November 26, 2018

If seen from a holistic perspective, Marketing is all about creating value. Whether in the form of a campaign or an activation or even a winter sales offer, creating value – both extrinsic and intrinsic – for the customer, is the true definition of Marketing. However, this cycle of value-creation often comes to a halt. The customer might not want to buy a particular product or might move to a fellow competitor. Worse, there has been a behavioral change in the customer’s purchase pattern and he now might be drawn to an alternate product. This puts the marketer on a brand new ordeal – be on the lookout for another customer. Statistically, acquiring a new customer is much costlier for a business. You bring him in, you provide him the product, you give him an after sales service – and the list goes on, until he becomes a loyal customer. However, retaining a customer is not only less costly for the company but also gives you a much better chance of deriving much better extrinsic and intrinsic value from him (and vice versa). According to Bain and Company, a 5% increase in customer retention can increase a company’s profitability by 75%! This process – Retention Marketing – has morphed into a widely used term and is now a key weapon in his bag of armaments. 

In the simplest of all terms, Retention marketing is a strategy which focuses on your existing customer base. The goal is to create repeat customers, and increase both their frequency of purchase and the average order volume per purchase. The most popular metric to measure the success of a retention marketing campaign is retention rate.

Samantha Anderl, Senior Director of Acquisition Channels at Campaign Monitor, recently mentioned on an article that the standard marketing funnel no longer exists. Focusing only on acquisition won’t do it anymore. There are more things to a marketing funnel than acquisition. “A new marketing funnel has emerged and merges pre-purchase and post-purchase stages to present a complete view of the entire customer lifecycle. Multi-channel, multi-touch, multi-path customer journeys are the new marketing funnel”, she explains. “The end goal is no longer to simply convert a lead into a customer. It’s about maximizing the lifetime value of loyal customers who will come back again and again”, she added.

Fig 1 – A modified version of the traditional marketing funnel (The AIDA Model); Source – www.campaignmonitor.com

The marketing funnel previously used consisted only of Awareness, Engagement, Discovery and Purchase (known as the AIDA model by many). However, the modified version today has added Adoption, Retention, Expansion and Advocacy into it – thereby, ensuring an elongated version of the customer life-cycle. Unlike the traditional funnel, in the new marketing funnel, leads can enter at any stage. They can travel through in random order, and leads may not even make it through every stage because every lead is unique and every journey is unique. There is no traditional one-size-fits-all funnel, journey or customer experience. This personalization at a massive scale is what makes customer retention a task of paramount importance.

Fig 3 – Reasons behind a customer leaving a company; Source – www.superoffice.com

According to a research conducted by a CRM software company named Superoffice, this is (see figure 2) the numerical breakdown of why customers get detached from a particular company or a brand.

A similar perception is seen to be held on the seller’s end as well. According to KPMG report, global marketers believe that customer retention will be the most significant driver of their company’s revenue growth over the next 1-3 years. 41% of respondents plan to increase their investments over the next year in technology that directly enables them to better engage and serve customers, including one-quarter who will be upping their spending for such technologies by more than 10%.

Fig 3 – A snippet from the KPMG report. Source – www.kpmginfo.com

So now that we understand the importance of customer retention, let’s take a look into the processes of creating a sure-fire customer retention system so that your customers keep coming back in circles; not only to buy more products/services, but to engage more with your brand/company.

  1. Start with a free trial

A free trial or simplified free version of a product is a great way to get customers in the door and keep them around, while also allowing them to explore what you can offer. When they discover the value of your product on their own, they will be more willing to become a customer. For example, Dropbox offers a free version and free trial.

“The freemium model can help convert users into paying customers if your business offers a 30-day trial allowing customers to test the value of your product, a free version of your offerings limited to only certain features, or free incentives if a user invites friends to sign up via email or social media,” says content marketing specialist Brian Honigman.

  1. Create an extraordinary Customer Experience

The never-ending pursuit of excellence to keep customers so satisfied that they tell others how well they were treated when doing business with you. Moving the product or service you deliver into the realm of the extraordinary by delivering higher than expected levels of service to each and every customer. Key facets include: dedication to customer satisfaction by every employee; providing immediate response; no buck passing; going above and beyond the call of duty; consistent on-time delivery; delivering what you promise before AND after the sale; a zero-defects and error-free-delivery process and recruiting outstanding people to deliver your customer service. Extraordinary service builds fortunes in repeat customers, whereas poor service will drive your customers to your competition.

Creating a surreal customer experience also involves rewarding a customer when required.

  1. Focus on measuring the lifetime value of customers

There’s a vast difference between the one-off profit you might make on an average sale, which ignores the bigger picture, and the total aggregate profit your average customer represents over the lifetime of their business relationship with you. Once you recognize how much combined profit a customer represents to your business when they purchase from you again and again, over the months, years or decades, you’ll realize the critical importance of taking good care of your customers. And because you’ll understand just how much time, effort and expense you can afford to invest in retaining that customer, you’ll be in control of your marketing expenditure.

