Customer Retention

A Complete Customer Retention Guide

In this customer retention guide, how we can build great relationships and improve retention in a cost-effective manner.

We all know the saying, it takes time and effort to build great relationships. And the happier your customers are, the more likely they are to stick around. It's like a first date vs a 10-year relationship. Without effort, time, and patience, you cannot have a successful 10-year relationship.

So how do you build great customer relationships that help improve your customer retention rates?

Reports suggest that 82% of companies state that customer retention is far cheaper than customer acquisition. Since a brand has already invested time and money in acquiring customers, it's only logical to retain them. And the only way to retain them is to deliver an exceptional customer experience. It is essential for brands to have a 360-degree view of the buyer’s journey and assess how customers think and feel about the overall brand. Several factors may affect the relationship between a customer and a brand such as how well a brand can resolve a customer issue or how frequently do you contact your customer with offers and deals.

With the dynamic shift in consumer behavior, brands are expected to be there at the right time and in the right place. And if a brand cannot fulfill the customer’s expectations, it is more than likely that they might risk losing those customers. In this customer retention guide, how we can build great relationships and improve retention in a cost-effective manner.

Table of Contents

What is meant by Customer Retention?

It can be defined as the set of activities that businesses perform to increase repeat purchases that ultimately lead to increased sales. The key objective is to retain as many customers as possible by taking necessary measures to incentivize the customers to make purchases. An effective retention strategy begins when a customer first comes in contact with your brand and continues throughout their journey.

The research found that customers view relationships with brands just like they do with friends. To build lasting relationships, it is essential to understand what your customers are looking for. With the advancement of technology, it is now possible to have relevant and targeted conversations with your customers to build rapport and customer loyalty.

Why Is Customer Retention Important?

Customer retention is more than answering your customer’s queries. It is about building a relationship that fosters communication and trust. With the changing customer expectations, it has become essential to deliver personalized experiences that help in customer retention. However, there are several challenges that marketers are still facing. Low repeat sales, high traffic, and low conversions are some of the common challenges. So how do you get customers to keep coming back to your store, and how to ensure you retain them?

Although most ecommerce marketers are aware of this, it is becoming increasingly challenging to combat customer churn. Modern customers expect and demand more in terms of timing, relevancy, and convenience. And it is essential for marketers to hold the other end of the bargain.

Customer retention not only measures the ability of a company to successfully acquire customers but also how successful they are at satisfying these customers. There are a few reasons why it is important:

Cost effective: We all know that retaining customers is cheaper than acquiring new ones. In fact, you'll be spending five times less if you can retain customers. In addition, it is 50% more likely that you can sell to an existing customer than to convert a new customer.

Loyalty: In today’s competitive market, brands of all sizes have turned to loyalty programs to stay on top of the game. However, due to the dramatic shift in consumer expectations, having a “earn and burn'' points system simply won't meet them. Customer loyalty programs must have simple journeys but meaningful destinations. Every interaction a customer experiences with your brand must be carefully planned to arrive at a meaningful destination finally.

Referral: Customers who are satisfied with your services are more likely to recommend you to their friends and family, thus bringing in new customers.

To nurture such relationships, we must look at the overall journey of the customer. Personalizing interactions has become a superpower for brands to breed meaningful relationships that ultimately convert. Having an innovative and experimental approach to building customer loyalty will not only help in improving conversion rates but also help in optimizing acquisition costs at large.

When is the Right Time to Focus on Customer Retention?

If you’ve started to acquire a decent number of customers, it is wise to start strategizing ways to keep them happy as a means to retain them. You’ve already spent a lot of marketing dollars to acquire these customers. So how do you get them to come back to your store?

Your focus on retention must start from day zero.

The key objective is to keep your customer happy the moment they start browsing your store. However, whether it's time to shift your focus on customer retention depends on where you are in your business lifecycle. A business that just started out is different from one that has been around for years. Here’s how you can identify which stage you are at:

Getting started: This stage is where you are new to the market and your key focus should be to improve brand visibility and acquire customers.

Growth and traction: This stage is where you have started gaining sales. In this phase, you should maintain a balance between acquisition and retention.

Established: This stage is where your sales are continually growing and the revenue is stabilized. In this phase, you should actively focus on retention

How to Measure Customer Retention?

It is largely dependent on four key underlying metrics. Let's find out what those are:

1. Average order value

Average order value can be defined as the average amount spent by a customer each time a customer places an order on your app or website. Analyzing this key metric allows you to understand your overall marketing efforts and optimize them based on how well it is performing.

