How to retain customers: 5 tips to improve retention rates

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Increasing your customer retention rate by just 5% can increase your profits by up to 95%.

Since it costs 5x more to acquire new customers than to retain existing ones, increasing customer retention rates is crucial for improving your bottom line. To get more repeat customers, you need to start from the beginning: What kind of customers are you attracting in the first place?

Using a data-driven retail approach, you can identify leading indicators of churn to step in and retain customers before it’s too late. This article will go over five expert tips that will help you retain customers and reduce churn in retail and e-commerce.

1. Focus on acquiring only high-value customers.

Not all customers are created equal. The 80/20 rule (also known as the Pareto Principle) applied to customer retention states that 80% of your company’s profits will come from 20% of your customers. Most customers will buy once, but 20% will turn into repeat customers and regularly purchase high-value products. By increasing the percentage of high-value customers to more than 20%, you will increase your retention rates and profits.

To acquire more high-value customers, you first need to figure out the characteristics of that 20%. Using a Customer Data Platform (CDP) or a similar retail data solution, you can learn things such as:

  • The geolocation of the top 20%
  • Their age group
  • Their financial status (how much they earn per year)
  • Their marital status
  • Their interests
  • Which pages they land on
  • Which ads bring them to your site
  • Which products they buy first
  • The second and third products they tend to buy
  • The average time frame between the first and second purchase

Once you figure out who that 20% is and how you have been attracting them, you need to replicate those strategies to attract more high-value customers. For example, if specific products tend to attract higher-value buyers, focus more on those products in your acquisition campaigns. When using Facebook Ads, target lookalike audiences to reach people who fit the demographics of your repeat customers. Additionally, you can use retail clienteling software to improve experiences for your high-value customers and ultimately boost retention.

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2. Retarget one-time buyers at the right time to encourage a second sale.

Customers who buy at least twice are 9x more likely to turn into long-term, repeat shoppers than one-time buyers. That’s why the second sale is so crucial. To turn customers into two-time buyers, you need to target them at the right time.

The exact timing will vary based on the product they purchased and its shelf life. However, if you wait too long, customers will forget about you. The excitement they have when using your product for the first time will wear off.

This “buyer’s high” is crucial for turning a customer into a two-time buyer. On the other hand, if you retarget them too early, you may come across as pushy, and purchasers may not yet have had time to enjoy their first product and realize how much they love it.

Using a Customer Data Platform (CDP) like Lexer, you can calculate the exact time to retarget customers and send automatic retargeting email promotions.

3. Send surveys to learn more about your customers for improved personalization.

One of the best ways to get repeat customers is by ensuring they are satisfied and feel you are prioritizing their needs. Sending surveys to customers can tell you precisely what they are thinking. By collecting customer feedback, you can discover how your products or customer service are lacking and learn about features your customers want to see.

Use both multiple-choice and free-text surveys. Multiple-choice questionnaires may get more responses, as they require less time to fill out, but free-text surveys allow customers to express themselves in their own words.
You can also use surveys to collect important customer data, such as how they found out about your company and how particular acquisition methods correlate with consumer purchasing patterns.

4. Track customer retention metrics and early indicators of churn.

By drilling down and tracking customer retention metrics, you will be able to spot an increasing churn rate early and work to bring it down. Here are some metrics you need to track to understand how your marketing campaigns are affecting your retention rates:

  • Churn rate: This metric tells you how many customers you are losing over a specific period.
  • Repeat purchase probability and rate: These metrics tell you how likely it is for a customer to make a repeat purchase and how many customers turn into repeat customers.
  • Average order value and profitability: These metrics tell you the value and profit of each order when considering the average repeat order rate.

The truth is that to track customer retention metrics properly, you need to drill down into segment-based tracking and see how specific campaign metrics affect and compare to your overall business KPIs. Predictive analytics can help you predict and prevent churn before it happens.

Using a tool like Lexer’s Track, you can track customer behavior across specific channels and campaigns and see how they influence your key objectives.

5. Improve customer loyalty and retention with software like a Customer Data Platform (CDP).

Using a CDP like Lexer is crucial for understanding customer behavior and integrating first, second, and third-party data into a central, unified dashboard. It helps you drill down into segment-specific behavior and optimize your strategies on a campaign-specific level to align your campaigns with your long-term business goals. Thus, CDPs are an essential tool for improving the customer experience in your retail business.

A common problem businesses face when trying to improve their retention rates is a lack of clean data and customer intelligence presented in simple, easy-to-understand reports. General data such as overall retention and churn rates isn’t enough. A CDP pulls data from multiple sources and creates an easy-to-understand big picture called a “single customer view.”

A CDP helps you learn about customer behavior at specific points in the customer journey and analyze engagement in particular segments. These customer insights and customer segmentation tools help you improve the customer journey and optimize it for better retention rates.

You’ll be able to implement retargeting and trust-building at crucial stages in the customer journey (which may differ for each segment) and retarget the consumers most likely to convert.

How an online wine retailer used these tactics to retain customers

Interested in seeing these retention tactics in action? Learn how Vinomofo increased its customer retention rate 12x higher than in previous retention campaigns using Lexer’s tools and guidance.

Lexer helps the world’s most iconic brands drive incremental sales from improved customer engagement. To learn more about our CDP and tools for marketing, retail, and service, use the calendar below to book a meeting.

Abby Borden
VP, Marketing

Abby Borden believes that at the heart of great marketing is deep human connection. She has spent a decade working with retailers like REVOLVE, Nike, CVS Health, Best Buy, and J.Crew, helping them find human connection with their customers at scale.

Outside of work she enjoys the beach with her pups Franklin and Diego, harvesting vegetables from her garden, exploring new hobbies, and being active.