Last Updated On October 05, 2020 / Written By Chloe Henderson

Complete Guide to Customer Retention Strategies- 13 Examples

Businesses should focus their attention on customer retention strategies to increase returning shoppers and maintain sales. This enables retailers to build a stable client base to promote longevity.

Even when customer traffic and sales increase, there is no guarantee that shoppers will return to a retailer unless they are provided with unique experiences or incentives.

With customer retention strategies, companies can increase their generated revenue, returning buyers, and order value by tailoring customer service to shoppers' wants and needs.

First, management needs to clearly understand what customer retention means and the best practices.

What is Customer Retention?

Customer retention strategy refers to the various projects aimed to keep current shoppers returning, establishing loyal customers. Successful customer retention ventures will convert first-time buyers into repeat customers to maximize their lifetime value (LTV) and expand the consumer base.

Monitoring and investing in customer retention helps businesses understand their shopper's needs and satisfaction levels. Low retention is often a reflection of poor customer service or experience and enables management to determine how to improve their shopping journey.

Ultimately, focusing on customer retention benefits both consumers and the business in the long run by-

  • Lowering the Cost Compared to Customer Acquisition
A study by Econsultancy disclosed that 82% of companies found customer retention efforts to be more cost-efficient than customer acquisition. However, many businesses focus more on gaining new buyers rather than caring for their established customer base.

  • Increasing Average Order Value
Retaining customers is not only cheaper than expansion efforts, but it also increases the average order value (AOV). In fact, studies show that loyal customers tend to spend 23% more on orders than average shoppers.

  • Increasing Profits
Valuing returning customers can significantly improve the bottom line. Studies show that increasing customer retention by just 5% can increase profits by up to 95%.

On average, loyal consumers make up approximately 65% of a company's client base. Therefore, focusing on retention activities will yield a high return on investment (ROI).

  • Establishing Brand Ambassadors
An added incentive for investing in retention is that loyal customers tend to advocate for companies and product lines, becoming unofficial brand ambassadors. Increasing customer advocacy provides a free marketing approach that can boost brand exposure and sales.

Customer Retention Metrics to Monitor

There are several key performance indicators (KPIs) that reflect a business's ability to retain customers. However, there are a few metrics that management should focus on specifically, including-

1. Repeat Customer Rate

The repeat customer rate is the base of customer retention, measuring the percentage of customers that are likely to return after their initial purchase. The higher the metric, the more willing consumers are to return to a retailer. This is an excellent way for businesses to evaluate the impact of their retention efforts.

To calculate the repeat customer rate, management needs to know the number of buyers with more than one purchase and the number of unique buyers within a specific time frame. After determining these values, it is a simple division formula-

(Number of Customers that Purchase More Than Once / Number of Unique Shoppers) x 100

2. Purchase Frequency


The purchase frequency measures how often consumers are returning to a business. This metric is especially vital since 40% of a retailer's annual revenue is generated by repeat customers.

Management can calculate their store's purchase frequency by dividing the total number of orders by the number of unique customers within the same timeframe-

Number of Orders Placed / Number of Unique Customers


The higher the purchase frequency, the more times consumers are likely to return to a retailer.

3. Average Order Value (AOV)

The AOV refers to the average amount a customer spends during a single transaction. By comparing this metric to the repeat customer rate and purchase frequency, companies can better understand how much revenue is being generated from returning customers.

Using the same period as the previous calculations, management needs to divide their revenue by the number of orders placed-

Total Revenue Generated / Number of Orders Placed


The higher the metric is, the more returning customers spend on a single order.

Tips to Increase Customer Retention

Focusing on retaining rather than acquiring new customers saves businesses money, helping to maintain their bottom line. Therefore, companies should consider different strategies to boost customer retention.

1. Have a Mission Statement

Research shows that 64% of customers who feel that they have a relationship with a company said that sharing the same values is the main reason they patronize a brand.

Most consumers have an interest in goods or services that are relevant to them in some way. This is known as implicit egotism, where people gravitate towards people, places, and things that resemble themselves.

Therefore, businesses should make sure they stand for something to attract like-minded shoppers. By publishing a company mission statement, promoting community values, or addressing environmental issues, organizations can retain customers that share the same perspective.

2. Collect Customer Feedback


To discover what buyers think of a business or product lines, management can run customer surveys via emails or in-person transactions.

These surveys can request specific feedback, star ratings, or suggestions to improve customer experience and satisfaction. This makes customers feel that they are valued and their opinion matters.

3. Capitalize on a Product's Momentum

Improving a product line by creating new features or accessories is exciting for a company, but must be translated to the consumers. By advertising item innovations, businesses can pique the interest of loyal customers who advocate for a specific product.

This not only creates excitement for the line's release but promotes the feature's functionality to existing and new shoppers as well. Studies show that informing customers of new products increases recommendations and repurchases by 30%.

