The Amplitude Guide to Building a Successful Customer Retention Strategy

No matter what product or service you sell, you can reach a finite number of customers. Sure, your company may be nowhere close to its ceiling yet — but all the same, it’s wise to think about customers as a limited resource. After all, maintaining your relationships is more efficient than constantly trying to build new ones.

Easier said than done, we know. Customer loyalty has been trending downward. That means being “good enough” is no longer, well, good.

Customer retention programs are necessary for brands hoping to keep their customers around. Here’s how leading companies think about retention and strategies you can implement to improve yours.

What is retention, and why does it matter?

Customer retention measures the number of customers interacting with your brand and making repeat purchases. The more customers you retain, the easier it is to maintain your profit levels without running big acquisition campaigns.

In the ecommerce world, for example, retailers are losing more money than ever to acquire each customer. Successful retention programs make the most of your budget: Retention efforts are twice as effective as acquisition efforts for growth in SaaS.

Plus, loyalty pays off in the long term. Ecommerce loyalty program administrator smile.io found that the more customers shop with a brand, the more they spend. Building up customer relationships gives you more of a chance to upsell or cross-sell to customers, and happy customers are also excellent advertisers for your company.

4 important metrics that measure customer retention

You can use a few metrics to measure customer retention, depending on your business model.

Repeat customer rate: The percentage of customers who return to make a second purchase from your company. This metric works well for retailers or other companies that sell recurring products or service packages.

Churn rate: The percentage of customers who leave your company over a certain period. This metric is useful for companies that run on a subscription model because churn is easy to spot in the form of canceled subscriptions. Your churn rate is the inverse of your retention rate. You can track your churn rate in Amplitude or use our Churn Rate Calculator to easily find this metric.

Average purchase frequency: How often customers come back to your store. This metric works well for retailers who want to see how often the typical customer returns to buy from them again. It supplements your understanding of your repeat customer rate. You’ll likely calculate this metric over a long period to catch those repeat buyers in your numbers.

Customer lifetime value: How much the average customer spends for the duration of their association with your brand. Customer lifetime value helps understand the average worth of a customer relationship. Successful retention efforts will make this metric trend upward.

The first two metrics are the most important to determining your retention rate, so establish a baseline using one to measure the success of your retention efforts.

Strategies for improving your retention rate

Increased retention comes from delivering both value and memorable experiences. Customers will decide the value your company offers by comparing the quality of your products or services with your pricing. But many more factors play into experience, so here are a few strategies to improve retention.

Improve your site and app usability

A smooth online customer experience is a must for shoppers. In its Customer Loyalty Survey, PwC found that 51% of consumers would be less loyal to a brand with a subpar online shopping experience. Millennials and Gen Z were even more sensitive to this issue.

Amplitude can help you run a website user experience analysis to see where users are dropping off and help you A/B test your UI and UX changes. Improved usability is an ongoing process, so get started with this one ASAP.

Still, usability isn’t just about how easily your users can intuit their way around your site or product. Enable users to learn as they go. Command.ai makes it easy to add unobtrusive product tours to your onboarding flow.

Use customer data and feedback to guide your growth

Your app and/or website provide a near-constant stream of valuable data if you know how to take advantage of it. If you haven’t started with behavioral analytics, it’s time to unlock this powerful data source. Behavioral data will show you everything from browsing patterns to the most successful CTAs to products people consider but then navigate away from without buying.

Customer feedback gives you a way to know what people are thinking. You may choose to solicit responses via NPS or other surveys designed to answer big questions. Customer health scores are another way to get an overview of how your audience interacts with your brand. You can also catalog customer complaints and analyze them for commonalities.

Personalize (and personify) every customer interaction

Customers want brands to understand them, which is where personalization comes into play. Customers are happy to share their data if it’s used to provide better experiences for them. For example, customers told PwC they’d like discounts on products they typically use, loyalty programs with flexible rewards, and easy access to their preferred products and services.

Whether you want to do personalization at scale or focus on hyper-personalization, it starts with using a tool like Amplitude to collect customer data.

While personalization efforts are driven by automation, customers don’t want to be interacting with bots for complex or sensitive issues. Qualtrics found that 48% of consumers worry the AI boom will result in a lack of human connections at companies. When consumers are looking for trusted advice, whether on their health or a problem with their computer, they prefer human assistance.

Prioritize quick customer service responses

Show customers you care by responding ASAP. Sometimes, issues can’t be resolved right away, but it’s important to let the customer know you’ve received their question or complaint and are working on it.

Whether someone reaches out via social, email, chat, or even a phone call, make sure you have systems set up to promptly log the communication and set a timeline for when they can expect to hear back from your team.

Incentivize loyalty and referrals

It’s no secret customers like rewards, so encourage them to engage with your brand by offering loyalty programs and referral rewards. Merkle found that 79% of customers are likelier to do business with a brand because of its loyalty program.

Whatever combination of perks you choose (such as discounts, rebates, special offers, early access to products, or chance-to-win offers), Merkle recommends lowering consumers’ costs in return for their repeated business.

Build a strong customer community

Millennials and Gen Z value feeling like they’re part of a community, so set your brand up to provide them with one. There are a few ways to go about this:

• Brand Discord servers bring together like-minded consumers (and offer them exclusive perks) but require resources to moderate.
• Social media hashtags can invite consumers to interact with the brand and each other, especially if you share user-generated content for your fans to comment on.
• A storefront that functions as a “third space” invites customers and their friends to spend time in a branded location.

Building a community takes time and resources, so it’s not for everyone. You may simply cultivate your brand’s relationship with consumers through email and blog communications. While not as effective, regular outreach can help customers feel like a part of your company’s story.

This is especially true for companies that share a mission and values with their customer base, like outdoor staple Patagonia or sustainable and justice-focused ice cream seller Ben & Jerry’s.

Find and re-engage lapsed customers

Winning back customers is possible, especially because so many people switch brands due to prices. If you can catch a customer once their situation has improved or show that you offer better value than the alternatives they’ve been going for, you have a chance of winning them back.

Discounts are a popular re-engagement strategy because they address the pricing issue while reminding your customers why they loved your product in the first place. You might also get a second chance by continuing to educate lapsed customers on the new features, changes, and improvements to your product and service. Who knows — perhaps you’ve addressed a major pain point of theirs without knowing it!

Thoughtful re-engagement campaigns respect a customer’s time. Send them an email with the “can’t miss” updates and a personalized discount every other week or once a month. Going overboard may earn you an “unsubscribe,” which is harder to come back from.

It’s never too late to start your retention efforts

Each customer you have today is a customer you can keep around. Building a retention program from the ground up takes time, but when you start with low-hanging fruit like personalization and loyalty incentives, you can see a real difference in just a few months.

You don’t have to go it alone. Amplitude and command.ai offer a suite of tools to help you gather and understand customer behavior and sentiments. Understanding your audience is the first step to serving them better, so don’t wait to make use of your customers’ data.