There is nothing like the thrill of closing a deal. When you achieve success, such as winning a new customer, the brain releases a powerful chemical called dopamine.

For a period, you walk on clouds as the pleasure and reward centres of the brain stay in overdrive. As marketers, this is what we live for. We create strategies, campaigns, and content to win the hearts and minds of new customers.

Success is addictive, so we go out in search of more wins, just to get the feeling again. But what happens after the thrill of landing a customer is gone? Customer acquisition is great, but what about customer retention? In marketing circles, we can’t deny that this part of the process is less appealing.

But are we right to think this way? Anyone who has been on a long sale will know that customer acquisition is often very hard. The good news is, there is a way to be just as successful—by giving customer retention the focus it deserves.

Research shows that the probability of selling to an existing customer is 60–70%. By comparison, the probability of selling to a new prospect is only 5-20%.

Customer loyalty keynote speaker Chip Bell nails it on the head,

Loyal customers, they don’t just come back, they don’t simply recommend you, they insist that their friends do business with you.”


What is customer acquisition?

Customer acquisition is the business of gaining new customers. As marketers, we walk an ongoing journey to find the best way to persuade customers to buy from us. The process never ends, because trends change and tastes change. What worked last year might not work this year.

Good customer acquisition involves a set of methodologies of finding and managing customer prospects and turning them into cash in the bank.



What is customer retention?


Customer retention is the ability of a company to keep its customers over a specified period. The goal of customer retention is not only to keep customers in your stable, but to encourage them to spend more. There are excellent reasons for marketers to focus on customer retention:

  • Acquiring a new customer can cost up to 5 times more than keeping an existing customer.
  • Increasing customer retention by just 5% can increase profits from 25-95%.

But there are more reasons. Emerging trends show that customers are more willing to switch to another company easily. American Express found 33% of customers will think about switching companies after just one case of poor customer service. U.S. companies lose $136.8 billion per year because of avoidable consumer switching. If you spend so much time and energy acquiring new customers, would it not make sense that you’d do everything possible to keep them?

A big part of customer retention is customer loyalty. One customer experience agency found loyal customers are 5 times as likely to repurchase, 5 times as likely to forgive, 4 times as likely to refer, and 7 times as likely to try a new line.

The outdoor company Patagonia is one example of a brand that has achieved incredible customer loyalty. They created a campaign to tell clients to only buy their products when they needed them. They even took out a full-page ad in the New York Times on Black Friday which said “Don’t buy this jacket”.

It sounds like brand suicide, but it worked. Behind the campaign was the idea of creating loyalty by showing a brand worth following. Patagonia’s brand message said,

We design and sell things made to last and be useful. But we ask our customers not to buy from us what you don’t need or can’t really use. Everything we make–everything anyone makes–costs the planet more than it gives back”.

It was a genius idea. Not only did they achieve more brand loyalty, but the financial results were staggering. In the four years from launching the campaign in 2011, sales went from $400 million to $750 million.


Why are customer retention metrics important?

Building a strong customer retention strategy is not always at the top of the list for marketing teams. It shouldn’t be this way. There is no point looking for all the dopamine hits of customer wins and then losing the same customers through poor retention strategies.

It’s quite common for companies to take their customers for granted. Sometimes they assume that the hard work is done. They think good service levels and decent pricing will keep customers on board. Studies show that growing companies concentrate on customer success. The top 25% of growing companies had the lowest customer losses. You’d see a clear link.


How to measure customer retention

There are many ways to measure customer retention. Here are three commonly used methods:

Net Promoter Score (NPS)

For the Net Promoter Score you’d ask your customer one simple question—would you recommend us to a friend or colleague? Customers answer on a scale of 1 to 10. Those scoring 1-6 are called detractors—they are not happy with your service and won’t recommend you. If a customer scores 7-8, we consider them to be passive or on the fence. Your promoters—and you want as many customers as possible to be promoters—will score you 9-10.

To calculate your NPS, subtract the percentage of detractors from your percentage of promoters. An example could be: 60% promoters – 20% detractors = 40%

Convert the percentage to points, meaning your NPS score is 40. We consider a positive score good. As customer loyalty changes, so will your score.


Share of wallet

Share of wallet is the percentage of a customer’s spend that is spent on you. The higher your share of wallet, the better your position against your direct competitors.

To work out your share of wallet, ask your customer to rank your brand versus your active competition. The ranking is any number out of 20. You want as high a number as possible. A low number means you are leaving money on the table against your competitors.

The industry standard says that there is a direct correlation between your score, meaning how they view you, and how much work they give you. So, if your score is 5 out of 20, you could assume that you have roughly 25% share of wallet.


Churn rate

Churn rate is the number of customers that stop using your services. If you have 1,000 paying customers and 20 have left, divide the total amount by the departing amount to get your churn rate. In this example, your churn rate is 2%. In many industries, 5% is considered to be a good number.

For more information on ways to measure customer retention, visit here.


Tactics marketers can use to increase customer retention

Put your mission at the forefront

Like Patagonia, use your mission to drive customer loyalty. The modern customer is motivated by a company’s purpose. If you have a big purpose that your customers admire, then you can get them to stick with you. Research shows that nearly 90% of millennials will switch from one brand to a competitor if it does not align its mission with their values.


Market to existing customers

Remember that your chances of success when selling to existing customers are between 60-70%, as opposed to 5-20% with new customers. It stands to reason that you’d put as much effort into your current customer campaigns as you’d put into your other marketing campaigns. Given those percentages, some would argue for more.

The advantage is that you already know your audience. Rekindle the fire and grab their attention, give them great offers, and measure your results.


Maximise your data

You already collect reams of data on your customers. If you don’t, you should start now. Maximise on this important data by finding out what customers need and want. How can you help them even more? You already have the inside lane against your competitors. Drive up your share of wallet by using data to market offers your customers can’t refuse.


Personalise your offers

An emerging trend is for brands to personalise their offers to customers. Nike shoe customers can select their own fabric, design, or colour. Draw customers in by showing them that you see them. If you offer a service rather than a physical product, there are many ways to personalise your customer engagements too.




Today’s consumers want to be seen. Take the time to understand who you serve and how you could serve them better. As soon as you recognise the value of customer retention, start to look at your customer retention strategy. If executed well, it may surprise you by delivering the highest marketing ROI of all your marketing programs.

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