Retention Marketing: What It Is, Strategies & Examples (2024)

Updated Dec 2, 2022.

Marketing strategies for many businesses revolve around attracting new customers. Although this strategy has nothing wrong, the largest contributors to your business growth are your existing customers.

Customer retention is essential for running a successful business. Investing in and adopting effective retention marketing strategies helps you retain more customers and increase your customer lifetime value (CLV).

This article discusses the basics of retention marketing, including best practices and real-life examples.

Let’s get started.

What is Retention Marketing?

Retention marketing involves many strategies to achieve a successful and productive relationship with existing customers.

This marketing type is not only particular to eCommerce sites, as both big and small-scale businesses use this comprehensive strategy to entice customers and get them hooked on their products and services.

Customer Retention for Small Businesses Graph
Source: Eztexting

Usually, retention marketing strategies can be in the form of any of the following:

  • Loyalty programs aimed at rewarding the most loyal customers
  • Warm welcome emails to ease new customers into the onboarding process
  • Exclusive offers aimed at appreciating customer loyalty

Employing retention marketing tactics offers businesses the unique opportunity to engage customers for the benefit of increasing the profit made from each repeat purchase.

Retention marketing helps increase purchase frequency and the rate of repeat purchases. These two critical metrics are pivotal to determining if your customer's lifetime value is increasing or not.

Companies Attitude Towards Customer Llifetime Value
Source: 99firms

Why You Need Retention Marketing Right Now

Retention marketing strategies offer several benefits to exploit and incorporate into your business. Some of the unique reasons why you should use retention marketing methods for your business include:

1. Repeat Customers are Cheaper than Getting a Brand New Customer

Businesses spend more trying to woo more customers to choose their brand over time than retaining current customers.

The major disadvantage of marketing to new customers is that there is no guarantee that such customers will grow into loyal customers over time, as the marketing game is very complex.

Existing customers are more likely to complete a repeat purchase than new customers so long they end up on the side of satisfied customers.

Repeat Customer Stats
Source: Getuplift

2. Require Little Information

Another reason you should opt for retention strategies for maximum customer satisfaction is that you do not have to deal with the stress and insecurities that tend to accompany new customers.

Returning customers are already quite familiar with your eCommerce store, have already considered and weighed their options, and need little or no information, unlike new customers, as everything seems new to them.

3. Loyalty

Your customer retention rate is closely linked to your customer loyalty, which is quite visible among repeat customers. They are more likely to share your products or services with their contacts than new customers.

Customer retention using marketing automation
Source: Ocreative

Customer Retention Marketing vs. Customer Acquisition

Difference in Definition

Customer retention marketing involves all the strategies and tactics that encourage repeat purchases and boost customer retention.

On the other hand, customer acquisition consists of all the marketing practices geared at finding and securing new customers and retaining existing ones.

Customer Acquisition Costs by Industry
Source: Popupsmart

Essential for Business Growth

On the upside, customer retention marketing does not completely replace acquisition marketing which focuses on securing new customers for a business.

Your business cannot eliminate customer acquisition marketing. Although it tends to be more expensive in terms of value to the business than customer retention marketing, you can reduce customer acquisition costs (CAC) for more benefits.

These two methodologies are at their best and deliver the most results when used together. We are taking the ideology of a sport into play, which relies on defense and attack to get the desired result.

With your eCommerce marketing as the sport, your customer retention marketing would fall under the defense as it is the most conservative of the two.

In contrast, your customer acquisition marketing would be your team's attacking focal point; both are needed to dominate the marketing game truly.

Customer Acquisition vs Customer Retention
Source: Tabsite

Business Life Stage

Ultimately, what mix of your customer retention and acquisition marketing methodology would be determined mainly by what life stage your business finds itself.

Retention would not affect new businesses as you have no active customers and must focus extensively on customer acquisition.

When you have gained a significant customer base, you can begin to chip in more on customer retention marketing. You can measure customer retention and acquisition.

Best Retention Marketing Channels

Effective retention strategies use specific channels to boost retention. No perfect or laid down approach guarantees successful retention marketing.

The channel is mainly chosen depending on the size, the industry, and your business's target market. It plays a massive part in determining if your retention marketing and growth strategy will succeed.

Channels Marketers Use for Customer Retention
Source: 99firms

Some of the best retention marketing multiple channels to consider include:

1. Email

Email marketing is one of the surest channels for retention marketing. It has a relatively comprehensive extensive cover to reach a large number of your customer base concurrently.