  1. Maintain a Frequent Communications Calendar

Avoid losing your customers by building relationships and keeping in touch using a rolling calendar of communications. This is a programmed sequence of letters, events, phone calls, “thank you’s”, special offers, follow-ups, magic moments, and cards or notes with a personal touch etc. that occur constantly and automatically at defined points in the pre-sales, sales and post-sales process. People not only respond to this positively, they really appreciate it because they feel valued and important. It acknowledges them, keeps them informed, offsets post-purchase doubts, reinforces the reason they’re doing business with you and makes them feel part of your business so that they want to come back again and again.

  1. Focus on bringing back the “lost customer” rather than acquiring a new one

There’s little point in dedicating massive resources to generating new customers when 25-60% of your dormant customers will be receptive to your attempts to regenerate their business if you approach them the right way, with the right offer. Reactivating customers who already know you and your product is one of the easiest, quickest ways to increase your revenues. Re-contacting and reminding them of your existence, finding out why they’re no longer buying, overcoming their objections and demonstrating that you still value and respect them will usually result in a tremendous bounty of sales and drastically increased revenues in a matter of days … and will lead to some of your best and most loyal customers.

  1. Don’t just sell — educate your customers

According to serial entrepreneur David Skok, sales is often more effective when you have an existing relationship with a customer, and when you’ve already provided value. Customers often enjoy receiving helpful recommendations on new information and products that will help them achieve better results.

  1. Create a customer community around your brand

People don’t actually connect with your brand; they connect with the other people that connect to your brand.  Give those people a voice on your website to remind your guests they aren’t buying a “product” they are buying their way into a community of like-minded people, or people they want to be more like. One such fascinating example is Go Pro.

As an e-commerce brand, they have also grown into something so much more than a camera company. They have created an incredible sense of customer community around GoPro, encouraging users to share footage from their adventures with people across the globe. GoPro strives to build relationships with customers, without distancing themselves from their core audience of action sports enthusiasts.

  1. Choose the right platform for your customers

The best way to improve your customer service efforts is to utilize the channel your customers most prefer. Research has shown the death of email support has been greatly exaggerated. However, you need to pick the channel that makes the most sense for your business. Hosting companies, for example, know that live chats are critical when their customers’ sites go down; other companies may have customers who prefer using self-service, or even phone support.

  1. Try to decrease attrition

Virtually every business loses some customers, but few ever measure or recognise how many of their customers become inactive. Most businesses, ironically, invest an enormous amount of time, effort and expense building that initial customer relationship. Then they let that relationship go unattended, in some cases even losing interest as soon as the sale been made, or even worse, they abandon the customer as soon as an easily remedied problem occurs, only to have to spend another small fortune to replace that customer. The easiest way to grow your business is not to lose your customers. Once you stop the leakage, it’s often possible to double or triple your growth rate because you’re no longer forced to make up lost ground just to stand still.

Fig 4 – Impact of customer retention on a given company; Source – www.cxsolutions.com

The impact of many of the strategies mentioned above has been quantitatively measured by renowned customer service-based consultancy firm CX Solutions:


It’s not just all the retention strategies and content that you need to focus on. At the end of every quarter, you must analyze the ROI of the effort that you’ve put in. Following are the key retention metrics that you need to understand and implement in order to ensure your retention strategy is a hit:

  • Customer Churn Rate (CCR)

Customer churn rate (CCR) is the percentage of customers that have been lost over a specific period of time.  In other words, these are the customers that have stopped making purchases.

Although it might seem ridiculous to focus on the customers you’ve lost, knowing your churn rate helps you determine what steps to take when developing a retention strategy.  Since you want this metric to be extremely low it stands to reason that the lower it is, the more effective your retention strategy is!

  • Repeat Purchase Probability (RPP)

Repeat purchase probability (RPP) is the likelihood of a customer making another purchase. 

Your brand’s repeat purchase probability rate is very closely related to your customer churn rate – the less likely they are to make another purchase, the more likely they are to churn.  Keeping an eye on this metric allows you to assess where customers are falling off throughout the customer journey, giving you the opportunity to put preventative measures in place.

  • Repeat Purchase Rate (RPR)

Repeat purchase rate (RPR) is the percentage of customers who’ve made more than one purchase at your store.

Your repeat purchase rate gives you gives you a clearer snapshot of the effectiveness of your entire retention strategy, providing proof that each of your tactics are working.

  • Time Between Purchases (TBP)

Time between purchases (TBP) is exactly what it sounds like – a metric that shows you how many times a year a customer completes a purchase.

When you know how long it takes the average customer to make another purchase, you can begin to target their buying patterns with retention strategies designed to increase their desire to buy.  This knowledge positively impacts your ability to maximize revenue.

Marketing is just not what it once used to be. We have seen the arrival of new mediums. We are seeing new tools slowly replacing new ones. Likewise, the strategy or the outcome that marketers once expected from their campaigns have also started to change. Once, it was all about spreading the word out to the mass. Now, it has become a game of personalization – curating and individually fine-tuning every message in order to ensure sales. More importantly, it’s not just about sales anymore; rather, it’s about forging a long-term bond with the customer. To retain not only his share of monetary transaction with the company or the brand, but to also make him a part of the brand’s entire story.

Written By Farhat Zishan

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