What Is Retention Marketing? Strategies and Challenges for 2024

Companies spend upwards of $168 billion a year on customer churn.

If yours is a small business or startup, you can’t afford to lose too many customers, as it puts your company on the brink of extinction. That’s why you need customer retention marketing strategies.

Retention marketing is a marketing method that aims to maintain your existing audience and encourage them to buy from you. It comes after customer acquisition and requires entirely different strategies from any other form of marketing you’ve employed.

Repeat customers are said to spend 67% more money compared to newer customers, which alone proves why their retention matters so much.

In this blog post, we’ll explain what retention marketing is, and the top strategies, techniques, and challenges of utilizing this form of marketing.

Table of Contents

What is Retention Marketing

Retention marketing is your business’s strategy to maintain customer loyalty and encourage repeat purchases.

You can rely on a handy formula called the Customer Retention Rate to gauge your many customers. The formula is:

CRR = (E – N)/S x 100

CRR stands for Customer Retention Rate, while E is how many customers you have at the end of a sales period, N is how many customers you acquired during the sales period, and S is the number you had at the start of a sales period.

But okay, I know what you’re probably thinking. Why not just focus on new customer acquisition instead? One should not replace the other, but retention marketing is also a critical part of your business marketing plans.

It’s cheaper to maintain customers

How much money do you spend on marketing and remarketing per year? What about advertising? It’s no small sum if you’re like most businesses. And while you can’t stop these marketing efforts altogether, you’ll find that once you add retention marketing to the mix, it’s considerably cheaper.

And why is that?

The people you’re aiming your marketing messages toward are already customers. They’ve bought your products or services. They know what you’re about. They don’t need as much education and nurturing to push them toward another purchasing decision.

In short, you can reduce the marketing messages required, saving time on your campaigns but still achieving results.

They’re readier to buy

Another perk of retention marketing is the reduced need for onboarding. As mentioned above, you must provide lots of education and information toward new leads and freshly converted customers.

You’ll send everything from eBook chapters to product specs, checklists, demonstration videos, blog content, and nine yards.

And even after you do all that, there’s still a chance a lead might not convert.

It’s different with retention marketing. This audience has a proven record of purchasing your products and services. Thus, with a little nudge through your marketing materials, they should be on the cusp of making a choice.

They have stronger feelings associated with your brand

And here’s another awesome reason to consider retention marketing: customer loyalty, or the lack thereof.

Once you convert a customer, building a loyal, stable relationship takes time. They must have a lot of positive experiences with your brand.

Customers who have purchased from you a time or two before are already more loyal. As a result, they can become some of your biggest brand ambassadors.

Top Retention Strategies for 2024

Hopefully, you see how retention marketing can benefit your business, but which strategies should you implement?

Don’t worry; I’ve got you covered with this handy overview.

Personalized engagement

By this point, there’s no excuse to forego personalization when communicating with your customers, whether long-term loyal or newly converted ones.

Personalization has become a pillar of successful marketing, with almost 90% of marketers reporting a positive ROI.

Retention marketing gives you a golden opportunity to take all that data you’ve accumulated on your customers and put it to good use. You can fine-tune your interactions with your audience, personalizing beyond just their name.

For example, suppose Customer A recently bought a vacuum cleaner. In that case, you can use push notifications, email, email marketing, social media, or SMS marketing to recommend accessories such as attachments and hose adapters.

Personalization is valuable to your audience because it makes them feel heard. They know you’re paying attention to what they’ve purchased and what they may be interested in.

Beyond upselling, you can also make new recommendations on what you believe your current customers would like. Since data back the suggestions, they have a higher chance of resulting in a purchase.

Loyalty programs

Another excellent retention technique is making customers feel like VIPs via a loyalty program.

Members can bring in annual incremental revenue growth at 12% to 18%. Here’s another stat for you, courtesy of the same source: 84% of consumers who purchase from a company with a loyalty program are likelier to stay with the brand.

If you’ve struggled with customer loyalty and retention, you shouldn’t skip loyalty programs. Customers should want to join yours in droves, especially if it’s free and easy to sign up.

The most important part of a successful loyalty program is good rewards. If your audience doesn’t feel they’re being amply compensated for their time and purchases, they won’t buy from you anymore. It’s as simple as that.

People will gravitate toward freebies, discounts, and exclusive sales, so consider that when putting together your loyalty program.

Quality customer support

Now is no time to get lax on the quality of your customer support. If anything, your customers will want responsive, high-quality support more than ever to maintain their loyalty and satisfaction.

How can you elevate the exceptional customer service and support you offer? Try these tactics:

Ask for customer feedback and implement the requests that come up the most often. Be sure to address recurrent complaints.
Build out an omnichannel support model so you can assist customers on all the platforms they use, from social media to text and email.
Consider hiring more customer service reps to ensure no one gets too overwhelmed by their job responsibilities, causing their performance to suffer.
Personalize the customer service so it’s tailored to your specific customers according to the customer’s progress in the sales funnel.
Consider using AI as a chatbot to answer questions so your sales reps can handle escalated complaints instead.

