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5 Min. Read

What Is Retention? Definition, Strategies, and Benefits

What Is Retention? Definition, Strategies, and Benefits

Keeping your clients coming back for more is the secret to a long lasting business. It reduces your marketing spend, gives you recurring revenue and strengthens your bond with clients. Here is everything you need to know!

Customer retention is the simple concept that customers can repeat business with you. By having a solid customer retention of customer loyalty strategy, you can maximize your marketing. Ultimately you will get a higher lifetime value (LTV) per customer, which makes your client outreach more effective long term. 

This is the fancy way of saying if you can keep your current customers coming back, you’ll have a more sustainable business overall. 

This guide is a short dive into customer retention strategies with a cost-benefit analysis of each one. Let’s dig in. 

Here’s What We’ll Cover:

Definitions: What Is Retention?

Why Customer Retention Matters?

Top 3 Strategies for Customer Retention

Key Takeaways

Definitions: What Is Retention? 

For our purposes today we need to define three core terms: 

Customer retention - the ability to keep your customers coming back for more

Retention marketing - marketing to existing customers to keep them purchasing your products or services

Customer retention team - the department responsible for retaining customer loyalty over time. (This could be you if you are a freelancer or solopreneur)

Retention rates - your customer retention rate is calculated like this: 

First, define a period of time. 

Retention rate

= ((a - b)/c) x 100

a = no. of customers at the end of the period

b = no. of customers acquired during the period

c = no. of customers at the beginning of the period

Why Customer Retention Matters? 

There are a few professions and businesses out there that don’t have the gift of retaining clients. An example is wedding planners. In theory, you only get married once. Therefore you only need your planner once. Even if you did marry again, it is extremely rare for a couple to return to the same wedding planner to plan their second wedding.

So wedding planners have the constant act of marketing to new clients. It takes a lot of energy and strategy every year to gain more clients. 

Customer retention matters because it makes your business life easier. Retention marketing strategies are much simpler than reaching out to cold leads every sales cycle. This is also known as acquisition marketing. Keeping the customers you have helps you improve your product and get recurring income. 

Loyal customers are also more likely to be truthful with you as the brand owner. In the long run, they help you improve your services with honest feedback. 

Top 3 Strategies for Customer Retention

Subscriptions or Retainer Agreements

The “subscribe and save” button that Amazon has on its grocery products is what catapults Amazon to the top. It’s not the odd birthday gift or expensive camera you buy once every 5 years.  

Likewise, law firms have cracked the code of retainer agreements. These are long-standing contacts with clients that require a monthly retainer fee. In return for the monthly stipend, the client gets access to legal services whenever they need them. Wins all round! 

Subscriptions work for products. Retainer agreements work for services.

These strategies work because they lower the barrier to entry. The customer is locked into a sales cycle from the get-go. Simpler for them and for you. 

Create an Amazing Loyalty Program 

Loyalty programs seem like they are just for supermarkets and Burger King. As a small business, you can use loyalty programs creatively too. It could be as simple as offering a discount to repeat customers. Maybe if your company does at-home tire maintenance, you could offer every 10th appointment completely for free. Makeup artists could offer a complimentary beauty kit or a special birthday rate for existing customers.

The secret to a killer loyalty program is to think of what your customer really wants.

Nurture Your Customer Relationships

This is a big retention strategy. It may sound obvious but it goes a long way to really nurture your client at every step of the customer journey. It could be a follow up email message to get feedback on your product. It could be a message to wish them a happy birthday. It could even be establishing a strong bond with your clients by buying them a welcome gift. Even creating relevant content strengthens your relationship with clients. Spending time thinking of how you can delight your existing clients is never time wasted. 

Key Takeaways

Keeping your customers on board is the path to a sustainable business. It is possible to run a successful business without having repeat customers. As I mentioned, wedding planners do it all the time. But increasing customer retention rate is far more valuable to both the customer and us long-term.

Read more useful articles on our resource hub.