To calculate this, divide the total revenue by the total number of orders

AOV = Revenue/ number of orders

Let's take an example. Let's say your total revenue was $40,000 in the month of September. And you had a total of 1000 orders that month. Your AOV would be $40000 divided by 1000 = $40. So September’s monthly AOV was $40.

There are several ways you can get your customers to spend more at your store. Some of the successful strategies can include:

Cross selling: “Hey Jessica, how about this pair of shoes with that dress?”
Upselling: “ Hey, would you like this pair of boots for only $40 more than the pair in your cart?”
Volume discounts: Hey Joey, you can now Buy 3 shirts for 30% off
Free shipping: Hey get free shipping on a purchase of $x
Coupons: “Hey, get $10 off on your next purchase”

2. Repeat customer rate

Repeat customer rate can be defined as the proportion of customers who have made at least two purchases in a specific period of time. The time frame can be any time chosen such as a week, month, quarter or year. It is an important metric to measure the overall customer experience and understand how much your customers find value in your product.

Repeat customer rate = number of customers with more than one purchase/number of unique customers

3. Purchase frequency

Purchase frequency can be defined as the total number of times a customer purchases in a given period of time. The greater the purchase frequency, the greater the chances of offering an exceptional customer experience. To calculate purchase frequency, you have to divide the number of orders by the number of unique customers in a given period.

Purchase frequency = Total number of orders (365 days)/ total number of unique customers (365 days)

It is advisable to analyze this data for a one-year period to have a broader understanding of your customer’s spending habits. There are several ways you can incentivize your customers to keep coming back to your store. Some of them include:

Win back campaigns - Run win-back campaigns on WhatsApp by telling customers how much you’ve missed them. Here’s an example

revive dormant customers

Rewards program - Running a loyalty program incentivizes customers to shop with you again. The more they buy, the more points they can earn in addition to the benefits that they can avail for being a member. You can run loyalty programs on WhatsApp to inform and incentivize customers to enroll. In this example, the brand informs the customer how much they need to purchase to become a member and all the added benefits they will receive once they become one.

4. Customer lifetime value (CLV)

Customer lifetime value can be defined as the total amount of revenue generated from a customer during the lifetime of the average business relationship. It is a metric to measure how valuable the customer is to your brand. It is also an important metric to analyze early signs of attrition. However, in addition to calculating customer lifetime value, it is important to take into account the customer acquisition cost. Both these metrics go hand in hand as measuring CLV is only valuable when you understand the actual cost to acquire the customer. For instance, if the CLV an average customer is $1000 and it costs more than $1000 to acquire them, then the brand may be losing money unless it takes into account the CAC. To calculate the CLV, you have to multiply customer value by average customer lifespan in a specified period of time.

CLV = customer value x average customer lifespan

(customer value = average order value x purchase frequency)
(average customer lifespan= sum of customer lifespans/number of customers)

What are Some Customer Retention Strategies?

Customer retention is an essential element in sustaining a business as it helps to understand how loyal and satisfied your customers are. It also helps save costs. In addition, loyal customers are 23% more likely to spend with you than the average customer. Let's look at some retention strategies that may prove effective for your business:

Deliver lasting impressions

We've all heard the saying “first impression says it all”. Well, it's not only applicable in daily life but also in business operations.

At the end of the day, we are serving humans and when a customer makes their first purchase, it poses an opportunity for marketers to make a lasting impression.

For instance, a customer lands on your advertisement on Facebook and clicks the send message button. It opens a chat thread on WhatsApp wherein the customer inquires whether the dress is available in size S. The bot responds and the customer further enquires about a bag that matches the dress. The bot helps the customer find the product they are looking for by asking questions to understand the customer’s needs.

It is crucial for marketers to ease the shopper’s buying process and help them find what they are looking for.

Collect feedback

One of the most effective customer retention strategies is to find out what customers think about your product. Feedback is an essential part of any business. Customer surveys are an excellent way to understand potential dissatisfaction and address it right away.  

Research by Harvard Business Review showed that customers who were asked for feedback were more profitable and less likely to churn than those who weren’t. Although asking for feedback may be impactful, customers don't always participate.

In such cases, it is crucial for brands to make it easier for customers to give feedback that doesn’t require them to invest too much time. You can use WhatsApp to set up buttons for customers to respond to feedback questions. You can also use star ratings to let customers rate their experience.