This marketing type works by first collecting customer data, including their email addresses, and sending them regular messages and information bulletins about your business to their box.

Depending on how your online business is structured, you can use email campaigns as an effective follow-up mechanism or generate customer feedback.

Rating by marketers on the effectiveness of digital media channels
Source: SmartInsights

2. Pay-Per-Click

Pay-per-click is a more direct marketing channel designed to target your customers and increase retention.

This marketing channel works on a 30 days window after a customer has made a successful purchase by sending them ads about the product they purchased or something similar to encourage repeat purchases.

You can use your rich data about your customers and active leads from your long-term CRM system to enhance your pay-per click (PPC) campaigns

3. SMS

SMS marketing is another retention marketing opt-in channel with a relatively higher open rate than email but is more suspicious by customers than routine email campaigns.

Access to a customer's private line requires you to show a high level of restraint and respect in the kind of information you send and the regularity of the SMS sent out. You do not want to come out as a burden to your customer.

Making your customers feel loved and building an emotional connection through periodic check-in messages should not be at the expense of your customers. Access to a customer's line can come in handy in building relationships with lifetime value.

SMS Marketing vs. Email Marketing
Source: Textedly

4. Social Media

Social media as a channel is designed to build successful relationships. Taking your retention marketing strategies to social media is a sure way of turning your existing customers into your brand followers and, ultimately to, brand loyalists.

Selecting the Right Social Media Channel for Your Business
Source: Socialpilot

5. Push Notifications

Push notifications are a great reminder for your customers on why they should revisit your business or make a repeat purchase.

As effective as this tool, you need to use it with a significant level of restraint to avoid customers labeling your notifications as spam and ignoring them.

Push Notification Engagement by Industry
Source: Andrewchen

Types of Retention Marketing Strategies

Retention marketing strategies are essential to every online business, especially eCommerce stores. They may be complex or straightforward, but their nature does not determine their effectiveness.

Realize that your business would not be able to run every available retention marketing strategy without it taking a toll on your business.

The ideal thing is to have a breakdown of all the customer retention marketing strategies available to your business. Narrow down the list based on the effectiveness and likely result of these strategies and go for the best option.

Some standard and widely used types of retention marketing strategies include:

1. Email Marketing Automation and Newsletters

Email marketing allows you to learn and gain from your previous marketing campaigns with a clearer and fine-tuned message for your business audience. After collating the relevant customer data, you can send the perfect tailored message to your customers at the right time.

Email marketing automation affords you the necessary information on the specific kind of email your customers would be most inclined to open. If they subscribe to your email newsletters, you can offer them discounts when they show signs of a potential purchase.

Here's a brief checklist of what to include in your newsletter
Source: Brafton

Segmentation is a crucial part of your email marketing automation. It would be best if you kept an eye on your retention email campaigns for list segments and new segment additions like additional content or promotions to spice up your newsletter.

2. Loyalty Programs

Loyalty programs are structured to reward loyal customers for brand loyalty. You need to recognize that they chose you from the numerous competition options available. Customer loyalty programs work by showing customers you care and value their continuous patronage.

Showing appreciation through little tokens and incentives helps build relationships that ultimately transform from the regular business and buyer relationship to a more personal brand and friend.

A referral program to reward your customers when they introduce new people to the brand is essential. Your loyalty program improves your business's value proposition to your customers.

Two-sided referral programs ensure both the business, the sales team, and the customers who introduced new potential customers all benefit a thing or two from the arrangement.

3. Multiple Channel Communication Options

In a business arrangement, communicating with a customer should not be restricted to what the business has pre-installed. You must be open and flexible in letting your customers dictate the most suitable communication options.

Communication is two ways, and you need to ensure the options available to customers are easily accessible and conducive for relationships to be formed and flourish.

Email, SMS, and social media are among the most widely used communication options to keep in touch with customers. They offer comprehensive and easily accessible coverage as customers can access them from the comfort of their fingertips.

The good thing about these communication options is that they all provide room for customer feedback, which is needed to retain existing customers.

Multichannel vs Cross Channel vs Omnichannel Marketing
Source: Clevertap

Retention Marketing Best Practices

Retention marketing strategies only work best if implemented in the proper framework and structure, as using a retention marketing strategy is not a guarantee for success.

The best practices to take note of when using retention marketing strategies for maximum results include:

1. Avoid Stalking Users

Messaging anyone just because they showed significant interest in your brand is the wrong way to retain customers. You need to ensure you seek and have gotten explicit consent from users before listing them among your list of customers to be in regular communication.

