Marketers must focus on getting customers to stay, and not burn them out with untargeted promotions.

All marketers know that improving retention is an effective way of increasing profits and growing your business. But in today’s competitive landscape the retention marketer faces many challenges: creating the right touch points, presenting the right offers and using multi-channel to an advantage all require strategic thinking and a creative implementation.

Here are five retention strategies to help you maximize customer spend, reduce churn, and make right on your acquisition dollars:

1. Define your high-level lifecycle stages and build KPIs for each one. The basic tenet of retention is that in order to provide a loyalty-building customer experience we need to know who we’re catering to and why. Customers come in all shapes and sizes, and for any effective retention strategy, segmentation is a must. Start by differentiating between the basic lifecycle stages—Registered Only, New, Active, and Churned customers. When looking at these various segments, we can understand behavior patterns, retrieve meaningful data, and do a better job of communicating the right message at the right time.

For Registered Only customers—those who have created an account, signed up for a newsletter or provided their contact information in some other way but have not made a purchase—knowing the acquisition channel is of high importance, for example, whereas while dealing with New customers we’d like to know the size of first order and whether the purchase item was on sale. When communicating with a Churned customer, knowing the previous “quality” of the customer is crucial.

Defining the most relevant KPIs for each group will help us orient our mission towards the conversions we’re aiming at. (It’s much easier to reach your goals when they are predefined!). We’d like to convert Registered Only customers to New customers, convert New into Active, and reactivate Churned customers.

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Telling your apples from your oranges is a first and vital step for effective customer marketing.

2. Delight your best customers. According to our research of more than 200 brands, 60% of revenue in e-commerce is generated by the top 25% of customers. Each e-retailer should be able to identify the top customers who are valuable enough for the company to receive VIP treatment. (If you’re not using a predictive analytics model, you can use this hack to define your VIPs.) Once your VIPs are delineated, it’s vital to make them feel special.

Here are some of the tactics our customers use:

  • Pre order of new collections—try giving your VIPs early access to upcoming items or collections not yet available to the rest of the public; for trendsetters, this is a great bonus and a superb way to give special attention.  
  • Free shipping—shipping prices are one of the most common obstacles to a completed purchase. Waiving shipping costs is a sure way to show you care and promote more transactions.
  • Free returns—a counterintuitive finding of customer behavior is that customers who return more items are usually better customers, with a higher average lifetime value. Free returns will give VIP customers the freedom to try and explore your offerings and increase the chances that more of them will stick.
  • Invites to parties, pop-up shop openings, etc. —sometimes there’s just no substitute for real-life, face-to-face, brick and mortar shopping experiences. People love to be a part of the action and to identify with a group. This is a great way to create brand advocates.
  • Holiday gifts and seniority bonuses—show some love, either around the holidays, where bonuses and special offers will ensure that your loyal customers spend their holiday dollars with you, or as seniority bonuses (“Thanks for being a great customer for three years”), which will weave some tradition and continuity into the relationship.

3. Understand your customers’ experiences. Since we record and analyze user data, we may mistakenly presume that we know everything there is to know about the wants and needs of our customers: their overall customer satisfaction, the features they prefer, their user experience, and what we need to update or change. But there are ways to create a more profound understanding of our users’ experience. Qualitative data, which can only be accessed through direct dialogue with users, may serve as a well of actionable insights. The Customer Satisfaction Survey can give businesses deeper insights into the relationship between customers’ expectations and their actual versus desired experiences.

For example, you can send surveys after the first purchase to ask customers about their experience (the purchase process, shipping, delivery, item review etc.) You may also want to call customers who had a full return of their first purchase to understand why and try to compensate them. This qualitative data may highlight areas of the user experience that need further attention.

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4. Remarket to lapsed customers. Some customers who have made a purchase with you in the past might not have visited your website recently, nor have they signed for your newsletter. This means they have no idea about your new launches, new offers and new plans. Simply approaching these customers and telling them about your new products will rekindle your relationship with them and likely bring in more business.

Remarketing enables you to target ads to your existing, lapsed and potential customers who have previously visited your website or used your mobile app. This type of remarketing can display your ads on websites that are part of Google Display Network, on Google as they search with queries that are related to your products, on Facebook Custom Audience, and more. The idea is to find your customers where they are, and build their awareness for your brand without them having to actively go to your site or app.

5. Give power back to the customer. For years, the digital paradigm has been trying to get the customer to do whatever marketers want them to do, not necessarily what the customer wants to do. Now, as customers have more options available to them, we need to turn that around. Retailers can no longer be overly aggressive: they must be smart and put the customer back in control.

Customers can feel when they’re being taken advantage of or manipulated. So no matter what lifecycle stage they’re in, treat your customers with respect. For example, for your New Customers, create an incubation phase that emphasizes brand awareness rather than blasting them with untargeted and irrelevant emails. For Active Customers, offer choices—for instance, between a discount and free shipping—that will give them a sense of inclusion and control over the process. 

Marketers can no longer afford to simply churn through new customers and expect to go get new ones after they have burned their relationships with the old ones. Instead, marketers must focus on getting them to stay, even if that means trying to slow down their spend rate in order to keep them engaged over a longer period of time without ‘burning’ them too quickly. It may seem counterintuitive, but then again we never promised that marketing would always make sense.

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Retention marketing is a key tenet in today’s online consumer market. According to Adobe, an increase of 1% in returning customers will lead to an increase of 10% in overall revenue. A recent Bain & Co. survey suggests that a 5% increase in customer retention can lead to a profit increase of 25%-90%. By maximizing the value of every customer, you are posed to bring valuable growth to your company.

Optimove provides marketing technology designed to improve customer engagement.

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