What Are Customer Retention Strategies? (With Importance)

By Indeed Editorial Team

Published November 8, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Business growth is often the main objective of any company. There are many techniques to achieve this, including maintaining and growing the customer base. Learning about strategies that result in customer retention may help you in contributing to the goals of a business. In this article, we define and provide a list of customer retention strategies and discuss their importance.

What are customer retention strategies?

Customer retention strategies refer to policies that a company may implement to ensure that consumers continue to use its products and services. If they do these correctly, these ideas can keep buyers from going to competitor companies. There are two main types of strategies a company may use to retain customers. The first is to reduce the price of their offerings to the point where they're a cheaper alternative than a competitor, while the second is to introduce products or services that aren't available in the current market.

Related: 10 Customer Retention Metrics (With Meaning and Importance)

9 customer retention strategies that work

Retaining consumers is an important goal that requires effective measures. It's crucial that companies consider how new market trends can negatively or positively affect their performance when coming up with strategies to keep current customers and attract potential clients. It may also be a good idea to look at the company's market position because this can help them determine where to focus their efforts. Here are some effective retention strategies:

1. Improve customer knowledge of the brand

An effective method for retaining customers is to help them understand and become familiar with the brand. If customers understand what they're buying, they're more likely to be satisfied and come back to make another purchase. Some effective strategies to making learning about products and services easy include creating a website, eBooks, or detailed videos. If customers can find information and solutions to their problems related to a company's products, it may reduce complaints. It may also help build trust in the brand. This is because the information the company provides matches the results the customer expected.

Related: What Is Brand Marketing? (How to Develop a Good Strategy)

2. Maintain communication with customers

One way to maintain a connection with customers is by sending e-mails. If a customer gives their e-mail address, it's likely because of their interest in the company's products or services. Contacting current and potential customers via e-mail is often effective in keeping them interested in buying from the company.

To increase customer loyalty, it's important to constantly update a company's e-mail subscribers on the latest products and services that the business offers. It may be a good idea to send personalized e-mails that relate to the customer's interests. This may help them feel more connected to the company and may encourage loyalty to the brand.

Related: What Are Customer Interactions? (Benefits and Tips)

3. Provide incentives

Rewarding a customer after a purchase or a referral is a common customer retention strategy that many businesses employ. These incentives can be in the form of discounts, coupons, or free products. The company may also offer free shipping or delivery on certain orders. Incentives are effective because they often make the customer feel appreciated and valued. This translates to increased loyalty and a higher chance of repeat business. Repeat purchases also provide the company with more information about the customer, which they can use to build a relationship with them through personalized offers.

4. Encourage employee engagement

Employee engagement is one of the most important tools for customer retention. Interaction between consumers and employees physically or online may directly influence the customer's thought process and decision-making. If employees are friendly and helpful, customers are more likely to trust them. This may result in a higher conversion rate and a higher chance of repeat business.

5. Build a reputation and be consistent

Distinguishing the business from other brands in specific areas, such as the quality of products and services they offer and their customer service, may help to create and maintain a solid customer base. This also enables them to build a reputation that they can use to attract new customers. It's important to be consistent in all aspects of the business because consumers are more likely to trust a business that always meets their expectations.

6. Apologize when at fault

Making mistakes is always a possibility when running a business. It's crucial for a company that wants to maintain their performance and keep their customers content to implement a policy that involves apologizing to customers when they make a mistake. This may help establish a connection between new customers and the company and also strengthen the existing relationship between regular consumers and the business as it helps customers feel cared for by the business.

7. Make services convenient

A company that makes its services convenient for customers is more likely to retain them. If a customer finds it difficult to access the services a company provides, they're likely to turn to a competitor. To improve accessibility, companies often create or use a system or that facilitates easier access to the business depending on the type of service or product they provide and the needs of their customers. Examples of this include self-service kiosks, mobile apps, and online chat platforms for customer concerns and inquiries.

Related: Why Is Exceptional Customer Service Important? (Plus Tips)

8. Listen to the customers

Listening to customers and understanding what they want is a good strategy for retention and makes rendering customer service easy. To make this strategy effective, companies often encourage and facilitate the development of soft skills among their employees, especially those in the customer service department. Skills that may be necessary for them to improve include empathy, active listening, and assertiveness.

Businesses also try to make sure that customers are able to communicate easily with the company. They do this by providing a variety of ways for consumers to contact them, such as through e-mail, telephone, and social media. They may also make suggestion boxes available to customers to allow them to share their concerns or provide feedback.

Related: Customer Service Skills: Definition and Examples

9. Share testimonies from customer experience

An effective way to encourage consumers to purchase a product is by sharing testimonials from existing customers. Because there's often the presence of competition, it may be necessary to remind and convince even loyal customers that they made the right choice in purchasing the business' products. Companies may gather testimonials from satisfied customers through various means, including online surveys, social media, and word-of-mouth. They may share these on their website or in their marketing materials.

Importance of a customer retention strategy

Retaining customers is a vital aspect of business growth. Attracting new customers is often a more demanding activity in comparison to retaining old ones. Investing resources in retention strategies is of great importance and may influence a company's growth positively. Here are some reasons why retention strategies are important:

Results in free advertising from customers

Customers who trust the company and buy from it for a long time can easily promote a business and its products and services to other potential and interested buyers. This free advertising allows the company to expand their customer base, which may result in more sales and an increase in profit. Retention strategies facilitate this by ensuring that a company is able to meet existing customers' expectations.

Related: 10 Tips for Creating a Positive Customer Service Experience

Reduces marketing cost

Regular buyers generally require less marketing expenditure to convince them to keep purchasing. This makes retention more cost-effective in comparison to strategies that aim to attract new customers. Effective retention strategies enable companies to spend less on advertising and more on other areas of the business, such as research and development, which may result in better-quality products and services.

Related: What Are Marketing Techniques? (Plus 14 Strategies)

Increases profit

Customers who are repeat buyers may be more likely to spend more during their purchase. The reason for this is a customer who trusts the company and their products and services is typically more comfortable spending more in comparison to a consumer who's not familiar with the brand. This results in a higher profit for the company. The advantage of using retention strategies is that the company can maintain a customer base that keeps buying from them as long as they find value in the business's goods or services.

Facilitates improvement

One of the best ways to grow a business is by listening and learning from an unsatisfied customer. Paying close attention to customer feedback is very helpful in making products and services better. Customers who frequently buy products can easily notice areas that require improvement. With a good customer-service provider relationship that results from a company's retention efforts, customers are more likely to share their feedback and suggestions. The organization can then use this information to improve the business in various ways. These may include developing new products or services, improving existing ones, or making changes to business operations.

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