Customer Retention Tactics: How to Keep Customers (Happy)

By Thom Harrison - October 7, 2024

Businesses today face the challenge of keeping customers in a fiercely competitive online world. With countless choices at their fingertips, consumers can easily switch to competitors offering better deals or experiences. Learn how customer satisfaction and loyalty can help your online business gain the edge.

What is customer retention?

It’s never easy — finding new customers. But no matter the type of business you run, it’s generally a lot cheaper and easier to hold onto customers you’ve got than it is to go chasing after new ones.

Simply put, customer retention is about building lasting relationships with customers who keep coming back. The idea is to keep your existing customers happy and engaged so they keep coming back for more.

Why? Because happy customers are more likely to stick around, spend more, and recommend your business to others. The most underrated marketing strategy isn’t getting new customers—it’s keeping the ones you already have.

Loyal customers are not only more likely to keep buying from you, but they’re also much more likely to recommend your business to friends and family, sharing their positive experiences. It works both ways — loyalty drives retention, and the better your customer retention, the stronger their loyalty becomes.

Each customer lost is like losing two potential customers: the one who left and the one they might have recommended.

More than just a strategy, customer retention is about numbers you can measure. Tracking key figures like customer lifetime value, repeat purchase rates, and customer loss, you can better understand their behaviour and identify where your online business could improve.

Two key figures to keep in mind are CRR (Customer Retention Rate) and CCR (Customer Churn Rate). A high retention rate shows your customers are satisfied and loyal. A low retention rate, meanwhile, suggests room for improvement. But more on that later.

Why customer retention matters

Depending on the industry you’re in, and which study you trust, it can cost anywhere in the region of 5 to 25 times more to bring in a new customer than it does to retain one. When you keep your customers happy and loyal, you’re saving money on finding new ones, making more money from repeat purchases, and building a stronger brand.

According to OutBound Engine, loyal customers are 5x times more likely to make a repeat purchase, 4x times more likely to recommend the brand to family and friends, and 7x times more likely to try new products or services.

It’s only more important for online businesses. Without face-to-face interaction, this makes it so much harder to build relationships. You’ll need every tool at your disposal to keep your “churn rate” — that is, your loss of customers — down to a minimum.

Just a small increase in customer loyalty can have a big impact on your bottom line. Returning customers spend 67% more over time than first-time customers, while acquiring a new customer can be five to 25 times more expensive than retaining an existing one, according to Forbes.

92% of consumers believe that recommendations they’ve received from friends and family have more impact than advertising. Added to that, those customers who are loyal to your brand are also 1.9x more likely to defend it against criticism!

Having said this, the stats will depend on the industry you’re in. Statista reports that media and professional services businesses are much more successful when it comes to customer retention CRR (84%) than, for example, travel and hospitality industries (55%).

✅Increased profits: Retained customers tend to spend more over time, leading to higher revenue and profit margins.

✅Decreased acquisition costs: Acquiring new customers can be expensive. Retaining existing customers helps offset these costs.

✅Improved brand reputation: Satisfied and loyal customers are more likely to recommend your business to others, doing more for your brand’s reputation.

✅Improved customer lifetime value: Loyal customers contribute hugely to the long-term financial health of a business.

15 customer retention tactics that do the business

Customer retention isn’t just a number. It’s a smart investment for small online businesses. If you keep customers happy, you can save money on acquiring new ones, make more money from each customer, and build a loyal fan base.

Fortunately, there are tactics that small online businesses can use to keep customers coming back for more.

1. Surprise and delight customers

Let’s put this one ahead of all the rest. To hold on to customers, the first aim is to go above and beyond expectations — to go the extra mile. Nice surprises turn one-time buyers into lifelong fans.

Whether it’s a little thank-you note in the package, an unexpected upgrade, or a cheeky extra with their order, these thoughtful touches can leave customers pleased. It’s all about creating special moments.

As they say: the best customer service is not just about meeting expectations; it’s about exceeding them.

