3 Ways to Increase Customer Retention, Boost Profits

We all know that 20 percent of our existing customers generate 80 percent of profits. However, the customer retention efforts of many companies still leave a lot to be desired.
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We all know that 20 percent of our existing customers generate 80 percent of profits. However, the customer retention efforts of many companies still leave a lot to be desired.


According to a report by the Harvard Business Review/Bain & Company, "increasing customer retention rates by 5 percent increases profits by 25 percent to 95 percent."

Additionally in a
study it was noted that:
  • Advanced customer lifecycle metrics are being adopted slowly with only 23 percent of marketers tracking the rate at which their customers churn, and under 40 percent tracking customer lifetime value.
  • 70 percent believe that their retention marketing efforts are only average, poor, or need improvement.

So, what should companies do to improve customer retention? Here are three actions that can help:

1. Know Your Customers

According to the Email Marketing Census, three quarters of companies (73 percent) carry out basic segmentation. However only 22 percent said that they currently implement "advanced segmentation."

It is essential that you adopt strategies to engage customers and prospects with communications that are relevant to their individual interests. It's time to move away from "mass personalization" (an oxymoron), to true personalization driven by the needs of individual customers.

Case in point; traditionally, the Kentucky Derby was marketing based on assumptions about their customers. They knew little about their email subscriber file, people's interests and what would make them want to engage.

To turn things around, they implemented a new strategy to learn more about their fans and cultivate engagement with the race and venue. The program included:

  • Identifying specific fan behaviors in order to develop three interest-driven databases for targeted communications.
  • Creating newsletters that contained content that would speak specifically to the three identified segment audiences.
  • Through call-to-action clicks, they were able to ascertain what part of the Derby experience was of importance.
  • Based on behaviors, consumers were constantly moved into more appropriate segments so they could receive more relevant communications.

As a result of these actions, the Kentucky Derby achieved an average read rate of 37.35 percent, an average clickthrough rate of 19.44 percent, and a reduced opt-out rate of 64 percent.

2. Develop Opportunities to Engage

When you make it a priority to understand what your customers want from your business and what is important to their personal or business lives, you can create authentic and powerful opportunities to engage with your brand and product.

UK fashion giant ASOS, voted the Awards for Excellence 2014 winner by the Marketing Society of the UK, developed a loyal following via retention marketing campaigns on Twitter and Facebook which generated excitement about the brand and cultivated a community experience.

The company used a social app to drive users to the website via a virtual "queue" which allowed users to gain access to digital sales previews. Points were gained by users engaging with the app and sharing their experience on their social media posts.

The app received 715,745 shares and was seen more than 1 million times, resulting a 32 percent increase in Facebook fans and 174,000 people joining the virtual queue. This resulted in an increase in traffic and conversions on the ASOS website.

The company is also very active on another social platform frequented by their target customers, Pinterest, where they generate an average 7,202 pins a week. In 2012 the company had 8,000 Pinterest followers; that number rose to 49,458 by December 2013; and quadrupled by 2014 to 220,784 followers.

3. Prioritize Personalization Strategies and Technology

A study published the Chief Marketing Officer (CMO) Council and Tealium, a marketing solutions provider, noted a strong link between improved marketing performance and a strong digital marketing technology plan. It determined that:

"...those with a formal strategy contribute more to overall revenue and value creation. 50 percent are able to achieve more targeted, efficient and relevant customer engagements, and 39 percent achieve greater return and accountability of marketing spend."

Gilt, a top internet retailer has invested in technology to deliver a high level of personalization and relevance that drives customer engagement and retention. Results from their efforts have included increased orders, decreased email and mobile push notification unsubscribe rates and higher repeat purchase rates.

When customers return to the company's home page they are presented with highly customized content based on that individual's past history. Variables that drive this level of personalization include previous browsing, purchasing, favorite brands and wish lists. Additionally, customers receive personalized "Your Personal Sale" offers. These feature the most relevant brands and products based on their shopping patterns and self-stated preferences. This allows Gilt to further refine their personalization algorithms.

Building on this success, Gilt recently took this approach to the next level with their Concierge Service, a high-touch and personal concierge program that captures customer's preferences at every touch point (phone, email, chat). Through this Concierge program, Gilt has achieved double-digit reactivation and a 10 percent plus an increase in additional orders from their best customers.


  • Increasing customer retention rates increases profits.Not only will you keep the customers you have but they will be more likely to refer your business to others. As reported in Luxury Daily, 20 percent percent of luxury sales are generated by word-of-mouth.

  • Understand customer lifecycle metrics.
    Marketers need to have a better understanding of their customer's journey - and why customers leave. You need to track the rate and reasons for customer churn, so you can better understand what is needed to increase retention.
  • Don't run your marketing based on assumptions.Through the use of well defined and accurately generated data you can develop effective segmentation strategies that will allow you to target the exact audience that is receptive to your messaging.
  • Ernan Roman is president of ERDM.
    ERDM conducts Voice of Customer (VoC) research to identify high impact Customer Experience strategies.

    Inducted into the DMA Marketing Hall of Fame due to results clients achieve with ERDM's VoC research driven strategies.

    Clients include IBM, MassMutual, Microsoft, NortonAntivirus, QVC and NBC.
    Roman is the author of Voice of the Customer Marketing and of the Huffington Post published blog, Ernan's Insights on Marketing Best Practices.

    Named by the Online Marketing Institute as one of the "2014 Top 40 Digital Luminaries" and by Crain's BtoB Magazine as one of the "100 most influential people in Business Marketing".

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