Retention Marketing: How Companies Attract and Hold Regular Customers

Retention Marketing: How Companies Attract and Hold Regular Customers

There is a hubbub of activity at the conference table, the whole marketing team is sharing ideas and exploring flashes of inspiration in a big brainstorming session. The topic: how to acquire new customers to increase sales. In the midst of the creative exchange of blows, there is suddenly a question in the room – what do we actually do for our regular customers?

Yes – what exactly do companies do to reward the dedication of their loyal customers? In many cases, the answer is simple: far too little. Companies often do not pay sufficient attention to loyal existing customers, although the figures speak for themselves: regular customers bring in the most money, whereas new customers require investment.

You don’t just have to take our word for it, why not take a look at a piece of proper research? Harvard Business School published a study called „The Economics of E-Loyalty“. Old and sage advice, such as the following, came out of it: “We showed that in industry after industry, the high cost of acquiring customers renders many customer relationships unprofitable during their early years.” But this is no reason to fear for sales because the solution is also immediately presented: “Only in later years when the cost of serving loyal customers falls and the volume of their purchases rises, do relationships generate big returns. […] Increasing customer retention rates by 5% increases profits by 25% to 95%.”

So those who manage to increase their Customer Retention Rates by 5 percent can look forward to an increase in profits of up to 95 percent. But here the next question arises: what is this Customer Retention Rate supposed to be? How can a company make good use of these and what are the prerequisites to do so?

So many questions, but don’t worry: the answers can be worked out quickly. First of all, the clever minds in marketing can rejoice, because all this is part of a very exciting topic in their field: Retention Marketing. In order to provide all the necessary knowledge, we start with the definition of that term.

What Is Retention Marketing?

Whether you call it Retention Marketing or Customer Retention Marketing, it focuses on customer loyalty. Anyone who knows the watchword customer care is in the right ballpark because both existing customer care and retention marketing are part of the area of (customer) relationship marketing, also known as CRM.

Retention Marketing is primarily aimed at the company’s profitable regular customers and ensures that they buy even more. Here, companies use an internal ranking to take special care of the more profitable customers and to let less profitable customers go, so that the resources can be used for the profitable groups. In order to carry out this task, you need a database with the current and relevant customer information and a sophisticated strategy of lead management. On this basis, the customer’s wishes can be perfectly identified and the strategies aligned with them.

The goal when it comes to retention marketing is to reduce the rate of churn and to bind customers to the company. In addition, one can also set one’s goal of recovering those customers who already emigrated. These are therefore the core areas, but what is the sense of undertaking all that effort?

The Benefits of Retention Marketing

In order for customers to become regular customers, many different factors that increase customer loyalty must be taken into account. If the company has won over its regular customers, retention marketing comes into play: It strengthens customer loyalty through personal actions aimed at targeting the selected group of existing customers.

An innovative strategy ensures that regular customers are satisfied, they feel emotionally connected to the company and return again and again to make repeat purchases. This generates revenue, of course, but the impact of satisfied customers in the public sphere is almost as valuable: customer reviews, recommendations from friends, and the like attract new customers to the business and thus also ensure increasing demand and higher sales. In addition, one can interpret warning signals of customer churn and thus on the one hand prevent a customer exodus, and on the other use the right methods to retain potentially dissatisfied customers and keep them loyal to the company. This includes dealing with complaints and professional classification of this criticism. In this way, critics can be transformed into regular customers.

The more satisfied regular customers are, the more they order, random purchases are made more frequently and the value of the shopping cart increases. These profitable regular customers are the focus of the marketing strategy, depending on whether it is a matter of tying them even closer to the business or recovering them.

