5 Customer Retention Strategies to Increase Profits and Grow Your Business 

According to Harvard Business Review, it costs businesses on average 5 to 25 times as much to acquire a new customer as to retain an existing one. That’s an important metric, because another analysis—this one from Bain & Company—finds that increasing customer retention by as little as 5% increases profits by between 25% and 95%. Fred Reichheld, author of that study, explains why: 

“Return customers tend to buy more from a company over time. As they do, your operating costs to serve them decline. What’s more, return customers refer others to your company. And they’ll often pay a premium to continue to do business with you rather than switch to a competitor with whom they’re neither familiar nor comfortable.” 

Most Companies Have Not Gotten the Message 

Clearly, companies need a smart customer retention strategy to increase profits and grow their businesses. It’s nevertheless the case that only 40% of companies (and 30% of agencies) focus as much on customer retention as on acquisition–and only 18% focus more on retention than acquisition. Perhaps that’s because acquisition comes more naturally to most marketers, or maybe the reason is a lack of understanding of customer retention best practices. 

Focus on Strategies That Work 

The first step to creating a successful customer retention strategy is to rethink the way your business prioritizes its marketing efforts, and expends its marketing budget. The second is to implement the customer retention strategies which have worked for other businesses, including the following 3: 

#1 Increase Client Satisfaction Using CRM 

Let’s say you’re an internet service provider. Your customer service center gets a call from a customer who’s lost his internet connection. Your rep solves the problem, and you think your work is done—but what if this is the 4th or 5th time in the past couple months this customer had the same problem? 

Customer relationship management (CRM) software is designed to track, monitor and organize all your customer communications, enabling you to provide superior customer service. If the ISP depicted above had been using a CRM for its reps to record and access details from every customer interaction, its service rep would have known that this was a protracted problem for this customer, would have been able to acknowledge (and apologize for) this fact, and would have been able to design a solution that left the customer satisfied and appreciative.  

Effectively leveraging a CRM solution not only means you’ll have access to details that can help you mitigate losing customers, you’ll also build trust and instill customer loyalty among those you retain. 

#2 Measure Customer Lifetime Value (CLV) 

Your customers are not all created equal. Some make frequent purchases, while others bought just a single item months ago. Some purchase high-ticket items, while others buy your least expensive products. These customers, based on their purchase history (among other factors), are of varying value to your business. You can measure their relative value by calculating a key metric: customer lifetime value (CLV), which basically represents the estimated net profit you’ll make over the entire course of your relationship with each type of customer.  

There are several formulas used to calculate lifetime value. For example, Shopify recommends an approach which incorporates recency (the last time the customer made a purchase); frequency (how many purchases have been made within a designated timeframe); and monetary value (how much the customer has spent within the same timeframe). Whether you adopt this or some other approach, calculating CLV will enable you to more effectively utilize your retention budget by providing appropriate perks for your highest-value customers. 

#3 Ramp Up Customer Service 

The quality of customer service your business provides matters–it matters a lot. According to a recent customer survey from Harris Interactive, for example, more than 85% of respondents said they would quit a company with which they had even a single unsatisfactory customer service experience. 

To ensure you provide the best possible customer service, make sure your service reps are fully trained and resourced, and capable of handling the lion’s share of customer problems on the first call, without the need to transfer calls to someone else within the organization. Avoid long hold times like the plague (more than 70% of customers say long hold times are among the most frustrating experiences they encounter). Finally, don’t mix customer service with sales. In one recent survey, for example, 56% of consumers said they resented companies that tried to upsell in the middle of a customer service call. 

#4 Offer a Loyalty Program 

If it makes sense to do so, consider offering a loyalty program that incentivizes repeat purchases and customer tenure. Your loyalty program can be used to reward VIP customers, send birthday specials, let customers earn points for referring new customers, and award your customers with extra points when they make a purchase during specific promotions. Loyalty programs also give you another reason to keep in contact with your customers, reminding them of unused points and upcoming promotions and opportunities to earn them and use them. 

#5 Give Them a Reason to Return 

Once you’ve captured your customers’ information in your CRM and have their permission to contact them with promotional offers, follow through with an email marketing strategy that includes emails following each new customer’s first purchase. There’s a variety of approaches you can use depending on what kinds of products and services your business offers, for example: 

Service Oriented Businesses Such as Spas, MediSpas, Salons and Clinics 

  • (Same day of procedure) Send an email containing helpful after-care tips and reminders. 
  • (24 hours following treatment) Send an email checking in to see if customer is pleased with results, and welcome them to call if they have any concerns or questions. 
  • (2 weeks following treatment) Follow-up with customer to see if they are still happy with their results. 
  • (1-3 months) Send “time for your next appointment” reminders and occasional emails with helpful tips, trends and product suggestions (tailored to each customer segment). 

Product and Product + Service Based Businesses such as Software and Manufacturing:  

  • (Same day as trial or purchase) Send an email outlining how-to-use tips and tutorials and product tours. 
  • (Approaching trial end) Send email offering customer incentive to purchase product or subscription before trial ends. 
  • (Monthly-quarterly) Send product tips, case-studies and white-papers based on your customers’ purchases and preferences. 

There’s a myriad of ways you can approach your email marketing to support your overall customer retention strategy. The point is to support your customer by anticipating their needs and questions, and addressing those needs with timely contact-points and helpful information.   


A smart, robust customer retention strategy is a critically important component of your marketing mix, but it’s not the only one. Your business needs a comprehensive, integrated marketing strategy that effectively attracts, converts and retains customers through proven best practices. Our team at McAllister Marketing is comprised of online marketing, social media, website development and design, SEO, and advertising experts, all working together to offer our clients successful tactics for growing their businesses. Our comprehensive approach includes strategies that help you attract, convert and retain more customers while building your brand presence. We’re super easy to work with and serve as an extension to your in-house team. Contact us today to learn how we tailor our services to your specific needs and objectives.   

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