Subscription models

If applicable to your business products or services, consider offering a subscription model to your customers. Already a multi-billion-dollar corner of commerce, subscription services are an excellent way to guarantee more stable revenue.

Customers will pay for a service or product, usually monthly. Netflix is a classic example of a subscription service that allows you to pay monthly to continue watching its television shows and movies.

A product-based example of a subscription service is the pet brand Chewy, which lets you purchase pet products, medication, and supplies and decide the delivery frequency.

Subscription models give you plenty of chances to communicate with your customers, driving engagement. You can send them a reminder message that their subscription order is about to ship (if you specialize in products), and you can also reach out when it’s time to renew the subscription for another year.

Innovative Retention Techniques

Beyond the above retention marketing strategies, I have a couple of tactics you can implement that take it to the next level and ensure you have happy, loyal customers for a long time.

AI and predictive analytics

I have already discussed how AI can be an asset in customer service, but predictive analytics is one of its most innovative uses, which goes with retention marketing.

Today, AI can parse large portions of data and provide valuable insights through these predictions.

Most marketers only talk about the financial side of AI predictive analytics, but it can do more than that.

AI can review your customer data and predict what they may do next. It will assess their geographics, demographics, and psychographics, as well as their purchasing history.

AI can then guess which purchases the customer might make next and for how much. This information can help you in many ways. For one, you can more accurately calculate the Customer Lifetime Value of each customer, focusing on the ones who should bring in the most revenue for your business.

Additionally, you can recommend products with more accuracy and personalize your marketing efforts.

Interestingly, AI looks at measures such as how much an average customer spends on your brand and what they buy to provide fraud detection. The algorithm can determine if a customer’s behavior seems out of pocket and whether it may be indicative of fraud.

Post-purchase communication

Most of us are used to getting a survey a few days after we complete a purchase asking how we liked the product. But why take that post-purchase communication and crank it up a notch?

For example, you can express appreciation for a purchase. The key here is being genuine in your sentiments. If a consumer senses you’re phoning it in or sending them a thank-you for better engagement, it will have the opposite effect.

These emails are best reserved for certain types of businesses, such as handmade goods, single-person-owned businesses, or companies that give back for every purchase. When customers feel good about what they bought, they are likelier to do it again.

You can also use this post-purchase communication window to upsell or cross-sell the customer. Recommending them products that augment the value or usefulness of their purchase will drive up their willingness to purchase from you again.

Special offers and discounts

Do you know what else makes your audience feel like VIPs? Offering them special discounts and offers that no one else in your audience gets but them. These offers would exist outside of your loyalty program but work similarly.

For example, you might provide a reward like a special discount code when your customer has been with you for a year. The discount code will motivate them to purchase from you again, especially if the code has a brief period until expiration.

Sustainability initiatives

With almost 80% of consumers mentioning how important sustainability is to them, embracing a greener business will win you more customers and help you keep the ones you’ve worked so hard to convert.

Switching to greener packaging, announcing eco-friendly initiatives, taking active and transparent efforts to reduce your carbon footprint, and providing content that teaches your customers how to join you in sustainability will prove you’re backing up what you preach.

Overcoming Challenges in Retention Marketing

While retention marketing is a valuable way to achieve more business objectives and increase your revenue, there are challenges in this arena you must be aware of. I have solutions and strategies to implement for each, so let’s look.

Data management

Managing customer data isn’t too challenging if you have a small audience or are a new business. Naturally, your audience will grow with you as you continue on the road to success. While this is exactly what you want, you begin experiencing data management issues.

CRM or database management software will help you maintain all your customer records so you don’t get your wires crossed and risk low-quality customer interactions.

Segmenting customers

Audience segmentation is another task that becomes gargantuan as your audience grows. However, as well as I do, you know that failing to divide your customers into buckets isn’t an option.

You need customer avatars to make sales and marketing more efficient, so what are you to do? Well, audience segmentation is one area where AI is getting a lot of acclaim. It can sort through massive amounts of customers, trickling them into buckets in minutes when it would take you hours or days.

Better yet, AI doesn’t suffer from human error, so you can rest assured your results should be accurate.

Monitoring the wrong metrics

Are you paying attention to the customer retention metrics that matter?

If you aren’t, you can create the illusion that your campaigns are succeeding when perhaps they aren’t. Here’s a rundown of all the KPIs to measure that will determine if you’re retaining customers at a cost-effective rate:

Cross-selling rate
Upselling rate
Customer effort score or CES
Revenue churn rate
Client communication response time
Customer health score
Net Promoter Score
Customer satisfaction score or CSAT
Renewal rate
Customer Lifetime Value or LTV
Resolution time
Repeat purchase rate
First response time
Customer churn rate
Cancellation rate
Net revenue retention
Annual recurring revenue
Monthly recurring revenue
Website traffic retention
Email open rates
Email click-through rates
Customer loyalty program participation rate
In-store visits
Average Revenue Per User or ARPU
Average Repeat Order Value or AROV
Purchase frequency

Not asking for or not using feedback

When you ask for customer feedback, it shouldn’t merely be as a courtesy. You should request a customer’s insights only because you plan to use them to improve your business and customer service.

