What Is Customer Retention Marketing?
Customer retention marketing aims to create engaged customers that return to a store or a website again and again. It’s a major shift in focus that recognizes the value of marketing to your existing customer base rather than constantly trying to grow it.
This shift in focus also puts a heavier emphasis on the profitability of your pre-existing database. While this new strategy has proven itself to be extremely beneficial, it should never be the sole focus of a brand’s marketing power. A brilliantly executed retention marketing strategy is one that works in tandem with the pre-existing traditional and digital acquisition marketing strategies.
Adopting a retention marketing strategy is not as tall a task as you may think. For instance, you’ve probably already done much of the heavy lifting. Most businesses have mountains of behavioral data from existing customers that can be turned into big revenue by enlisting the help of retention automation.
Paying Attention to Customer Retention
In the old school days, e-commerce retailers focused solely on tried-and-true customer acquisition marketing methods. They subscribed to the same modus operandi – and the motto remained static for decades: more ads + more customers = more sales.
In the ‘80s and ‘90s, there was only a handful of key channels that marketers zeroed in on that worked well to attract audiences. Retention was but an afterthought. However, the turn of the century brought about massive channel explosion:
More channels also meant more choices for consumers. It quickly became (and is today) easier than ever to not only jump between channels, but to shift brand allegiances in the blink of an eye. Thus, an emphasis on keeping those one-time buyers loyal, returning customers began to evolve. In addition, marketers are beginning to recognize that the cost of acquisition is simply not economical nor worthwhile and is actually holding them back.
In their pursuit for value over volume, they’re turning toward their existing database with a renewed focus on retention. It’s becoming an essential piece of the e-commerce marketing mix.
In the pursuit of value over volume, #ecommerce marketers are turning to their existing #database w/ a renewed focus on #retention CLICK TO TWEET
Keeping existing customers happy and buying could easily be considered the most profound, meaningful journey a B2C marketer could embark on — it’s hard but yields dividends.
We have two things on our side that not only make retention possible, but much more achievable: behavioral data and intelligent, self-learning martech systems.
To demystify things, what this really equates to is insights/knowledge and scalability/automation.
Understanding Customer Retention Marketing
Put simply, retention marketing aims to create engaged customers that return to a store or a website again and again to make repeat purchases.
Compared to that acquisition-first mindset so many brands went by just 20 or 30 years ago, it’s an atrophied muscle for a lot of marketing organizations. Making such a major shift requires a commitment to better understanding and marketing to your existing customer base as opposed to solely trying to grow it.
It costs nearly 7x more to attract new customers than it does to retain existing ones.
Since you’ve already spent countless amounts of time, energy, and dollars nurturing existing customers, it really makes all the sense in the world to keep them loyal.
Re-focusing on retention also offers previously unseen benefits to the bottom line. There’s a 27% chance of a one-time buyer returning again, but there’s more than a 50% chance of a 2nd- or 3rd-time buyer coming back.
A study done by the Harvard Business School showed that increasing customer retention rates by only 5% can increase profits by up to 95%. Yet another study by Gartner estimated that 80% of a company’s future revenue will come from just 20% of existing customers.
So, while more marketers need to pay more attention to retention, it should never replace acquisition, only complement it. A brilliantly executed retention marketing strategy is one that works in tandem with traditional and digital acquisition marketing strategies that are already working.
Adopting a retention marketing strategy is not as tall a task as you may think. In fact, you’ve probably already done much of the heavy lifting. Most businesses have mountains of behavioral data from existing customers that can be used in various ways. I recommend diving into these pieces to learn how:
- 5 Data-Driven Customer Loyalty Programs to Emulate [Brand Examples]
- [Revolution Series] How Cheaper Than Dirt Uses Customer Behavior Data for Personalization: Chelsea Mueller
- Revenue, Conversions, and Retention: The Key Metrics of a Healthy Growing Brand
You now have access to almost unlimited data about any attribute you could possibly want. When it comes to retention, this information can help make more tailored and personalized marketing strategies focused on enhancing the customer experience.
Measuring retention — is it working?
The best high-level retention metrics include:
- Percentage of sales from repeat customers
- Active customer repurchase rate
- Customer lifetime value
And then other derivative metrics to consider might include:
- Behavioral/engagement differences among existing (or long-term) database members vs. new buyers — likelihood to purchase, for example, or even AOV
- App sessions, email engagement, social engagement, and website interaction among known contacts vs. anonymous visitors
The secret to customer retention marketing
Here’s the idea: loyalty is a luxury, re-engagement is the remedy. Let me say that again. Customer loyalty is the key to executing a lucrative retention marketing strategy, but re-engaging inactive or one-time buyers is the best way to get people to that point.
Re-engagement campaigns are all about reinvigorating that spark that once existed when a customer purchased. If buyers are defecting or unsubscribing, don’t dwell — 25%-50% of customers become inactive, and brands lose an average of 25% of their mailing list annually.
Luckily, you have several options when it comes to defecting or inactive contacts. You can:
- Win back inactive and defecting customers with standard win-back campaigns. Win-back campaigns and subscriber reactivation communications remind customers of the value of doing business with you. You can also target inactive contacts via social channels.
- Engage customers with replenishment offers. Reminders to reorder previously bought products can help to get customers back and buying.
- Delete or unsubscribe them entirely from your list. This option isn’t ideal.
- Take them off any main lists, and instead include them only on sporadic or specific one-off emails.
- Test variations of re-engagement (e.g., “We miss you!”) emails to get them to confirm opt-in status and interest. When executing strategically, this is the best option.
Perks of loyal customers
In addition to purchasing more, loyal customers are also more likely to share experiences with their social network. The Harvard Business School coined the phrase “word of mouse” as the reach of social media is much larger than that of traditional word of mouth. So these follow-up communications will be well worth it in more ways than one. Referrals are extremely beneficial in the e-commerce retail space, with that impact being amplified by the heightened use of social media channels.
Let’s dive into loyalty a tad deeper.
3 Examples of Retention Done Right
Here are three examples of brands that have executed awesome retention strategies via loyalty programs (and tactics to emulate).
► Retail: The North Face
As part of its loyalty program, The North Face leverages a point-based rewards system, access to exclusive events and deals, and prioritization of members.
► Airlines: American Airlines
There’s something about numbers — and when it comes to driving loyalty, sometimes numbers speak louder than words. There’s something about showing members that hard facts that seems to inspire action. American Airlines does so especially effectively:
► Telecommunications: Verizon Wireless
Similarly, Verizon offers quantitative and qualitative benefits of membership, along with several othjer strong CTAs for members, including entertainment rewards.
With the increased focus on the need for more personalized customer experiences brought on with the surge of behavioral data, marketing organizations have a pre-existing base in which they can build a solid retention marketing strategy.
You can subtly shift your your focus to creating more engaged customers in order to reap the rewards. And, as we all know, the benefits of long-lasting, loving customers are well worth it, far outweighing the cost of acquiring new.
Retention and e-commerce marketing success go hand-in-hand; without a strategy to maintain lasting relationships with customers, brands risk losing valuable data, deals, and dollars. ◾
Handpicked Related Content:
- RFM Modeling 101: Predict Churn, Purchase, & Retention with Simple Segmentation: Caren Carrasco [Podcast]
- 3 Important Retention Strategies Every Retailer Needs to Know
- Managing Customer Reviews for Greater Retention and ROI: Brian Merritt [Podcast]
About the Author
Michael is a content marketing, audience development, and customer experience fanatic. As Digital Content Manager at Emarsys, Michael helps manage the content hub where he and his team create helpful content for e-commerce and digital marketers.