If you are responsible for customer retention, and you don’t have 5-6 initiatives in-progress, you are headed down a dark road.
Say the customer retention rate goes up — you’ll have little to take credit for. And if it trends down, you’ll have to scramble to solve problems that take months to fix.
I’ll start from the basics and walk you through 9 customer retention strategies that every growing company uses.
What is Customer Retention?
Customer retention covers any effort a brand makes to keep existing customers. This can include work from marketing, sales, product, customer service, or a dedicated customer success team that’s laser focused on retention.
The fundamental goals are to ensure that existing customers are satisfied and maintain their loyalty over time. Every strategy in this post aligns with one or both of those core goals.
I think of customer retention as an active process rather than as a result, or simply tracking repeat purchases. It’s the specific set of actions you are taking to keep existing customers.
The reason companies care so much about retaining customers is that it’s profitable. Selling to existing customers costs less than acquiring ones. It’s also not a good sign if people who bought your product are choosing to shop somewhere else or use a different platform.
How to measure customer retention
Customer retention rate (CRR) is a simple, widely used metric for measuring customer retention and detecting changes over time. It tells you how many users, subscribers, or buyers stayed with you during a given period of time.
Here is the equation and three variables necessary to calculate CRR:
Customer Retention Rate = ((E – N) / S) × 100, where
- E: Customers at the end of the period
- N: New customers acquired during the period
- S: Customers at the start of the period
For example, a company has 300 users at the start of the month, acquires 35, and has 305 total users at the end, then their CRR would be 90%.
Is 90% a good customer retention rate?
Maybe — if you are coming up from 85%, sure, that’s wonderful. If you are dropping from 95% you have a fire on your hands.
Trending up is a good place to be. Beyond that, it’s hard to say. I can’t give you an exact percentage to shoot for. Look for benchmarks within your industry because it varies widely.
If I had to say something, I would say that a CRR of 75% or less means there’s probably strategies you could use to meaningfully increase the retention rate. Again, there are some markets where 75% is above average, and others where this number would be fatally low.
Analyzing customer retention
The overall CRR only tells you so much. With a few years of data, you can filter out a lot of the noise and accurately account for seasonality — but even then, looking at the overall average obscures issues impacting particular segments of users.
Here’s an easy example. Say you dig in and find that a particular demographic segment has really low customer retention rates relative to other segments. It could be nothing. But it could also signal that this particular group of customers isn’t getting what they need, or maybe they are not truly a good fit for the product.
Many companies segment customers into cohorts based on signup date. In online education for example, you might look at whether students who joined in September are more likely to complete courses than those who joined in January. SaaS companies look at cohort retention to get a better sense of how many users remain active over time.
Along with segmenting retention data, you’ll want to consider other metrics that shed light on what customers are really doing, and the impact their behavior has on your business.
- Churn rate
- Customer lifetime value (CLV)
- Customer acquisition cost (CAC)
- Referral rate
- Discount impact
- Purchase frequency
These are just a few of the many other data points you may want to bring in. For companies that lean into social media, customer engagement metrics might be really helpful to bring in.
1. Actively listen and adapt to customer feedback
Customers won’t always tell you when they’re unhappy. They’ll just leave.
That’s why it’s so important to proactively gather feedback through surveys, reviews, and direct conversations. These methods uncover pain points you might not even know exist, like frustrating website navigation to slow response times.
Different methods are good at targeting specific issues, such as:
- Standardized surveys: Research-backed surveys like NPS, CSAT, and CES can help you get a sense of where your product satisfies customers and where it’s falling short.
- Polls: Often quick, one-question surveys that help companies gather information at critical points during the customer journey, such as during checkout or after a customer service interaction.
- Exit surveys: Questionnaires and interviews with customers who are leaving, asking them why they’re canceling or unsubscribing.
- Focus groups: Small, moderated discussions with customers that surface preferences, emotions, and motivations that quantitative doesn’t pick up.
- Usability testing: On-site and in-app testing where users attempt to complete desired actions, which uncovers points of friction, frustration, and confusion in key workflows.