If your customers feel that your feedback requests are only lip service, they won’t bother sharing their opinions and thoughts anymore.

That doesn’t mean you must implement every last suggestion your audience gives you, but those that are feasible and make sense for your business should go to the top of your to-do list.

Lack of personalization

You can’t forego personalization when communicating with long-term customers, even if you now have 10,000 long-term customers instead of only 1,000.

Remember, you can use AI to assist you with more meaningful personalization, and on top of that, there’s always automation software for emails and social posts.

Poor customer service

A customer service team stretched too thin will not receive high marks from your audience. They won’t be able to deliver the qualified, personalized service your audience deserves for sticking with your business.

The answer isn’t to turn to the bots, at least not 100%. Then, your customers will complain about your customer service lacking a human element. While AI chatbots are fine, there should always be a human representative your customers can contact when they want to hear a person’s voice.

Case Studies and Real-World Examples

As you proceed with your retention marketing goals, check out these great examples to inspire your next steps.

Sweet Fish Media

Specializing in newsletters, YouTube videos, social media, and podcasts, Sweet Fish Media slashed its 30-day churn rate from 15% to under 3% in under a year, too!

How did the B2B agency do this, you ask? First, they began measuring their churn, as they had previously lacked any system to do so. That’s when they discovered their churn rate was at a disappointing 15%.

Next, they reviewed podcast metrics every quarter to see how their client success stories played out. After one customer volunteered to pay for the data, it snowballed, and Sweet Fish soon decreased its churn rate.

Their goal was only 5%, but they achieved a churn rate of 3%, which is great!

eBay

An eCommerce giant like eBay has an impressive retention rate, with theirs lingering at around 83.33%.

The online store and bidding platform has achieved that by focusing on five-star customer service, including quickly answering inquiries and questions despite its large customer base.

Amazon

You can’t discuss customer retention without mentioning the retail giant Amazon, which had a retention rate of 90% within the first year of launching Amazon Prime. The number shot up to 98% within two years for US Prime users.

Amazon has achieved such huge customer retention success for multiple reasons.

It has always tried to obtain as much customer information as possible. Even if the customers don’t stick around, this data is valuable for Amazon, enabling it to learn what potential customers could use its services.

Beyond that, it’s known when to trigger that all-important sense of FOMO, such as with its limited-time flash sales called Amazon Lightning Deals. Amazon has also used personalization measures to engage its long-term customers, including tailored product recommendations.

ZoomInfo

The software company ZoomInfo specializes in B2B intelligence and data management. This SaaS service has a high retention rate of over 98.5%. That’s even greater than Amazon and eBay, so how does it do it?

ZoomInfo ensures it provides educational information for its audience that aligns with their progress in the sales funnel, introducing a certification program, private training, on-demand education, and live webinars.

Bantoa

The fashion eCommerce site Bantoa, based in Italy, has a close-knit community that has driven much of its customer retention. The contextual marketing messages delivered to that community are always segmented by criteria such as recent purchases, customer clothing preferences, shopping behaviors, budget, clicks, and views.

From there, consumers will receive timely push notifications if a product they like is available.

CTR rate for Bantos — *Image courtesy of Pushwoosh*

Given its CTR of 91.9%, its strategies are working!

Conclusion

Retention marketing is critical for maintaining an audience and growing brand loyalty to ensure future purchases. No matter the size of your business, even if you’re a startup, you have options to improve your customer relationships.

Adopting and customizing the techniques discussed today is an excellent place to start!

EngageBay is an all-in-one marketing, sales, and customer support software for small businesses, startups, and solopreneurs. You get email marketing, marketing automation, landing page and email templates, segmentation and personalization, sales pipelines, live chat, and more.

Frequently Asked Questions (FAQ)

1. What is the first step in developing a retention marketing strategy?

First, you need to build a customer journey map to understand where your customers come from, where they’re getting stuck in the sales funnel, or if there are phases they don’t like. Next, you can calculate the churn rate and set a goal for reducing it.

2. How do I measure the success of my retention marketing efforts?

Tracking the metrics I recommended above or following the CRR formula of CRR = (E – N) /S x 100 will help you determine whether you’re on the right track with your retention marketing campaigns.

3. Which retention strategies are most effective for small businesses?

All sorts include customer loyalty programs, educational information, feedback analysis, strong customer service, and community-building.

4. How can technology enhance retention marketing efforts?

Data management tools, CRM, AI, and automation software can expedite retention marketing efforts and allow you to dig deeper into audience data to personalize your communications.