Quit spamming

Sending irrelevant message blasts is so yesterday. Modern consumers expect more and hence, it is crucial for marketers to send contextual messages. With the advancement of technology, it has become easier for brands to collect customer data and deliver personalized experiences based on them.

For instance, if a customer shops from your store on WhatsApp, you can send targeted messages based on their previous purchases. In this case, let's say the customer bought a dress from your store, you can use this information to send a shoe recommendation that matches the dress. This ensures relevancy and context and reduces your chances of getting blocked.

Your customers don't want to feel like just another contact on your list. To ensure that your customers keep coming back to your store, it is essential to make them feel important and valued. And having an engagement strategy that is relevant to previous interactions will not only ensure customer loyalty but also retention.

In addition to relevancy, you must also focus on the timing of the message. Before sending out any messages, you must be aware of the preferred channel of communication. Do your customers like to be contacted via email, WhatsApp, or any other channels of communication?

Recommendation & Personalization

Research suggests that 71% of consumers expect companies to deliver personalized interactions and 76% get frustrated when it doesn't happen. It's no surprise that modern consumers want better and more convenient experiences. The onset of the pandemic has made a dramatic shift in consumer expectations. From web and mobile interactions to store visits, consumers view personalization as a default setting for engagement.

An effective customer retention strategy must take into account shopper history, interactions, demographics, etc to ensure that customers keep coming back for more. In a research, it was found that when customers were asked to define personalization, they said that they associate it with positive experiences and being made to feel special.

To personalize your shopper’s experience you can send dynamic product recommendations based on shopper behavior, history, demographics and more. For instance, if a customer lands on your WhatsApp chat thread enquiring about a necklace, the bot can further send earring recommendations that match the choice of necklace.

Loyalty programs

Loyalty programs offer special incentives to customers in an attempt to attract and retain customers. There are multiple ways to run a loyalty program and make customers feel like an integral part of your business. Research suggests that  84% of consumers say they’re more likely to stick with a brand that offers a loyalty program.

In addition, 66% of customers say the ability to earn rewards actually changes their spending behavior. However, building customer loyalty takes time and strategic actions. A successful customer loyalty program needs to be at par with customers’ needs. You can segment customers based on purchase frequency, and spending rates and optimize loyalty programs based on them. You can also use loyalty programs to invite customers to

✅Exclusive events
✅New product launches
✅Early access to sales

A great example of this is Myntra Insider. Myntra’s loyal members can get early access to sales. Customers can purchase products at sale prices if they are a member.

Referral programs

It's every brand’s dream to convert first-time buyers to repetitive shoppers. But how do you get them to continue buying from you? And how do you acquire more customers from the ones that already shopped with you? First, it is essential to deliver an exceptional customer experience.

Next, leverage the power of referral programs. Rewarding existing customers for referring your brand to their friends and family is a great way to power word-of-mouth marketing and boost customer retention. In addition, referral programs leverage the power of social proof while bringing in new customers.

What are Some Customer Retention Examples?

Businesses are constantly brainstorming on how to acquire new customers. However, for any brand, it is essential to maintain a balance between acquisition and retention. It is critical to take this into account to ensure that you aren't losing customers faster than you are acquiring.

To improve retention, brands must look closely at the entire customer experience. Brands must know how their customers think and feel when they interact with them. Let's take a look at these customer retention examples to learn and explore methods to improve conversion rates while revolutionizing customer experience:

Offer a Seamless Omnichannel Experience

An omnichannel experience attempts to focus on the overall quality of interactions between a brand and its customers. To offer a seamless omnichannel experience, brands must focus on every aspect of the buyer's journey and make sure that it is connected across all touchpoints.

Let's take an example. A customer receives a push notification that their favorite wishlist items are on sale. They browse through the reviews on your website and decide to ask questions to your live bot on Facebook. After receiving the necessary details, he finally placed an order after going back home. Although the customer opted to purchase from one channel, all the other channels were connected so that the customer could pick up where they left off.

Instant Customer Query Response

Reports found that 73% of customers think that speedy support is the key to a good customer experience. With everything at our fingertips, customers want everything instantly. Whether it's a general product query or an after-sale support, brands must pay close attention to delivering responses instantly.

You can leverage AI chatbots to be available 24/7 and cater to customer queries almost instantly. In addition to speedy responses, AI chatbots are excellent at understanding what customers are looking for. However, if you can't be available 24/7 it is always better to let your customer know that you will get back to them as soon as you can. You can do this by setting up auto-replies on your chatbots.