Collecting this data is important, but listening alone won’t help retain customers
Acting on feedback — whether it’s fixing a recurring complaint, improving service, or even just acknowledging concerns — shows customers you care. And the improvements you make based on what you learn will have positive downstream effects for your other customers.
2. Provide standout customer service
People appreciate great service. Quick, effective responses almost always enhance satisfaction and loyalty.
Conversely, providing paying customers with slow or low-quality service is basically just pushing them out the door. You either don’t know how to fix their issue or don’t care enough to solve it quickly — both terrible perceptions of your brand.
Providing excellent service is one of the most surefire ways to improve the customer experience. Make your brand available 24/7 on every channel your customers care about, and enable your employees to provide timely, helpful service.
Mistakes will happen. It’s all about how you respond. The service recovery paradox is a widely-observed phenomenon where customer satisfaction and loyalty actually grows after a service failure.
It could be a big error, but if your response is swift, effective, and communicated transparently, the experience can actually revitalize the customer relationship. It builds trust, it shows you really care, and the customer ends up with a more positive perception of who you are and what your brand stands for.
At the ultra-luxury Ritz Carlton hotels, all employees are allowed to spend $2,000 per day on service recovery without any sort of approval. This means frontline workers are empowered to solve customer issues immediately, which has resulted in many near magical word-of-mouth stories since the policy began in the 1980’s.
Your average customer may not spend $2,000 per night to stay in your hotel, but there is probably a number you could justify to empower your frontline workers to handle issues without the friction of communicating up the chain of command.
3. Design onboarding to engage and educate
Onboarding is the first real taste of what working with your brand feels like — it’s so much more than just getting users signed up. You want the process to feel smooth, welcoming, and intuitive.
The quicker people understand how to get value from the product, the better they will feel about using the product, how much they paid, and whether they are likely to keep paying.
To the maximum extent possible, personalize the experience for users based on their needs. Pushing resources or features that aren’t relevant to the customer signals that you don’t know what they need.
The positive onboarding experiences I’ve had included interactive tutorials and in-app instruction. Simple tooltip guidance and a few video walkthroughs made a huge difference for me when I was using Airtable and SEMRush for the first time. The quality of onboarding made me much more likely to open emails from them to check out new features.
Focus on finding out where there’s friction or confusion for customers during onboarding, and make small changes to better guide them.
4. Truly personalize customer experiences
Blasting out emails that begin with “Greetings {name}” is not the level of personalization that really contributes to customer retention.
Creating truly personalized customer experiences starts with collecting data about your target audience and figuring out what people want, what they care about, and most importantly, breaking the overall audience into meaningful segments that capture specific buyer personas.
From there, you will be able to offer these segments upsells and cross-sells that feel vital, along with resources that will help them engage more deeply with your product. Without data on your customers, it’s nearly impossible to offer personalized experiences that they will value.
This is an area where AI tools can be extremely helpful, both for surfacing trends in large amounts of data and acting on those insights. Personalizing content on dashboards and product recommendations on ecommerce platforms are two areas where AI already has a lot of traction.
Get creative with how you employ new tech to further personalize experiences for customers to keep them around. Gyms and fitness centers, for example, have leaned into the popularity of wearable tech to start offering personalized workouts and push notifications based on physiological data picked up by smartwatches and fitness trackers.
5. Implement loyalty programs
Loyalty programs are most effective when they go beyond basic discounts. My wife is a barber, and many of her clients stay with her for years. One reason? She gives each of them a free haircut on their birthday. It’s a small gesture, but it makes them feel appreciated — and the rest of the year, they tip generously.
I mention this because loyalty programs work best when customers feel genuinely connected to the brand or person behind it. It’s not just about saving money. People are more excited about upcoming deals, more likely to stay loyal, and more engaged when they feel seen and valued.
Consider the example of a small clothing boutique that offers loyal shoppers early access to new arrivals or seasonal sales. This makes customers feel like insiders and rewards them with the first pick of new inventory — without relying on heavy discounts.