2. Develop loyalty and rewards programs

Customer loyalty programs are now a key part of modern marketing. The idea is to reward repeat customers with perks, whether that’s discounts, special deals, and unique experiences. These programs create a sense of belonging and appreciation, greatly improving customer experience (CX) and boosting long-term growth.

One of the most common ways to do so is with a points system, where shoppers earn points for every buy or interaction. These points can be traded for rewards like discounts, exclusive deals, early access to sales, free shipping, and tiered rewards that encourage customers to spend more.

72% of global customers feel “brand loyalty” toward at least one company, and likely many more. By some estimates, 84% of consumers are more likely to stick with a brand that offers a loyalty program. According to Accenture, 65% of UK consumers say they’re more likely to make a purchase if rewarded with loyalty points (or travel miles).

Be sure to show appreciation to those who keep coming back by offering exclusive perks or special discounts.

3. Create customer profiles

The more you know about your customers, the better you can serve them. Gather details like shopping habits, preferences, or even what they pop in their basket on a rainy day. Armed with this knowledge you’ll be able to offer a personal experience that feels less like guesswork and more like good old-fashioned service.

4. Make it personal

Following on from the last point, this could be as simple as including a handwritten note with a package (“Let us know if you’d prefer a different size…”), or if you’ve invested in building customer profiles, you could go for something more personalised. Thoughtful touches can turn casual shoppers into loyal customers… and advocates for your business. Make each interaction feel personal. Everyone loves a bit of special attention, after all.

5. Streamline the buying process

Making the buying process as easy as possible for customers is key to boosting sales and keeping them coming back. When everything from browsing to checkout flows smoothly, customers are less likely to abandon their cart. This ease of use encourages them to complete purchases without hesitation, helping reduce lost sales.

An easy buying experience also leaves customers feeling satisfied and appreciated, which builds trust. If the website is straightforward and the payment process feels secure, customers are more likely to return. Positive experiences turn into loyalty, and loyal customers are often the best advocates for a brand, spreading the word and increasing sales.

6. Be mobile ready

Over half of internet searches now happen on phones. The slice is even bigger when it comes to shopping purchases. Google prefers mobile, too, giving better search rank to pages that have been optimised for smartphones.

So while the mobile experience is important to all website owners, it’s an absolute must if you have an online business.

7. Engage with social media and blogs

Keep the conversation going by sharing news of new products, deals, or updates. Use a mix of channels—email, social media, or even a friendly reminder in their inbox—so customers always feel connected. Keep it light, keep it regular, and they’ll stick around.

The 2023 State of Social Media Report highlights the importance of social media insights for businesses, with 88% of leaders recognising their value in retaining customers and offering outstanding customer care.

Use platforms like social media and blogging to connect with customers, share valuable content, and encourage conversations. This sense of community not only keeps customers informed but also makes them feel part of your company’s journey.

8. Make returns and refunds hassle-free

Make returns and refunds as easy and reasonable as possible, and you’ll not only win over customers but keep them in your corner. After all, who hasn’t been put off by the thought of a long, complicated returns process that feels more like trying to return a borrowed lawnmower to a grumpy neighbour?

Make everything as simple as possible—no awkward forms or endless emails—to show customers they’re valued. This is what most of the big gun online retailers do, after all. And when they know they can shop without worrying about getting stuck with something that doesn’t quite fit, they’re far more likely to come back for more.

9. Offer Buy Now, Pay Later

Buy Now Pay Later (BNPL) gives customers flexible payment options, so they can purchase goods without the full upfront cost. This can have a huge effect on sales, cutting down on “cart abandonment” and adding to a sense of customer satisfaction.

To make the most of BPL, team up with a reliable provider and make sure your customers know about the options you offer. Set reasonable spending limits to manage risk. And keep an eye on how BNPL is working for your business.

10. Get Feedback (and act on it)

Always seek out customer feedback—after all, it’s the best way to know how you’re doing. Ask them what they love and what could be better. When you receive their thoughts, don’t just tuck them away; take action. Making changes based on their input shows you value their opinions and that you’re committed to them.

11. Follow Up Regularly

Call in on customers after the sale with updates or requests for feedback. Touch base and listen to what customers have to say.

