Loyalty and Retention

4 Expert Tips to Create a Winning Customer Retention Strategy

November 15, 2020
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Is there a brand or store that you enjoy buying from because they make you feel appreciated? If your answer is yes, then this business you like and respect has a good customer retention strategy in place.

Businesses all over the world dream of having repeat customers; that is, those who are loyal and who keep coming back.

But why are repeat customers so valuable? And how can you create an effective customer retention strategy that helps you turn one-time buyers into loyal customers?

The Importance of Customer Retention

Having customers who know you and buy from you on a regular basis or who renew their subscription month after month is what businesses strive for.

The tactic involved is called customer retention. And data shows that it's less costly to retain current customers than it is to acquire new ones.

In fact, customer acquisition can cost a business from 5% to 25% more in marketing and ad spend, whereas having 12% to 15% customer retention can increase sales by 55% to 70%, according to Brandongaille.

Moreover, data compiled by Marketing Metrics indicates that the success rate of selling to an existing customer is as high as 60% to 70%, whereas the success rate for selling to a new customer drops to 5% to 20%.

What Is a Customer Retention Strategy?

It's the strategy a business puts in place to generate and increase customer retention.

The customer retention strategy can involve several steps or core points that can be used separately or combined to build and increase retention.

In this article we will be tackling four main components that as business, you need to include in your customer retention strategy to get results.

But first, you need to understand a few more things about customer acquisition before we delve into how to retain customers.

Customer Acquisition versus Customer Retention

We've talked about customer retention. It's how you keep customers coming back every week or continually subscribe to your product or service.

On the other hand, there is customer acquisition. It's acquiring those customers in the first place.

Or if you're just starting out, it's those first customers you're trying to attract to your store so you can later retain them.

Customer acquisition is the process businesses use to attract and bring in new customers.

"The goal of [the customer acquisition] process is to create a systematic, sustainable acquisition strategy that can evolve with new trends and changes," notes HubSpot.

Customer acquisition forms the basis of your efforts to acquire customers. Without customer acquisition, there won't be anyone to retain.

"Acquisition creates a foundation of customers while your [customer] retention strategy is how you build customer relationships and maximize revenue for each one," explains Shopify in a blog post.

In other words, you have to acquire customers first then create a customer retention strategy to retain those customers.

What to Include in Your Customer Retention Strategy

There are four main aspects you need to understand and be aware of to create a winning customer retention strategy.

These are:

  1. Customer retention rate
  2. Customer lifetime value
  3. Retention through rewards and referrals
  4. Excellent Customer Service

Let's explore the first aspect of creating a successful customer retention strategy, which is understanding what a customer retention rate is and how to calculate it.

1. The Customer Retention Rate

The customer retention rate is the metric used to measure customer retention.

In other words, it's what you use to determine if your customer retention strategy and efforts are working or not.

To measure the customer retention rate, you'll need 3 things:

  1. A time period or time frame (to measure with). Could be weekly, monthly, quarterly, or yearly.
  2. Number of customers your business has at the end of the time period
  3. The number of customers acquired during that period.

Now that you have the 3 essential parts, here's what the customer retention rate equation looks like:

Customer Retention Rate = ( (# Customers at End of Period - # Customers Acquired During Period) / # Customers at Start of Period) ) X 100

Here's an example to clarify what this formula means:

If your online store or website gets 20 customers in January, and you get five new customers along with one customer as churn every month after that, then your monthly customer retention rate looks like this:

( (24 - 5) / 20 ) ) x 100 = 95% retention

Of course, you can calculate at any time period you want.

This formula is handy because it lets you measure the extent of your retention efforts within your customer retention strategy and plan.

It's important, however, to see why customers churn, or leave. Ask them questions about why they are quitting your store or business and use that information (if it's helpful) to retain your current customers.

2. Customer Lifetime Value

We've mentioned that a customer retention strategy is your long-term process to retaining customers.

But a key factor that we recommend including in this strategy is customer lifetime value (CLV).

Put simply, customer lifetime value is the metric companies, stores, and any forms of business use to understand and measure the "value" of their customers.

Let's say you have 100 customers. Do they all have the same value? Do they all make the same purchases and pay the same?

Probably not.

This means that each of these customers comes with a certain value to your business.

This value extends over a period of time. CLV is about measuring a customer's value throughout their relationship with your business.

Shopify explains CLV as a measurement of "the total amount of money a customer is expected to spend in your business, or on your products, during their lifetime."

That's why businesses need to understand and learn how to calculate customer lifetime value.

Once they know who their top buyers are, they can then use tactics to increase their customer lifetime value, which in turn translates into higher customer retention.

This all falls into your customer retention strategy.

Here's a quick summary of what you need to do. You want to:

  • Understand and calculate customer lifetime value
  • Find out which customer has a better value for your business on the long-term
  • Focus on those high-value customers and work on retaining them
  • Increase their CLV as part of your customer retention strategy.

