How to Retain Clients Through Retention Marketing

Retention marketing today is considered one of the most effective ways to promote a business. Evidence of this can be found in statistics that provide various insights. It has been shown that attracting a new client requires five times more investment than retaining the interest of existing customers. Profits tend to increase by approximately 3.3% if the number of buyers increases by just 1%. However, if the right strategy is employed with existing clients, this figure can reach 7%.

Understanding Retention Marketing

Retention marketing refers to a set of tools aimed at maintaining a client base and enhancing their interest in the products. Essentially, the primary focus here is on those individuals who are already loyal customers of a given brand and who purchase its products.

It was not until the 1990s that the importance of increasing interest in existing clients was widely recognized. Over time, it became clear that this approach significantly boosts profits and even accounts for a larger percentage of revenue. Therefore, today retention marketing cannot be seen as merely a novelty.

The goal of retention marketing is to engage clients even more and encourage them to continue collaborating with the brand over the long term. It’s relatively straightforward to sell a specific product to a person; however, it’s much more challenging to entice them to return when they need the given product again. Initially, this can be achieved through improving the quality of your brand’s products. This is precisely what keeps customers consistently coming back to you.

Key Indicators of Retention

Each area of marketing has specific factors that play a crucial role in attracting and retaining people. Retention marketing also includes such indicators. Therefore, if you want your customers to become regulars, you certainly need to pay attention to these coefficients. We will discuss each of them in more detail.

Customer Retention Rate (CRR)

We propose the following formula for calculating the CRR:

The customer retention rate is the most important indicator requiring constant monitoring. Thanks to it, one can understand whether the brand is interesting to customers and to what extent this parameter is growing.

It is relatively easy to calculate: CRR = the percentage of people who have repeatedly engaged with a brand’s products / total number of clients. We can assess this indicator as follows: we take a specific period determined and find out who made purchases during that time. If the purchases were made solely by those who have previously used the company’s services, and no new clients appeared, this coefficient would amount to 100%.

The CRR largely depends on the characteristics of the product itself and how long it remains relevant.

Customer Lifetime Value (CLV)

The CLV or customer lifetime value directly correlates with the previous indicator. For instance, if you have a client who consistently buys your products and continues to represent your brand, they are far more valuable to you than a new customer.

To calculate the CLV, it is essential to multiply the average purchase period, the average sales volume, and the customer price. The average price of a repeat purchase is usually higher than that of a new customer.

Repeat Purchase Rate (RPR)

This figure shows how often repeat purchases occur. You can calculate it as follows: RPR = the number of people who have bought something from you more than once within a selected timeframe / all buyers during that same timeframe. For internet trade, RPR usually reaches around 30%. Thus, a third of all your customers come back to you to buy some product.

Customer Churn Rate (CCR)

The customer churn rate indicates how many customers leave one brand for another.

It is measured as follows: CCR = ((total number of clients – number of new leads) / total number of clients at the beginning of the set period) x 100. This indicator is no less significant than those listed above. It allows for timely reaction to client losses. Particularly important is the information that this indicator provides for those entrepreneurs who wish to collaborate with their clients for as long as possible.

The norm of CCR varies significantly for different types of businesses. For smaller businesses, a rate of 5% might be quite optimal. In larger businesses, it is crucial to remain within 2-3%. A 5% churn rate for them is a current tragedy. There are also sectors where CCR shows particular figures:

• for the education sector – 10%;
• for online games – 6.1%;
• for software services – 6.2%;
• for video services – 11%.

It is simple to determine the churn rate indicator. It is necessary to keep it in mind and avoid increasing it. To do this, one must actively and continuously work with those clients who are inclined to leave you and do everything possible to change their minds.

Net Promoter Score (NPS)

NPS or the customer loyalty index shows how satisfied people are with the services or products of the brand. To calculate it, client surveys are conducted.

If the indicator is between 0 and 6 points – the clients are dissatisfied; if 7-8 points – their position is passive; and if 9-10 points – they are loyal to the brand. It is necessary to start increasing the NPS since the lower the score, the less likely existing products will be repurchased.

Customer Satisfaction Score (CSS)

The customer satisfaction index or CSS is similar to NPS, but it is applied in those areas that offer specific services. Here, the scale is similar, but the maximum indicator – 5 points:

• 1 – maximum dissatisfaction;
• 2 – dissatisfaction;
• 3 – neutral position;
• 4 – satisfaction;
• 5 – maximum satisfaction.

The results of this index provide insights into what percentage of customers remained satisfied or dissatisfied after making purchases from you.

Tools to Help Retain Customers

After identifying all the coefficients and understanding that they are far from ideal, further strategic development is needed. Therefore, we will discuss tools already tested in retention marketing with high effectiveness.

Loyalty Program Development

This strategy is considered fundamental and should be used first. It adheres to standard retention marketing strategies, providing significant indicators of effectiveness. If you have not yet developed one, now is the time to do so and implement it right away.

Benefits of a Loyalty Program:

• enables building long-term relationships with clients;
• increases the level of customer trust;
• creates a significantly higher average purchase amount;
• allows understanding client desires;
• helps attract new clients to the brand.

It’s not difficult to develop a loyalty program and integrate it into your business – this is simple. Many studies have shown that approximately 57% of people will continue to use such a program, provided they can easily understand the bonus collection system. Additionally, 54% of users have no incentive to improve their accumulated metrics. This has a reason – people do not see any benefit for themselves but understand that the process of earning is quite complicated.

A Loyalty Program Should Be:

The loyalty program needs to be non-intrusive yet obvious. The more complex the system, the less interest people will have in using it. Additionally, there is no need to offer clients too many discounts. They do not yield effective results since people value targeted incentives much more.

Everyone participating in the program should understand why they need to earn as many points as possible. If they see the purpose and it is clear to them, they will strive to achieve it. Ultimately, to acquire bonuses, one needs to invest effort, but they will receive a very good reward for their efforts.

A loyalty program is successfully reinforced by other interesting offers. With their help, you can show your appreciation for purchases or improve relationships with different client groups.

Enhancing the User Journey

The customer journey allows brand owners to realize what the consumer needs. The more efforts are made to develop the user path, the better the relationship will be between customers and the brand, which increases their intent to purchase.

The user map includes segmentation, brand tone of voice, client profile, as well as a relationship map. It can be laid out manually or special Customer Data Platforms can be applied for this purpose. They enable monitoring consumer dynamics on the web resource and categorize all clients distinctly. If you use such a program, it allows you to track each client’s actions – from the moment they land on the site to the moment they share their contact data in a designated form.

Once you have gathered all this information, you can proceed to the next steps. It is essential to form a profile of your client and also establish the tone of voice of the brand. This should be done separately for each client group. The relationship map should ideally be multilayered, and each area of reverse communication should have its message plan.

Retention Campaigns and Personalization

When working on retention campaigns, attention must be paid to several key moments:

• creativity;
• interaction methods;
• key performance indicators;
• responsibility holders.

Retention campaigns can be considered the next step in the chosen strategy and manifest themselves in practice. Methods that allow retention while attracting new clients yield effective results.

In Conclusion

Although retention marketing is already actively applied in Western countries, in the CIS countries it has recently started to gain momentum. This approach can be summarized in one phrase – profit comes from repeat customers, which exceeds that obtained from new customers. Retention marketing is well studied and has numerous effective tools, allowing you to leverage them and easily achieve desired outcomes.