The fact that a user entered their email address or contact info required during purchase does not give you the room for spamming them with emails.

Communication is a two-way mechanism. You need to ensure users are okay with the idea of getting regular messages and communication bulletins from you before adding them to your broadcast list.

2. Respect Customers Breakup

A breakup is a situation that is bound to happen at a point in time during your interaction with customers. All your retention strategies should be geared at minimizing its occurrence, but it is inevitable at some point.

As a business, you need to understand that not all customers will stick with your brand. Some will opt for your fellow competition despite all the marketing efforts you have thrown your way.

You have to deal with customer breakups in the most mature way possible. Distance yourself and remove them from your broadcast list when you have identified them.

3. Feel Free to Experiment With Strategies

Often, your first attempt at a retention marketing strategy might not go on as expected, or the channel chosen might prove ineffective for your business needs, and if this is the case, there is no need to panic.

You might need to run out your entire list of strategies before you decide on what approach best fits your business and delivers the most result.

Try out all the available retention marketing channels with your users and decide on the one that offers the best experience and is most used during the experimentation phase.

Your final choice of retention marketing channel and strategy should resonate the best with your users and generate the most engagement for your business platform.

4. Monitor the Performance of Your Retention Marketing Performance

Several software systems and processes exist to help businesses better track the performance of their retention marketing strategies.

With the proper structure, you can know what factors brought about the success of your retention marketing strategies to guide in the future when there is a need to implement similar strategies.

For instance, if your customers churn decreases, you should want to know what factors contributed to this decrease and note them to replicate the same feats later.

Your vital metrics, such as customer lifetime value, repeat purchases, and referrals, should be the basis for monitoring your retention marketing performance.

5. Give Out Incentives

Deciding on a retention marketing strategy and leaving it to play out independently without complimenting them with necessary incentives to keep your customers loyal is not enough.

Incentives given out to customers must be designed to deliver the most value in real terms, as it is one of the ways of building customer loyalty to your brand.

By reducing the focus of your business from the sales aspect and diverting the focus on customer satisfaction, you are on the right track to getting the reward for your money spent on retention marketing.

Real-World Retention Marketing Examples

Retention marketing has a lot of practical examples in the real world as its usefulness resonates across many businesses that have seen reasonable success from incorporating their strategies into the business.

Some retention marketing examples in the real world include:

1. Instacart

Instacart - Curbside Pickup Stay on schedule and on budget

Instacart is a practical example of an online store that uses successful email campaigns to incentivize inactive users to reinstall the apps and reconsider their brand through free delivery and discounts to lure inactive users.

Besides their email campaigns, Instacart uses surveys and several feedback options to understand why users abandoned their app. With this information, they devised practical solutions to counteract the identified issues.

2. Airbnb

Airbnb - Anywhere, Any week, Any guests

Referral-based retention marketing campaigns are pivotal when the need arises to generate high-quality leads either through two-sided referral programs, user-generated content, or social endorsements.

Airbnb has discovered the efficacy of using referral-based retention marketing campaigns in its operations to drive customer retention. It readily affords new users incentives in rewards when they recommend new users to their app.

Mutual incentives have proven mainly instrumental for Airbnb through its reward mechanism for current users to acquire new users.

3. MyFitnessPal

MyFitnessPal - Fitness starts with what you eat

The MyFitnessPal app allows users to track their calorie intake and log their workout sessions through its simple user interface and food database.

Identifying the importance of onboarding as an effective retention marketing strategy, MyFitnessPall designed and equipped its app with an onboarding process to encourage new users to keep a comprehensive log of their calorie intake and daily workout routine.

With this, new users can readily experience the ease of counting their calorie intake via the MyFitnessPal app as accurately as the information they turned in.

More customers are gearing towards a personalized onboarding experience in today's world, and MyFitnessPal has identified this crucial factor.

Rather than going through the routine video set-up of how to use the platform, they offer a step-to-step guide to users on how to set up and key in their relevant information.

4. The New York Times

The New York Times

During the COVID-19 pandemic, The New York Times app offered free downloads and accessible information to users without needing a prior subscription.

As part of its marketing retention strategy, The New York Times displayed its credentials as one of the best and most prestigious news outlets to lure customers into patronizing their premium memberships plan.

