reliant on providers like Unbounce to launch these highly effective engagement messages. Not only have platforms like Xtremepush made it easier to create an on-site message but they have also vastly enhanced their functionality.

Following a simple SDK deployment (requires minimal input from a developer), you can start sending them straight-away.

In-web messages give you plenty of creative freedom, supporting large images that can be used to strengthen your marketing message (and there’s no text limit, either). They also support up to two CTA buttons, so you can drive more or less any business objective you have.


Web Inbox

Now, this might be a customer engagement channel you are less familiar with. It’s not all that common, despite its usefulness.

As brilliant as web pushes can be, they disappear once they’ve been engaged with or dismissed (hopefully not too often!). This makes them a less than ideal channel for evergreen content or offers that last for a long period (like a Summer sale).

For a web inbox, an icon is added somewhere prominently on your website. Clicking on it opens up a notification centre.

Essentially, this behaves like an email inbox, acting as a place to store all of the push notifications that each user has received from you.

The user doesn’t need to create an account, either, as the Xtremepush platform tracks the profile based on the Device I.D.

It also gives you repeat opportunities to convince visitors to opt-in for web pushes, with a simple on/off toggle that makes it easy without having to go into their browser’s notification settings.

As you can see, the three channels all work very well together, empowering you to reach all of your website’s visitors and nudge them towards goal completion.



App push notifications

If you have Instagram, Facebook or Twitter on your smartphone then you’ll know all about app push notifications.

These are messages containing information that come, unrequested, from an app alerting you to all manner of content, from likes and shares to sales offers and product updates.

They are an incredibly versatile and effective means of dragging users back into the app and sharing valuable content with them.

If your brand has an app then you need to start sending push notifications. It has to be pointed out though that it’s a permission-based channel. Android users automatically give consent when they download an app, but iOS users must go and do that manually. 

But who knows if and when this will change?

In any case, here’s a guide to convincing your app users to opt-in for push notifications.


In-app Messages

These appear within the app while it is in use.

We lead the mobile marketing industry in terms of how our clients incorporate this channel into their app engagement campaigns, driving business goals at every stage of the funnel.

We’ve seen them feature prominently during app onboarding and welcome series, but we also work with brands that use them to recover abandoned carts. 

One of the big advantages of in-app messaging is that you have several formatting options,  depending on the message you are sending. You can choose a subtle banner, or go all out with a full-page takeover.

And you can also be selective with who receives a particular in-app message, segmenting your audience based on any number of attributes and behaviours.

Learn more about this channel with our guide to in-app messages.



App Inbox

As with its web browser equivalent, this channel acts as an inbox which stores messages you send to an app user. You can set an expiry date on the message or mark it as permanent, depending on how time-sensitive it is.

Again, there are a host of business goals that an app inbox can help you achieve. In terms of formatting, you can either choose your service provider’s default template or build a custom one using HTML.

Here’s a more in-depth piece we’ve written on the value of the app inbox and its use cases.



Measuring your Customer Retention Rate

In order to understand how you are performing when it comes to retaining your customers it’s important that you are measuring your retention rate on a regular basis. You could do it on a monthly basis for example.

Below is a formula you can use to calculate your customer retention rate (CRR). It involves customers you have at the start (S), at the end (E), and the customers you acquired during the period you are measuring (N). It should look like this:

CRR = ((E-N)/S) x 100

For example

You have 180 customers at the start of the month. During that month you have gained 20 new customers, but you lost 13.

The number of customers at the end of the month = 187 (E)

The number at the beginning of the month = 180 (S)

The number gained during the month = 20 (N)

So, using our formula we get:

((187 – 20) / 180) x 100

(167/180) x 100

0.92 x 100

92% Retention Rate for the month

Businesses should always aim to keep their retention rate as high as possible. But as a general rule of thumb, it should not drop below 85%.


Some Customer Retention Statistics

As the saying goes: “The stats don’t lie. They tell whatever truth you want them to”.

Below are a few statistics about customer retention that can help you in your efforts to develop a loyal customer base. They may help guide you to making informed decisions at some point in your business life.

  • An increase in customer retention rates by 5% can lead to anywhere between a 25%-95% increase in your profits
  • 89% of customers will look elsewhere after one bad online experience with a brand.
  • Returning customers are 50% more likely to try new products.
  • They also spend 31% more than a new customer
  • Costs for new customer acquisition has increased by about 50% in the last few years


Examples of Retention Campaigns

Being in constant, but not overbearing conversation with your customers is what leads to customer retention. If you don’t interact with them regularly then, odds are, they’ll forget about you.

