Customer Retention Strategies: 5 Best Practices & 6 Strategies to Reduce Churn

Customer retention is the biggest opportunity – and biggest challenge – for businesses today.

While many companies focus on acquiring shiny new logos, acquisition is only a small piece of the puzzle. If you regularly acquire new customers but they only stay for a month or two, you won't build a long-term sustainable business (or good word of mouth for your brand) - no matter how low the cost of customer acquisition, you are in leaky bucket territory.

To reduce the acquisition burden, you need to retain your customers; and the first step to satisfied, brand-loyal customers is retention. Improving customer retention is especially crucial during times of economic uncertainty, when it is increasingly important to build a resilient business with a reliable revenue stream.

But how do you retain your customers? The key is to engage them at the right time, in the right place, and with the right message. Using smart targeting to ensure you reach the right people and integrated cross-channel campaigns to help you do the right thing when and where it's most effective, you can create loyalty programs that keep your customers engaged and satisfied.

Read on to learn more about customer retention: what it is, why it matters, and our top strategies and best practices for customer retention.

> What is Customer Loyalty?

Customer retention is the rate at which your business can retain paying customers over a period of time. Customer retention is important for any business because it not only measures its success in acquiring new customers, but also its success in satisfying existing customers. This makes it a crucial metric to measure regardless of the growth stage of your business.

Why a Customer Loyalty Strategy Matters

Most people think retention is crucial simply because it means you lose fewer users than you would otherwise. But a good loyalty strategy is actually one of your most powerful levers for growing your business by creating loyal customers and building valuable relationships with your customers.

"Loyalty can be more than twice as powerful as customer acquisition"

Research by Price Intelligently showed that a 1% increase in customer acquisition affects your bottom line by just over 3%. But improving your retention by reducing your gross churn by 1% extends customer lifetime value and increases your bottom line by about 7%. It's true: retention can be more than twice as powerful as customer acquisition.

Additionally, these current customers spend an average of 67% more than new ones. They're also more likely to refer you to other customers, which is one of the most effective ways to generate leads. Research shows that referral leads convert 3-5x more than leads from other marketing channels, have a 16% higher lifetime value, and have a 37% higher retention rate, making them even more valuable .

"By reaching customers with the right message, at the right time and in the right place, you can improve customer satisfaction and increase the likelihood that that user will stick around"

One retention tactic that works particularly well is lifecycle messaging. Lifecycle messaging is about reaching users with contextual, personalized messages that provide value based on their actual experience of using (or not using) your software. These messages are targeted and delivered across multiple channels, often as part of an orchestrated multi-channel campaign.

That means you can reach them where they're most likely to be, whether that's inside your app or product or outside. By engaging customers with the right message, at the right time, and in the right place, you can improve customer satisfaction and increase the likelihood that that user will stick around.

Best of all, to create these message schedules, you don't need a "retention hacker". All you need for a lean but effective customer loyalty program is a few hours to create a simple messaging campaign that will pay off big...