12. Create mailing lists and newsletters

If you’re running an online business, blog or any other kind of website, no matter what you do, you need a way to stay in touch with your visitors. And since almost everyone has an email address, building an email list is one of the cheapest, most cost-effective ways to do that.

It’s a fantastic way to keep in touch with your customers and share updates, promotions, or valuable content. Encourage sign-ups through your website, social media, or even during the checkout process.

Once you’ve got your list, treat it with care—send out regular newsletters that inform, engage, and make your audience feel special. After all, a little friendly communication can go a long way in keeping your customers coming back for more.

13. Deliver exceptional customer service

The customer is king. Train your team to provide great service every single time. A well-prepared team can turn a simple inquiry into a memorable experience. Make it easy for customers to reach out with questions or issues—whether it’s a quick chat on social media or a friendly call to the office. When they do, be friendly, quick, and helpful, treating each customer as if they were your own dear mate.

14. Stay current

Keep up to date on trends relevant to your industry and pay attention to the changing needs of customers. Staying in tune with the market helps you provide the products and services they’re eager for, and this is exactly the sort of thing that will keep your brand the top choice.

15. If all else fails: rebrand

If you’ve exhausted all the othe roptions but you still find customers are still slipping away, it may be time for a little revolution.

A fresh look or new direction can reinvigorate your brand and attract attention. Embrace change, listen to your audience, and redefine your identity to win back those customers.

Sometimes, a bold step is just what’s needed to breathe new life into your business!

How to calculate customer retention (and loss)

If you’d like to better understand how your customers are doing, there are three simple metrics to track: Customer Lifetime Value (CLV), Customer Retention Rate (CRR), and Customer Churn Rate (CCR).

Customer Lifetime Value (CLV) measures the total revenue an average customer generates during their time with a company. Since retained customers tend to spend more, a higher CLV is a strong indicator of success.

To calculate CLV, you’ll need to calculate how much a customer spends over a given period.

For example, if a customer spends £12 a month, their CLV over three years would be £432. Knowing this value helps determine how much to invest in acquiring and retaining customers.

Customer Retention Rate (CRR) shows the percentage of customers a business keeps over a certain period. A high CRR indicates that the business is effectively keeping customers happy and engaged.

On the flip side, Customer Churn Rate (CCR) tracks the percentage of customers who leave during a set timeframe.

A high churn rate suggests something’s wrong — whether it’s customer satisfaction, competition, or other factors. Having a high “churn” rate is a bit like filling up a leaky bucket. No matter how many new customers you bring in, if others are slipping away, you’re never really getting ahead.

To sum that up:

CLV shows how much each customer is worth over time.
CRR reveals how many customers stick around.
CCR tracks how many customers leave.

Of course, for smaller businesses or side hustle, you might be able to go on intuition to gauge retention. But as your business grows, it’s helpful to have precise numbers.

How to calculate CRR

Let’s focus on the positive with CRR to work out how well you’re keeping customers.

Imagine you start the month with 750 customers, lose 60, and gain 100 new ones, ending with 790 customers. To calculate your CRR, subtract the number of lost customers from your starting customer count, divide by the starting number, and multiply by 100.

1. Find the number of retained customers: Subtract the new customers (CN) from the total at the end of the period (CE). In this case: 790 – 100 = 690 retained customers.
2. Divide by the initial number of customers (CS): 690 / 750 = 0.92.
3. Convert to a percentage: 0.92 x 100 = 92%.

So, after the calculations, your Customer Retention Rate (CRR) comes out to 92%. This means 92% of your customers stuck have been retained during that period. A very healthy number!

Wrapping up

Nurturing customer loyalty is more of a journey than a destination. It’s all about making each customer feel valued and appreciated. Be that through exceptional service, personalised touches, and other tactics to create engagement, your online business can create a vibrant community of loyal customers. Don’t shy away from being a bit bold and adventurous in your approach. With a sprinkle of creativity and a dash of dedication, you can transform one-time shoppers into lifelong fans.