These are some types of campaigns that you could consider introducing to your customer retention strategy that we have seen work well for our clients in the past.


Re-engaging Dormant Users

This can often happen in the Sports Betting & Gaming industry. With so many sportsbooks out there providing different odds and offers it can be easy to be forgotten.

Re-engage lapsed and dormant users through intelligent, data-driven interactions.  Use your detailed customer profiles to engage them with odds and offers that you know are likely to appeal to them.

Identify players with a high Lifetime Spend and reward them with exclusive deals and exciting offers.


Recover Abandoned Carts

Primarily a problem in the eCommerce industry, but can happen in many other industries as well. There are plenty of reasons why a person might not complete a purchase and leave their items in their online cart.

About $18 billion is lost by eCommerce brands globally every year. So, your approach to recovering abandoned carts is vital in securing more revenue.

Cart abandonment rates range between 60 and 80%. Send emails, web pushes, in-app messages and even traditional SMS messages linking customers back to their pre-populated baskets.


Alternatives to abandoned cart emails


Customer Lifetime Value

Customer Lifetime Value is the average expected profit a business makes on each customer.

It’s based either on historical figures or if you have the right analytics software, predictive modelling of future purchase behaviour.

Either way, it’s a crucial metric to get a handle on, with knock-on implications and learnings for multiple business operations.


Why is it important to know?

There are 2 main reasons why knowing your CLV is valuable.

1) It puts your average cost of customer acquisition (CAC) into context. If you’re spending $100 to gain a new customer, for example, then understanding your CLV helps you to work out how long it takes to recover your investment and turn a profit on that customer. Seeing your brand’s marketing and sales costs in this light can be an eye-opener. 

2) It begs (and actually answers) the question; If we hold on to our customers for one extra year, how much more profitable will we be? This is a powerful incentive to invest more in customer engagement and retention campaigns.


Calculating your Customer Lifetime Value (CLV)

Firstly, you want a holistic view of your average customer’s value, in other words, the profit you make on them over a given period (usually annually). This should be straightforward enough to calculate. 

1) Divide your total profit by the number of purchases made (annually) to get an avg. purchase value. 

2) Divide this figure by the number of individual customers that year. This gives you the avg. purchase frequency (i.e. how many times per year a customer buys from you). 

3) Multiple the avg. purchase value by the avg. purchase frequency to get the avg. Customer value.

Secondly, you work out the average duration a customer continues to buy from you (customer lifespan). Naturally, if your business operates on a subscription or contract basis this is going to be much easier to calculate because it’s clear when a customer has churned. Within the traditional B2C model of one-off and intermittent purchase patterns, this is harder to quantify.

Lastly, you multiply the avg. customer value by the avg. customer lifespan to get your customer lifetime value!

{Avg. Annual Customer Value X Avg. Customer Lifespan (in years) = CLV}


Some Common Misconceptions

Customer retention is a relatively straightforward concept. Give your customers a great experience, treat them like you actually care about them, and they should be loyal to your brand in return. Easy.

But when it comes to putting together strategies, some people tend to confuse themselves and start to believe in some customer retention myths, putting them off the whole idea.

  • “A happy customer is a loyal customer” – It takes more than making someone happy to make them loyal and retain them as a customer. 73% of customers will avail of a cheaper option if it provides the same product/service.
  • “Once they’re gone, they’re gone” – Many believe that when a customer decides to walk away from your brand that you’ll never see them again. This is simply not true. There are plenty of ways you can bring them back to you.
  • “All your customers want the same thing” – Absolutely not. Each and every customer of yours acts in a different way and wants different things. Treat them all the same and you may find yourself with less customers coming through your doors.
  • “Customer retention strategies are complex” – Once you understand your customer and what makes them tick, then you shouldn’t have any trouble keeping them as loyal customers. Putting together a retention strategy is not as difficult as it might seem at the start.

Customer retention doesn’t have to be as complex as it is often made out to be. Understanding what’s involved and what’s untrue about it can help you develop some really great campaigns.

A lot of the time, simply just understanding your customers and interacting with them in the right way, and through the right channels, can help to keep your churn rate on the lower end of the scale.

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