3. Retain Customers through rewards and referrals

One of the coolest and least expensive ways to build customer retention is through loyalty and referral programs.

For starters, loyalty is earned BUT if you have a program, you can offer a host of incentives to both attract and retain customers.

Let me explain, a customer loyalty program is a program where customers collect points to get rewards and discounts. Businesses use loyalty programs to:

  • Build long-term relationships with customers
  • Build and increase customer retention
  • Increase sales through existing customers
  • Drive customer loyalty
  • Upsell to current customers
  • Attract new customers

As you can see, five out of the above six points support customer retention, which is the essence of loyalty marketing and subsequently loyalty programs.

There are some points to consider before creating your loyalty program like understanding your audience and what you can offer them in return, but generally it doesn't take long to set up a loyalty program within your website or online store.

Gameball's loyalty programs can be easily installed via Shopify, WooCommerce, Wordpress-based websites and other websites.

Another inexpensive tactic, also provided by Gameball, is referrals.

This is where you ask current customers to refer you to their friends and family.

With Gameball, you can reward customers for their referrals.

For example, if customer Andrew refers you to five of his friends, you can reward Andrew when his friends begin engaging with your store or when they make their first purchase.

You can then enlist Andrew's referrals and get them to refer you and so on.

The cool thing about referrals is that it's based on trust. Customers who trust you will refer you.

And it's all free marketing for your business.

4. Customer service for customer retention

Another effective tactic to include in your customer retention strategy is to offer stellar customer service and support.

Stellar is a big word by the way. What we mean is, offer customer support that helps your customers, doesn't keep them waiting long, and that answers their questions.

You can also ask them questions about the services and products you offer, or your website, or anything along the buying stages, so you can improve them, show your customers you're listening, and save future customers time and effort.

Customer support is a great way to retain customers.

We've used it at Gameball and it has worked wonders.

Customer Satisfaction with Gameball: A Quick Case Study

As I mentioned, one of the core things about using Gameball, since its inception, has been customer support.

We may not speak Spanish but we have made many Spanish-speaking customers happy by making their experience with Gameball an exciting one.

Here is what some of our reviewers on Shopify have said about our customer support:

customer testimonials for Gameball

A Customer Retention Story

Let me tell you about an experience I had with customer retention – or lack thereof!

I'm an avid bookworm so buying books forms a decent portion of my budget.

There was a bookstore that I constantly bought from because, in addition to tons of books, they had a loyalty program, where each purchase translated into a tick on my card and after 10 purchases I was entitled to a voucher. Yay!

My purchases meant I could – eventually – get EGP 100 off my next purchase.

So in a way, I was getting "rewarded" for my loyalty and purchases. Even if it was hard work getting there.

Then they decided to revamp their loyalty program.

Here's what they did:

  1. They cancelled the previous program with all the progress made and points acquired in it.
  2. They created a new program where you had to pay money to subscribe
  3. They cancelled a credit card discount they had made with some local banks along with all other discounts available.
  4. They didn't tell anyone. Only when you went to their store, you discovered the series of unwelcome surprises!

I can safely tell you that as a customer, I wasn't happy. And I stopped buying from them for several years.

Their prices were the same as any bookstore. They didn’t offer me an incentive to buy from them.

Not to mention, I wasn't happy about nearing my last voucher only to discover it went up in flames.

What this bookstore failed to do was retain me as a customer – and I'm sure others as well.

So, why should I pick them?

They may have had a customer retention strategy in place but it only focused on them. It didn't involve the customers.

Not only was it a bad strategy, it literally drove customers, like myself, away.

It's ok to want to change your loyalty program or make changes to the current ones. But once you stop thinking of your customers, remember your loyal customers, you can expect things to backfire.

That's why, if you ever want to change your loyalty program or how it works, or even create a new strategy, I highly recommend you think of your customers and their points first.


Having a customer retention strategy is essential for any business.

It will differ based on the type of business and customers you have to deal with.

But the essence is:

  • Provide value to get value
  • Use a loyalty program or a referral program or both to attract and retain customers
  • Measure and increase customer lifetime value
  • Get customers to talk about your customer support team

And bit by bit your customer retention efforts will be rewarded.

"You want to ensure the customers you worked so hard to acquire stay with you, have a great customer experience, and continue to get value from your products," says Shopify.

And we totally agree with that.

An important reminder about creating your customer retention strategy is to give it a bit of time before deciding if it's working or not.

We recommend giving it three months so you can measure the impact of your efforts and compare it to another quarter.

Are you ready to launch your customer retention strategy?

Don't forget: loyalty and referral programs can support your business big time. And Gameball has got you covered with both.

Check out Gameball and retain your customers today!

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