Other common examples of loyalty programs include:
- Punch cards
- Birthday rewards
- Referral bonuses
- VIP or early access
- Points programs
- Members-only discounts
- Exclusive events or previews
As you build out your own loyalty program, you’ll find the mix of incentives and benefits that really resonate with your customers. A thoughtful loyalty program turns occasional buyers into regulars — and regulars into advocates for your brand.
The wildly successful shoe brand, Hoka, gets people to sign up with members-only free shipping. But it’s the emotional, aspirational, selling-the-dream message that builds the long-term connection with the brand.
6. Offer subscription services
Not every company can offer this, but where it’s viable and implemented well, subscription-based options are mutually beneficial. It’s predictable revenue for the business, and convenient for the customer.
For physical products, replenishment subscriptions hit the nail on the head for customer convenience, and companies can offer a discount knowing people are locked in.
For services, turning routine appointments into an annual subscription can be an exceptional way to drive retention. I called an HVAC company to service my furnace, and ended up signing for the yearly membership. Now I already have an appointment set up for my AC during the summer (instead of trying to book during their busy summer), and I get a discount on both services (which I need yearly, no matter what).
For companies with digital products that don’t currently offer subscriptions, introducing a tiered pricing model is one option to consider — essentially customers pay to gain ongoing access to premium features or exclusive content. This encourages consistent usage and makes it harder for users to walk away.
7. Reward customer referrals
Referral programs, where existing customers are incentivized to bring in new ones, create a win-win that strengthens their relationship with the brand.
The rideshare giant Uber, for example, offers free rides to customers for referrals. “Oh you don’t have Uber? Let me refer you.” Both people get a free ride, and Uber gets a new customer.
Gusto, the popular payroll and HR suite, gives existing customers a few hundred dollars if they refer a new customer. It’s as simple as entering their friend’s email address.
The word-of-mouth marketing, the new leads, the new sales — all of this is obviously good for acquisition — but these referral programs can strengthen loyalty as well.
By offering a reward with real value to your existing users for referrals, you create a two-way relationship with customers. How many other brands do they interact with who put money back in their account in the form of free services, products, and actual cold hard cash?
8. Help customers master your product
You want to make it as easy as possible for existing customers to educate themselves about your product so that they can get the most value out of it. It’s a challenge, because most professionals use dozens of different tools each week, each of which has updates, new features, and so on.
Keeping users up-to-date about your product and offerings is good, but a sizable portion of people are not going to look for help until they need it.
The goal is to provide on-demand educational content that’s easy to find. Helpful content, video walkthroughs, wikis, knowledge bases, support forums — you want to have a range of resources that customers can understand how to use immediately.
Without these on-demand resources in place, customers will search outside your walled garden, where they will find information provided by your competitors (most likely), and have the idea of switching to a new service planted in their imagination. A smart competitor will have persuasive messaging that appeals to the specific frustration that brought the person to that page.
9. Identify high-probability churn signals and intervene
All of the most common reasons people leave are preceded by trackable metrics:
- Unmet expectations: declining usage; increasing support requests or complaints
- Lack of engagement: declining feature adoption, usage, logins
- Poor user experience: increasing bounce rate, abandonment, or support requests
- Pricing: declining subscriptions; increasing subscription downgrades, complaints
Along with these quantitative metrics, you’ll want to capture some qualitative data that answers questions like: how well does your product meet customer expectations, how do they perceive the value relative to price, and what improvements do they really crave?
Armed with this data, you can figure out how to re-engage customers before they churn. Because you understand what they’re missing, you can offer something they want.
For example, a software company could reach out to a user who’s stopped using key features, offering a customized demo or 1-on-1 training to ensure they understand how to get the most out of the product.
For online retailers, one of the most common customer retention strategies is the abandoned cart email. This is a simple, largely automated flow that creates a personalized follow-up email with a limited-time discount on the abandoned items, encouraging the customer to complete the purchase.
Whether you’re on the verge of losing a $60 sale or a six-figure client, it pays to have a range of strategies to re-engage customers. A well-timed, thoughtful intervention shows your customers that you understand their needs, which improves retention and deepens loyalty.