4. Educate Consumers

Retailers should aim to educate customers on products rather than solely focusing on selling. By informing buyers of how to avoid technical issues and maximize the use of a product, companies can increase a product's repurchase and recommendation rate by 32%.

The worst thing a business can do is leave customers uninformed and confused about how to operate a product. Companies can educate their buyers by-

  • Offering product demonstrations and tutorials in-store.
  • Sending item instructions via email.
  • Providing training sessions through customer support or sales teams.
  • Creating an online course so customers can self-train.
  • Building a community of product experts for reference.

5. Develop Customer Relationships

A strong business-customer relationship is built on open communication, not just sales. Companies can interact with customers via social media, email, and even review websites.

Management can designate a team that responds to feedback and complaints to ensure users that their opinions are heard and valued. This also gives businesses insight into consumer preferences so they can create personalized content.

6. Create a Personalized Customer Experience


Offering a personalized customer experience is what keeps buyers returning to a business rather than seeking products elsewhere. In fact, 79% of customers say they will share personal information in exchange for customized, engaging interactions.

By promoting the convenience of customer accounts, companies can get online shoppers to create a virtual login that will store their purchase histories, interests, and dislikes. With this customer data, marketing teams can develop exclusive promotions, discounts, and product suggestions based on specific buyer personas.

7. Offer Delivery and Returns

Order deliveries and easy returns are especially important to online shoppers. Many buyers will finalize or ditch an order based on shipping fees and the return and refund policies.

Therefore, retailers should provide free or low-cost shipping and clearly state their return process. The procedure should be easy to assure customers that they can exchange or returns items if needed.

8. Provide Excellent Customer Service


While businesses may assume customer service entails hefty investments to create elaborate shopping experiences, it actually reflects how well a company can solve shoppers' problems.

Before delving into a customer service project, retailers must first ensure that expectations are met and common consumer complaints are addressed. To do this, management can-

  • Provide Customer Support on all Channels - Customer support should be available on all sales channels a business uses. For example, a retailer with both a brick-and-mortar and online store should provide an in-store service desk and virtual chat for buyers seeking help.

  • Make Customer Support a Group Effort - Customer support teams should incorporate feedback from employees and shoppers to ensure they provide the best service.

9. Prioritize Quality Over Speed

While customers do prefer convenient and quick service, it does not trump quality. A study found that customers are nine times more likely to patronize a company if they provide courteous service and are willing to help shoppers. On the other hand, consumers are only six times more likely to be satisfied if a brand provides speedy service.

Employees should undergo training on making impactful customer interactions, addressing concerns, helping to find products, and completing transactions. While speedy service is ideal, it is only effective if all of the buyer's needs are met.

Rushing often leads to increased human errors, such as inaccurate order fulfillment, which can only decrease customer satisfaction.

10. Utilize Subscriptions

Companies can also increase customer retention by launching a monthly subscription model. According to a study, 15% of online shoppers sign up for at least one subscription to receive products. Businesses can offer exclusive items only available to subscribers or discounts on reordered products.

For example, Ipsy is an online beauty store that uses subscriber accounts to create customized monthly product bundles based on the customer's preferences and purchase history. This not only personalizes each shopper's experience but ensures satisfaction by utilizing customer data.

11. Establish Customer Loyalty Programs

Creating a loyalty program requires an in-depth look into customer needs and wants. A program should offer incentives, benefits, and convenience that shoppers would not otherwise receive. Many businesses have created successful program models by-

  • Giving Members a Head Start - Many businesses offer shoppers the chance to become loyalty members at checkout when customers are focusing on completing the transaction. However, consumers are more likely to join a loyalty program when it is automatically started for them upon their initial transaction.
  • Making Members VIPs - Keeping customers enrolled in a loyalty program is another challenge. Research shows that people enjoy programs with a hierarchy, such as VIP or "Gold" members. However, this scheme only works if there is a lower class within the system.
  • Assigning Members Positive Labels - A study by Stanford University found that people are more likely to participate in something if they are labeled with a positive characteristic. For example, addressing loyalty members as awesome or amazing can increase customer engagement.

12. Convert Negatives into Positives

While it can be discouraging to see online shoppers leave the website, persistence is key. The Business Insider disclosed that businesses can recover up to 60% of abandoned shopping carts by sending reminders.

Reminding customers via email that they still have an order waiting, gives shoppers the chance to return to their items where they left off.

13. Reward Loyal Customers


Businesses should recognize and show their appreciation for customer advocacy, whether for the brand or product line.

Companies can establish a referral program that gives customers discounts for every sale produced by a recommendation. Management can also monitor review sites and social media to publicly thank customers that post and rave about their business.


There are several customer retention strategies businesses can choose from, but there is no general way to value customers. Companies need to invest the time and effort necessary to develop an effective method to keep shoppers returning.