Non-subscribers also had on display on their app an in-app message that counts down the number left of their free articles per month, with this strategy aimed at enticing free users to buy into a subscription plan to keep enjoying a steady inflow of news.

Effectiveness of Retention Marketing

Ultimately, the effectiveness of your retention marketing strategies depends on several features, such as the product or service you sell, your target market, the kind of channel or multiple channels you use for your retention marketing, and a host of others.

For example, coffee would have a higher purchase rate in the average household than a dishwasher; thus, using the same retention marketing strategies and channels would not guarantee you the same result in both.

Using some or all the types of retention marketing strategies your business can afford alongside best practices for your thriving business is a way of increasing the effectiveness of your retention marketing strategy.

Offering customers an increase in their lifetime value had proven to significantly increase the rate of repeat purchases when loyalty programs were adopted and offered to customers.

How to Build Your Retention Marketing Strategy

Your business risks getting stuck in an endless loop of user acquisition campaigns if you do not get ahead of your customer retention problem.

Retention marketing focuses on shifting the attention of your business from customer acquisition to more impactful retention marketing strategies with the sole aim of boosting the profit margins and return on investment (ROI) of your business.

Some detailed steps on how to build your retention marketing strategy include:

1. Understand Your Users by Drawing up a User Journey Map

Without a proper and detailed understanding of your customer's unique needs, it can be challenging to retain customers. They are opposed to being treated like just another number in a long line of statistics.

You can better optimize your retention marketing strategy by determining where, how, and when existing and potential customers interact with your brand.

A user journey map is a unique tool that serves as a reminder that different customers come in contact with your brand at different stages and for various reasons, ultimately leading to different expectations of your brand.

Audience analytics software is an effective tool that helps you determine the where, how, and when of your customer's relationship with your brand.

By understanding the unique expectations of your customers, you are better positioned to meet their specific needs and offer them the best user experience, which ultimately corresponds to a boost in retention rates.

2. Determine Current Retention and Churn Rates

A cohort is a group of users with a common distinguishing trait. Using cohort analysis as an effective retention marketing strategy can help inform you on how many users churn and when they do.

Your cohort analysis can be based on the number of users that downloaded your app in a specified time frame or purchased a specific product. The idea is to provide you with information about happenings surrounding your business.

Suppose your cohort analysis is configured to keep tabs on all the users that downloaded your business app on a particular day and track their interaction with the app across a specified period.

In that case, you gain valuable insights daily on the users that came back, left of stages where users seem stuck.

With this, you have a system that highlights the different factors that ultimately impact attention, allowing you to adjust to areas flagged as friction points.

Cohort Analysis Example
Source: Clevertap

3. Focus on Onboarding and First Purchase

Every phase of your retention marketing strategy implementation is essential, but they should not be given the same importance as their impact varies.

The initial retention phase is the most important. At this phase, users first come in contact with your brand and giving them the best first-time experience is pivotal to guarantee their return.

Onboarding is the best way to prevent customer churn. It guides new users through their initial registration stage, educates them on the workings of your product, and creates information about your user to personalize their experience further.

When structuring your onboarding process, you must ensure it effectively delivers maximum value to new users as early as possible.

Sales Funnel Stages
Source: Apty

Users tend to stick to your brand provided they are guaranteed a smooth user experience. It is the role of funnel analysis to highlight the relevant sticking points of your brand.

4. Use Funnel Analysis to Solve Friction Points

Funnel analysis functions as an effective tool to point out how users use your business point and areas where they seem to drop off the platform.

Funnel analysis can also come in handy in determining the most effective customer acquisition channels, which allows you to focus your customer retention strategies on the track that brings the highest ROI.

How to Use Sales Funnel Analysis to Improve Customer Journeys
Source: Blog-taboola

5. Use Data to Create Personalized Customer Communications

Retention marketing's end game is to create connections with customers on a personal level by improving their experience on the platform.

When creating personalized messages and offers to users, you would need background insights and an understanding of what your user's needs are and what they expect from your brand.

Many mobile marketing platforms are designed to create detailed user profiles spread across demographics, user intent, and other criteria. These platforms collect and analyze user data to understand the platform users better.

6. Ease of Sharing Feedback

Providing measures for regular user feedback is the best way to identify friction points before users decide to drop your platform.

Feedback lets your users know their contributions are valued, and you have their best interest at heart. Your platform should seek feedback, including contact information, for you to keep in touch with users even after their complaints have been lodged and addressed.

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Martin Luenendonk

Editor at FounderJar

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.