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Decreasing customer retention rate? Check out these 5 strategies to fix it
August 29, 2023
Obtaining new customers costs owners significantly more compared to retaining those that have already bought from them. Recent research has proven that one can save five times more by focusing on customer retention instead of acquisition. What’s more, “old” clients tend to spend 67% more than one-time shoppers and are more likely to buy after watching your ads or getting an email.
And while most companies still prioritize new customer acquisition over retention, we recommend switching your attention to establishing a strong connection with existing clients.
In this article, Depositphotos, one of the world’s leading platforms for stock images, videos and music, explains key principles behind customer retention and share some tried-and-true ideas on how to improve your customer retention rate (CRR) using visuals.
What is customer retention and how can one measure it?
Customer retention is one of the key business success metrics used to define how loyal your existing customers are. The metric refers to certain chosen timeframes and reflects how many clients buy from you more than once during a month, six months, a year, or any other period of time. The higher the percentage, the better for your business.
To improve customer retention, one should work with their CRR (customer retention rate). It is calculated using the number of customers you have at the start of a chosen timeframe (S), the number of customers you gain within the chosen timeframe (N), and the number of customers at the end of the chosen timeframe (E). The formula to calculate CRR looks like: [(E-N)/S] x 100.
Take into consideration that smaller businesses often have significantly lower customer retention rates that well-known market giants like McDonalds or Apple, some of which reach up to 95%. However, for some industries, including hospitality and travel, the median is around 55%. The general rule is: CRR between 35% and 84% can be considered a positive (given that your customer lifetime value is higher that your customer acquisition cost).
Why prioritize retention over new leads
Businesses can’t do without continuous new customer flow, however, without a proper customer retention strategy, they’ll spend increasingly more resources on marketing their products and services. On the contrary, your existing loyal client base is not just a source of planned profits for your business, but also a tool to introduce your brand to new customers in a low-cost yet effective word-of-mouth way. That’s why it is important to balance lead generation and retention approaches.
And while gaining a new client often means direct profit to your company, gaining a loyal one has the following additional advantages:
- Saving marketing efforts five+ times;
- Chances for selling more, compared to a one-time client’s cart value;
- Profit planning that makes business more stable and unlocks its market flexibility;
- Profit planning that makes business more stable and unlocks its market flexibility;
- Boosting brand and product recognition—by motivating loyal customers to proudly share their brand experiences with others;
- Customer insights—loyal customers are more likely to provide you with information about their purchase decision, brand experience, and personal background.
Brands aren’t the only ones looking for a long-lasting relationship with customers—customers are also interested in finding a company that will fulfill their needs for years and be something they can rely on anytime and anywhere. Honesty in communication, shared values, service flexibility, clearness, and reliability are things that help companies grow their retention rates. Some strategies might work for certain industries better than others; however, visual communication improvements (such as keeping your brand consistent yet modern across products and platforms) provide more chances for success.
5 easy-to-apply customer retention strategies leveraging visuals
1. Well-designed onboarding tour & support flow
The first interaction with your brand is decisive for a customer. If they feel confused, disoriented, or left out, they are unlikely to buy again. At the same time, if their first purchase is convenient and enjoyable, they will want to buy again.
Develop event-tailored email sequences your customers will receive after signing up and making a purchase. This communication should be brief and aimed at explaining how your site or product works. In addition, make your support team easily accessible for customers by placing “help” buttons and contacts at the top of the screen.
Do not forget about pop-ups and congrats letters related to first purchases or other website actions. In all cases, use visuals to help customers understand your messages fast. More insights here: 6 important tips to help develop your brand's visual story.
2. Emphasize common values
Make the positive impact of a purchase clearly visible so that customers feel proud of their brand choice. If the shared value between your company and clients is art and culture, support an initiative that preserves unique historical sites in your region. Another example: recyclable products or packaging if your audience is eco-oriented.
Collaborations with artists, opinion leaders, and other brands that your audience admires helps engage with customers and gain their loyalty. We described some cases here: 5 types of brand collaborations and why they’re crucial for effective marketing.
3. Reject a one-size-fits-all communication approach
Customer experience personalization allows brands get better ROI. So claim 89% of marketers who have chosen this strategy. So, what can be personalized? Product suggestions, additional services, discounts, website layouts, and email design are all objects of personalization.
To increase CRR, try to determine how your brand can be useful to a certain customer right away and offer a personalized solution using email channels, website banners, and pop-ups. After a first sale, suggest a different product to your customer—for example, something that is most often chosen by similar clients.
Adapt your promotional offers to customers as well. If they ordered expedited shipping, make it free on their next purchase. Use visuals depicting customers of similar age, gender, and nationality as your current client.
4. Well-oiled mechanisms of delivery, returns, and refunds—explained with infographics
Communication that happens after payment dramatically influences a customer’s decision to come back for new products, recommend a brand to a friend, or leave a negative review.
Make customer feel like you care about them when they face an issue with product quality or receive a wrong order (by proactively contacting them and offering a solution), as well as when it is critical for them to get a product by a certain date (by enabling them to track product delivery and controlling timelines). In other words, be a reliable brand in practice.
Use easy-to-understand infographics to quickly explain delivery and return processes to users, and make sure that sections dedicated to your services are accessible from your main page.
5. Refresh your digital layouts and product packaging
The high quality of your products and services, as well as your ordering or booking mechanisms, must remain unchanged over the years because they make you a trusted brand. However, it is possible and even sometimes necessary to update your visual communication in order to keep your client base in a state of excitement.
Experimenting with trending colors, fonts, and shapes is beneficial to a brand for several reasons. First, any changes, both visual and product, attract attention and can be a reason for additional communication. Second, even if your existing audience does not “accept” new designs or products, you can allow them to enjoy their favorites coming back to your storefront. Third, radical experiments in the field of packaging design or product offers can be limited in time, which will create hype over them. Either way, you win.
Customer retention expectations vary for different industries and business scales. In 2023, high CRR is typical for media and professional services, and is hardly reachable for restaurants and hotels. For small brands, the average CRR is no higher than 30%, while global brands are able to achieve more than 90%.
However, regardless of your business type, convincing old customers to buy again is much easier and cheaper than acquiring new customers; that’s why working on gaining customer loyalty is almost always a good idea.
An effective yet simple way to increase the retention of your customers is to revise your visual communications. We advise you to test different approaches: from seasonal campaigns and onboarding video tutorials to the personalization of services. Lastly, reduce the cost of testing your retention hypotheses by using stock images, audio, and video in your communication.