With These Three Prerequisites, You Can Start Retention Marketing

The purpose and the advantages are obvious, so the marketing department gets the order from management to deal with the topic and to develop proposals that can be implemented in a timely and favorable manner. But before falling over yourself to get things done, you need to check some prerequisites. These must be met so that retention marketing can be used as sensibly and effectively as possible. The following three prerequisites requirements are the basic minimums:

  1. Technical requirements
    Data is the foundation of any marketing strategy. Therefore, a company’s data management needs to be up-to-date, well thought out, and well-organized. Without this requirement, every business will drive its marketers mad. This is because the database is the foundation for sensible and targeted use of retention marketing. This requires sophisticated systems that pull the data volumes out of all channels – of course only with the explicit permission of the customer and in compliance with data protection – and collects and links them sensibly. This is the only way to avoid missing any important information so that one can make the customer approach even more personal.
  2. Financial resources
    If you focus on the more profitable regular customers, it is advisable to provide a fixed budget with a top-up cushion for retention marketing. The larger the resources available, the more individually, creatively, and effectively the respective instruments can be used. After all, it makes a huge difference whether you send a postcard or a hamper of gifts for someone‘s birthday.
  3. Motivated employees
    The quality of retention marketing, in any industry, depends on the team. When employees are motivated and have the opportunity to let their creativity run wild, the ideas become all the more colorful, innovative, and smarter. This requires a certain amount of trust from management, sufficient time, and also the opportunity for employees to make mistakes and learn from them.

Those who are willing to create these conditions will inspire their marketing team. This joy can be incorporated into the work immediately because enthusiastic employees inspire customers. We will show what measures are ideal for this in the next section.

Measures for Successful Retention Marketing

Regular customers assume that the company knows its customers, which products they are interested in, and what relationship they share. If you keep this in mind, you can perfectly align your strategy with the customer and respond to it thanks to the collected data.

For this purpose, the entire range of customer loyalty tools, such as discounts, newsletters with relevant content, bonus programs, loyalty cards, and gifts should be available. In addition, one should attach importance to personalized e-mails as a means of communication in order to promote up-to-date promotions and offers. Last but not least, one has to avoid obstacles that make it difficult for the customer to shop in the company.

In the foreground is one thing: personalized service. These instruments appear generic, but the trick is to adapt them individually to the respective customer. This is because regular customers read e-mails and expect the content to offer added value and correspond to their purchasing behavior. Those who use their collected data wisely can sharpen the general tools in such a way that they address the emotions of the buyers. For example, those who regularly buy a particular product are much more likely to react to a discount for that particular product or to promotions that promote the related goods. A subscription that offers a number of deliveries in a certain cycle for a lower package price goes a step further. The data has the power to make regular customers completely happy.

The more profitable a regular customer is for the company, the sharper these measures must be in order to address him personally. Offline, you can offer discounts for repeat purchases, on subscriptions, and on credits that can be redeemed in all stores. Anyone who manages to convey to his customer that he is something special and feels emotionally in good hands has created ideal conditions for long and intensive customer loyalty. Online, this is a little easier to implement, as you can use a customer account that offers discounts for the next purchase, personalized emails based on the products already purchased, and the like. In e-commerce especially, one should consider a few other ideas, which we will now explain in more detail.

Retention Marketing and E-Commerce – How it Works

In e-commerce, it is important that invested advertising costs pay off and that the customer makes a purchase. In e-commerce, the cost-per-order (CPO), i.e. the costs incurred for a promotion per customer response, is composed as follows:

  • Tonality
  • Price
  • SEM Strategy
  • User Experience
  • Technology
  • Contact care

Therefore, the marketing strategy must be holistically designed to cover all these points. Regular customers are of great interest here, as they already have experience with the product range and the online shop. In addition, they have already gained confidence in the business and are connected to it. As a result, much more ends up in their shopping cart than that of new customers who may want to test the service carefully first.

This is where retention marketing comes in to strengthen a company’s customer relationships. Especially in e-commerce, there are obvious reasons why a customer no longer buys on the platform:

  • Customer no longer knows that the company still exists
  • Customer does not know that their needs can (still) be meet there
  • The desired product is currently not available
  • The price is too high

This is where the strategy has to start and this can be done on the basis of the available customer data. For example, with a view to the customer lifecycle, one can instigate personalized actions based on the respective insights about the customer and meet him halfway.

