Traditionally, customer retention has not had the same focus as customer acquisition. Although acquisition is important for revenue growth — more recently, there’s been a shift to focus on retention as businesses face acquisition challenges related to the current economy. This is why the time is now for all eyes to be on customer retention over acquisition.
Customer retention can accredit its momentum gaining importance to the emerging data brands being able to acquire loyal customer segments on repeat. For example, returning customers spend 67% more than new customers. With more brands realizing the value of retaining existing customers, it begs the question of how to stand out among the crowd. There are moments throughout the customer journey to capture customers’ attention and win their long-term loyalty.
The mindset shift
Brands used to focus solely on attracting new customers. Companies would invest effort and resources into raising awareness for their brand, reaching new customers in ways that would ultimately persuade consumers to buy their product — but that’s where it would stop. Once a customer completed a purchase, no effort was afforded to keep their attention for repeat purchases.
Customer acquisition costs are consistently rising, from paid media to paid search and content marketing. In a time where budgets are being pinched, brands don’t really have the necessary resources to spend budget on acquisition costs. As a result, there’s a greater emphasis on retention strategies — focusing on the post-purchase portion of the customer journey and providing added value to returning customers.
Meanwhile, brands are enhancing loyalty strategies. Barnes & Noble and Lyft recently introduced loyalty programs and Delta Airlines is heavily investing in its Skymiles loyalty program to keep customers coming back.
Leverage existing loyalty programs
Today’s consumers desire connection with the brands they engage with. Once a consumer spends money, they want something more out of the engagement — beyond just the product or service. This can be something as small as providing a positive customer experience or offering a loyalty program with value points and discounts to use on future purchases.
Loyalty programs are becoming common practice for major brands. Sephora’s Beauty Insider program has nearly 25 million members that make up 80% of their annual sales. The program earns customers points for each purchase. Customers are then provided the opportunity to choose how reward points are used, trading in points for rewards like gift cards, free shipping, or even free samples.
Brands can achieve more customers signing up for loyalty programs by being flexible. Which starts with flexibility. Sephora has proven that consumers want to choose how their reward points are used. Oftentimes it goes toward addressing concerns like product prices. A recent Deloitte study found “choice of redemption options” as a high-value feature for customers participating in loyalty programs. Providing flexibility and addressing concerns are pivotal for modern consumers.
Another tactic to enhance loyalty programs is offering exclusivity — ensuring customers feel special and excited to participate. Reebok offers a tiered loyalty program including early access to new products, bonus events and workshops. Following this model, brands can offer access to deals, merchandise, and events or that help form a community, creating a sense of belonging among these loyalty members.
While brands can evaluate existing programs to meet evolving consumer demands and proactively address customer concerns, sometimes, the key to retaining a customer isn’t through a loyalty program at all.
Go beyond loyalty programs
Even if a brand has the best loyalty program, if consumers don’t have a positive experience, the brand doesn’t stand a chance of increasing customer retention.
Brands must understand what consumers are looking for and proactively address their interests and needs. One example is diversity and inclusion, which is growing in importance for consumers making purchasing decisions. A recent Meta survey shows 65% of U.S. consumers expect brands to promote diversity and inclusion in their online advertising. Modern consumers want to support brands that are inclusive and provide a reflection of their personal identity and ideals. Customers want brands to authentically provide representation across their advertising and support causes that align with the consumer’s values.
Brands have to be relatable. The days of using celebrity spokespeople that all look the same and live lavish, unattainable lifestyles are over. Consumers want to see people who are like them doing relatable, real-life things. For example, rather than saying “this dress would look great on you for your trip to Milan,” talk about how it can help make the consumer feel more professional when working from home.
Finally, the most important element of successful customer retention strategies is providing top-tier customer service. To put it into perspective: everyone has called a company and spoken to a customer service representative that was unhelpful — or worse, there was no one to speak with at all. This off-putting feeling makes a consumer think twice before deciding to associate with that company again. Modern consumers want accessible, high-caliber customer service. In fact, 89% of consumers are more likely to make additional purchases after a positive customer service experience. This is why investing in customer experience will constantly yield improved customer retention rates.
As businesses face acquisition challenges as a result of the current state of the economy, it is more important now than ever before to shift focus to customer retention. Acquisition costs continue to rise, consumers are calling for more value exchange with their favorite brands, and improving loyalty programs is a flexible solution to meet consumer demands and improve customer retention rates.
Jay Kulkarni founded Theorem, Inc., in 2002. Over the last 21 years, Kulkarni has been the driving force behind the company’s extraordinary expansion. Prior to founding Theorem, Jay was one of the earliest employees at DoubleClick, where he headed up product management for advertiser solutions and email platforms. As a veteran in the online advertising space, Jay is published by several leading trade publications and is a participant in the digital marketing conference circuit