Three customer retention strategies that build long-term loyalty

It’s easy to get bogged down with all the changes happening in the marketing world (think: deprecation of third-party identifiers, changing consumer behavior, a get the picture) and forget priority number one, which is keeping our customers happy and coming back to our brand. So, let’s get back to basics and talk about a topic that can save marketers a lot of time and money, but can sometimes be overlooked: customer retention strategies.

In this article, we’ll:

  • Explain customer retention
  • Understand why it’s so important for marketers to get right
  • Explore different customer retention strategies & how they can build loyalty
  • Evaluate some criteria to consider when choosing the right loyalty partner to help achieve customer retention goals

What is customer retention?

Customer retention is the act of keeping customers loyal to your brand, influencing repeat purchases and preventing them from going to a competitor. Companies with high customer retention offer a product or service that provides enough value to customers for the price that they don’t feel the need to stray.

Marketers can (and should) employ customer retention strategies to strengthen customer loyalty and keep customers satisfied.Why is customer retention important?

According to Marketing Metrics, the probability of selling to an existing customer is up to 14 times higher than the probability of selling to a new customer. Not to mention, customer acquisition costs have increased by almost 50% in the past five years.

This is a huge opportunity for marketers. Of course, new customer acquisition is equally important to sustaining business—but focusing on nurturing relationships with existing customers that know your brand, are already interested in your products or services and are more easily persuaded to repeat purchases at a lower cost is extremely lucrative. Plus, retained customers are ripe to become loyal customers, not only buying your brand again and again, but also making an emotional connection and influencing those around them (like friends and family) to purchase.

How do you calculate customer retention?

You can calculate your success at retaining customers by solving for your company’s customer retention rate (CRR). This is the percentage of existing customers that stayed loyal to your brand and made repeat purchases over a set period of time.

To calculate your customer retention rate, you’ll need:

  • A fixed period of time you want to measure
  • The number of customers you had at the start of said time period (S)
  • The number of customers at the end of said time period (E)
  • The number of new customers acquired during said time period (N)

CRR = [(E-N)/S] x 100

Three customer retention strategies that work

1. Know your customers

The best method when it comes to how to retain customers is knowing your audience, and it all starts with data. Data is one of the most valuable resources in your arsenal when it comes to retaining customers.

The proliferation of access to first-party data (from website visits, emails, mobile apps and social interactions) allows marketers to really understand their customers. But it shouldn’t stop there. Marketers can augment this information with third-party data (like people’s interests, preferred travel locations, hobbies, basic demographics) for a holistic customer profile they can use to engage existing customers online and offline, to drive emotional connections.

We’re not the only ones that think a strong data strategy is key to retaining customers. In the recent Forrester Wave: Loyalty Service Providers, Q3 2021, Forrester notes “understanding the behaviors, needs, and motivations of loyal customers is a requirement for any successful loyalty strategy.”

When marketers use data and insights to lead their customer retention marketing, they’re also setting themselves up for long-term loyalty success with their customers.

Case study: Bar Louie

A powerful example of this is a recent win-back campaign by Bar Louie. Re-emerging from a corporate reorg and global pandemic, Bar Louie wanted to invite guests back to the table. Using Epsilon's Retention solution, we identified customers who had not been to the gastrobar in 7 to 24 months, allowing us to welcome them back with relevant messaging.

Then, we focused on developing different creative iterations that spoke to the Bar Louie customer—meeting them where they were, and encouraging them to return. And doing it in a privacy-centric way that resulted reactivating thousands of lapsed guests with a positive ROI.

2. Go omnichannel   

According to the 2020 Omnichannel Statistics Report, omnichannel strategies see 287% higher purchase rates and 13% more AOV compared to single-channel marketing strategies.

A successful retention marketing strategy begins by mapping your customer journey, then connecting with existing customers across all channels seamlessly (apps, mobile wallets, web, online and offline). That way, you’re meeting the customer where they are, and reward them in the currency of their choice—and judging by the 287% higher purchase rates, keeps them engaged and satisfied with your brand.

This is because an omnichannel strategy goes beyond transactional, one-dimensional discounts to instead offer personal customer experiences.