The second option are the so-called pricing methods. These are measures relating to pricing policy because many buyers use online platforms in the belief that they can get buy here cheaper than in specialist local shops. So the keyword is re-pricing, the continuous adjustment of prices to those of other well-known platforms. The goal is to offer the optimal price at all times. This requires technical tools because this cannot be achieved manually. With this information, you are well equipped for the time being to advance your own company. In order for this to continue to work in the future, one should look at the trends of the coming months.

Don’t Miss: Three Trends in Retention Marketing for 2020

Customer requests are evolving rapidly and those who can’t keep up will soon be dropped. Don’t forget that competitors pop up like mushrooms, what was impossible yesterday can already be bought tomorrow. This fast-paced age also produces trends that can be used for yourself and your service. For the immediate future, here are the three big A’s.

  • Artificial Intelligence (AI)
    The main application of AI (Artificial Intelligence) as a field of computer science is the automation of behavior and machine learning. What may seem abstract at first can be used in a very practical way, for example in the form of chatbots or for the evaluation of large amounts of data. Chatbots reduce long-term fixed costs, are available 24/7 for customers and offer direct communication. AI can also revolutionize the traditional database in such a way that you can answer all your customer’s W-questions in detail.
  • Authenticity
    In the advertising jungle, individual offers blur into shrill one-size-fits-all background noise. If you want to stand out here, you should attach great importance to authenticity. Honesty, openness, and transparency stand out for many customers much more than intrusive marketing. Another important tool is that of customer reviews that honestly share views of the product with others. Therefore, it makes sense to take care of the whole impact of your industry, like influencers do, and to place value on good, authentic communication with the outside world.
  • Augmented Reality (AR)
    With AR, virtual content is transported into reality. A well-known example is the game Pokémon Go. AR can already be used with software with your smartphone. A practical example of AR, for example, is to display furniture directly into the room when browsing catalogs or websites with a smartphone. The product is thus the AR marker. Another far more well-known example is Magic Mirrors, which film customers in pedestrian areas, for example, and expands these scenes with virtual elements.

By now at the latest, every marketer should be itching to implement new trends with their own regular customers. Because sooner or later someone at the management level will certainly want to hear hard facts. To prepare for this moment and easily get results, there is a proven metric: the Net Promoter Score®.

Retention Marketing + Net Promoter Score® = A Perfect Pair

The Net Promoter Score (NPS®) is the metric that indicates how satisfied the surveyed customers are. This metric can be obtained by asking a single question: “On a scale of 0 to 10, how likely is it that you would recommend our product to your friends? Please comment on your review.”

This sounds so simple that the question arises as to why you need special software. After all, you could simply send the question by e-mail. The answer is simple: The zenloop software offers the greatest benefit by analyzing the immense amounts of data.

The answers can be used to calculate and interpret the NPS so that there is a crystal clear marketing result that can be passed on to management. A perfectly adapted customer survey can be simple and practical.

Customer Retention Works When You Use Retention Marketing

Regular customers bring regular and profitable sales. It is therefore essential to take outstanding care of them. Retention marketing can do this – if it is implemented sensibly from the start. Because only those who invest time and resources can approach customer loyalty in a personalized manner and perfectly satisfy the wishes of existing customers. This and more is provided by sophisticated retention marketing. If this strategy has been perfectly implemented in the business, it can be the ideal tool to strengthen existing clientele‘s satisfaction with the company and their offer and then help deepen it.

All of this sounds so obvious that it is astounding how rarely companies use a meaningful marketing strategy. It offers a clever competitive advantage that can convince the large mass of buyers about the company, and the services they offer. Therefore, one should no longer hesitate, but immediately start to work on one’s own strategy in order to win the battle against customer exodus.


Susan Pfundt

Senior Content Marketing Specialist