For instance, Urban Company uses WhatsApp to allow customers to book services directly. This way the customer can have one on one conversations with the brand and receive responses instantly.

Personalized Conversations

The dynamic shift in consumer behavior has forced brands to level up to their A game. Customers want convenience, speed and relevant conversations while shopping with their favorite brands. Hence, irrespective of how amazing your campaigns are, it won't serve your brand unless it is personalized and relevant to your audience. In addition, spamming customers with irrelevant messages may result in you getting blocked.

Hence, a great way to improve customer retention is to personalize your shopper’s experience across their journey. For instance, Sephora uses AI chatbots to ease the customer’s buying process. Customers can raise queries, ask questions about products and receive responses tailored to their individual needs. The bot even asks specific questions to understand the customer’s pain points and helps them with the right products.

How to Create a Data-Driven Customer Retention Strategy?

Creating a retention strategy is easier said than done unless you have data to back up your strategies. Real-time customer data enables you to understand how your existing customers are interacting with your brand’s digital touchpoints such as website, and mobile application. In addition, it helps you implement hyper-personalized unique customer journeys depending on specific actions/events performed by the customer.

Capture Customer Insights with Unified Customer Profile

The core engine of Vizury Engage 360 is driven by first-party customer data captured and unified with our proprietary technology that seamlessly integrates with your existing marketing stack across channels, system and payment tools. This allows you to capture consumer insights by tracking 50+ attributes across customers’ demographics, intent, transaction behavior, Website/app behavior.

Hyper-targeted Campaigns with RFM-based Segmentation

Capturing a unified customer profile for your brand helps you to gain a deeper understanding of customers’ behavior with your brand and product. The Recency -Frequency-Monetary segmentation on your existing customer base allows you to create a better customer experience and build a more loyal customer base:

Recency: Analyzing and creating segments based on how recently customers visited a website/mobile application and what events/actions they performed enables you to create targeted campaigns to convert them faster. For example - If a customer has visited your website in last 24 hours and left an item in the cart, then sending a personalized message with offers/discounts on WhatsApp allows customer to take an action by either through website’s checkout page or completing the purchase on whatsapp itself.

Frequency- Identifying a segment of customers based how frequently they have made a purchase or transacted through your website/application and targeting them with personalized recommendations to upsell/cross-sell products helps you improve the CLTV.

Monetary- Analyzing customers’ past purchase behavior allow you to create segments based on the segment’s propensity to purchase high or low-value orders and launch unique campaigns to improve the AOV for the segments.

Drive Engagement with Hyper-personalized Recommendations

With a lack of personalization, brands fail to attract and engage customers consistently and end up losing a major chunk of revenue by not being able to drive repeat purchases. Data-driven customer experience technology enables you to recommend products that will drive conversion by capturing customer insights based on past browsing and purchase history.

Example A - For a customer segment that has spent more than 30 seconds on a product details page, our engine assigns a high propensity score to make a purchase of the specific PDP page. This allows you to target the specific segment with offers/discounts to drive conversions.

Example B - For customer segments that purchase frequently from a specific category, our engine assigns a high propensity score to refer other customers. This allows you to devise and launch loyalty programs targeting this segment and driving both customer acquisition and retention for your brand.

Improve Conversions with Seamless Customer Journeys on WhatsApp

With increasing competition across industries, it has become extremely challenging for marketers to use the same-old saturated marketing channels to engage with their customers. WhatsApp has clearly garnered the interest of both brands and consumers by being a simple, yet effective messaging channel that anyone across age groups can use to engage and converse with brands in real time.  

Effectively using WhatsApp as a channel requires brands to create contextual customer journeys, instead of sending promotional notifications. With Vizury’s engage360, you can commence the customer journey right where they left off in the website/app and guide them through the funnel by sending personalized communication on WhatsApp. This, in turn, helps drive engagement and conversions.

Optimize Marketing Campaigns with a 360-degree Custom Analytics Dashboard

Moving over and beyond tracking vanity metrics such as the number of sessions, Vizury Engage 360’s analytics dashboard is designed for your brand to track the impact of marketing and engagement campaigns on your top KPIs from ROI, and revenue to CTR/engagement.

engage 360


Building great customer relationships and loyalty cannot happen overnight. It is essential for brands to identify, analyze and understand customer interests to power conversations that convert. A relevant and personalized end-to-end customer experience is the best way to earn your customer’s trust and boost customer retention. Ready to improve your customer retention rates? Book your demo with Vizury today.

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