Case study: Dunkin'

Dunkin' is a brand that has successfully embraced an omnichannel strategy to drive retention and loyalty. Along with marketing across social, sponsorships, events, TV and more, a critical part of Dunkin's omnichannel approach is their mobile app. The app not only gives customers a more seamless, convenient experience by enabling online pre-ordering and multiple payment options for DD Perks® members, but it also gives the brand the opportunity to market drinks, deals and discounts to their customers.

During the pandemic, it gave them the flexibility to offer contactless checkout and curbside pickup which seemed to increase demand. On Dunkin's Q2 2020 earnings call, Scott Murphy, President Dunkin' Americas, said, "Perks active enrollment increased by nearly 110%," compared to last year. And for the 15th year in a row, Brand Keys named Dunkin’ the #1 brand for customer loyalty in the out-of-home coffee category.

3. Make emotional connections   

It is well known that customers who feel an emotional connection to a brand are far more valuable. According to PR Newswire, in some cases, those customers can spend up to twice as much than customers who just feel satisfied with a brand. Plus, they can have a 306% higher lifetime value (LTV).

While we saw people looking for more than surface-level connections with brands during the pandemic, this is sure to continue into a post-COVID world. Consumers still crave that trust and authenticity brands brought to the table in 2020. The Drum notes that when deciding to make a purchase, 81% of customers say that trust is an important factor in their decision.

In the 2021 Forrester WaveTM on Loyalty Service Providers, Forrester also discusses their Customer Experience Index (CX Index™), noting, “Data shows that three emotions bind customers to brands: feeling appreciated, happy, and valued. And emotions drive behavior, so how customers feel about the brand is as important as how they act toward it.” They recommend brands look for providers that incorporate emotional loyalty into their strategic frameworks and demonstrate use cases and strategies for growing emotional loyalty.

So, don’t think you can slack off when it comes to your existing customers. One of the keys to better customer retention is relationship building that you can further by creating emotional, trustworthy connections.

Strong customer retention programs can do this with:   

    • Surprise & delight with rewards (free gift or exclusive VIP promotion)   
    • Improve customer service through real-time, relevant 1:1 communications 
    • Boost satisfaction by anticipating customer needs
    • Engage customers on social media channels

Case study: Preferred Hotels & Resorts

Preferred Hotel Group's I Prefer is a prime example of a loyalty program that makes these emotional connections with guests across their 750 diverse luxury properties. To put their members’ travel concerns first during the pandemic, Preferred implemented an extension to their points expiration rules. As the travel situation changed, they regularly emailed guests who had to postpone bookings  with updates on which hotels were open, ultimately helping them to select an alternate destination when the time was right.

Epsilon's Loyalty & Messaging solutions help Preferred Hotels & Resorts keep up with their ever-expanding I Prefer program, and quickly react to the changing impact of COVID-19. Not only do they provide flexibility and speed to market to facilitate program change, but also work cohesively with a robust CRM to elevate their campaigns, and provide their customers with a top-notch digital experience that gives consumers a peace of mind about program benefits and upcoming travel plans. 

Remember: loyalty is an outcome, not a program

Truly progressive brands have evolved to look at ALL of their existing customers and new customers through a loyalty lens; not only those who are enrolled in their customer loyalty program. These innovators practice brand-level loyalty, using their customer retention strategies and tactics to create exceptional customer experiences, inspire passion and trust and engender long-term relationships to keep repeat customers.

Emotional connections then serve as the steppingstone to matriculate customers into a permission-based customer loyalty program. From there, the brand can glean the data and insights to deepen the relationship and deliver more personalized experiences that inspire a share of life, share of wallet, time and heart from your customers. Plus, people can feel confident that their privacy and preferences are being respected, which will keep them coming back. Customer retention, check!

Get started with the right partner   

In The Forrester Wave™: Loyalty Service Providers, Q3 2021, Forrester recommends that brands look for providers that hinge their loyalty strategies on emotional connections with consumers as well as provide qualitative and quantitative customer insights. The 12 providers in the report were evaluated based on current offering, strategy, and market presence.

Publicis Groupe (Epsilon is a part of Publicis Groupe) was named a Leader with the top score in the Current Offering category and received the highest scores possible in 15 criteria, including omnichannel loyalty strategy, data services and more


The Forrester Wave™: Loyalty Service Providers, Q3 2021

Download the full report to learn more