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How to Improve Your Customer Retention

Samuel Hum

A finalist in Esquire's Best Dressed Real Man contest, Samuel is ReferralCandy's fashion ecommerce expert and resident sartorialist. He is obsessed with human behavior and social psychology.

Latest posts by Samuel Hum (see all)

Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone.

When business owners think about improving sales, they tend to think of acquiring new customers. Small business owners often focus heavily on generating new leads or converting new visitors to customers.

However, what about the people who have already bought from you? Customer retention is equally, if not more, important than customer acquisition. Those existing customers have already shown they’re interested in your product—and by not focusing on bringing them back again, you could be missing out on a lot of sales down the line.

Here, we’ll explore exactly what customer retention is, and some ways you can apply it to your own business.

What Is Customer Retention and Why Should You Care?

Customer retention is essentially attracting or retaining existing customers who have bought from you in the past.

A distinction should be drawn between that and visitors who visited your store or website but did not purchase. For the latter, the acquisition cost is similar to that of acquiring new customers.

Customer retention strategies and tools, such as CRM software, aim to help businesses build relationships with customers, and provide ways to invite them back to buy from them again.

Potential New Sales at a Lower Cost

Customers who have bought from you before already know you exist and what you are selling. They have also tried your products or services firsthand—basically, you have already done the hard work of introducing yourself to these customers.

You can save resources trying to tell them about your brand and convincing them to try out your business for the first time. That can add up to significant savings on time, effort, and money compared to acquiring new customers.

Retaining a customer can be five to 25 times cheaper than acquiring a new one, according to data cited by the Harvard Business Review.

customer retention

Higher Conversion Rates in the Long Term

Since existing customers have bought from you before, you can now focus heavily on customer loyalty. If they are pleased with your product, they are more likely to return and buy again and again, resulting in new sales.

If they had a negative experience with your brand, all is not lost. This is the perfect chance to get in touch with them and find out how you can turn their experience into a more positive one.

Building healthy relationships with customers is one of the most important long-term strategies for any company. Companies that care about improving their customers’ experiences will have happier and more loyal customers in the long run.

Even More Sales

In 2014, 52% of retail executives who were surveyed by KPMG, a global network of tax, audit, and advisory firms, said they believed that customer retention would be the biggest retail revenue driver in the coming years.

The hardest part of getting new customers is often finding them—once you have them interested in your brand or company, it’s a lot easier to keep them around.

customer retention

How Can You Promote Customer Retention?

By now you know just how important retaining a customer is to your business and your bottom line. But if you’re struggling to get repeat customers, there are a few tactics you can take to encourage people to come back again and again.

1. Focus on Your Relationship With the Customer

The first thing to consider when it comes to customer retention is that you are building a relationship. This is a marathon, not a race, and it will take time and resources. Stay focused on the long term, not just the here and now.

Having the mindset of making your customers feel appreciated and showing that you care about their opinions is a big step.

2. Reward Customer Loyalty

Consumers have simply too many options to choose from, and they can sometimes suffer from choice paralysis. When confronted with too many options, people can sometimes become “stuck” while trying to find the best option and end up not being able to make any. Or even worse—they choose a suboptimal option instead.

If a customer has bought from you before, you can prevent them from having to struggle to make a decision by providing an incentive for them to return to buy from you again.

Customer loyalty rewards programs are a great way to achieve this. Customers accumulate points or purchases, and they get rewarded for continuing to visit you.

These can work in the form of physical loyalty cards, like Cokers, or in a digital loyalty program that can be accessed through apps on your phone.

It’s a win-win situation for both your brand and the customer.

3. Incentivize More Interaction With Your Brand

Customers may not need to buy from you all the time, but that doesn’t mean they cannot otherwise interact with your brand.

The key is in user-generated content. This can come in the form of social media posts, shares, and reviews.

Rewarding your customers for posting user-generated content is useful because they get the reward (say, a discount!) and you get extra promotion without lifting a finger. Customers, especially those who already love your brand, are naturally going to share it with those around them. Treat them like your VIP brand ambassadors and reward them for being your fans.

One good example is Frank Body, an Australian skincare brand famous for selling coffee ground skin scrubs. Their loyalty program is called Hotel Pink, and features different tiers, each with more discounts and exclusive perks.

customer retention

Customers earn points by purchasing, sharing on social media, and leaving a review. As they refer friends and earn points, they advance to higher levels and are given access to flash sales and advance purchases.

As customers interact more with your brand, you’ll also help improve top-of-mind awareness—you want to be the product your customers think of over your competitors, and social media can help encourage this.

4. Use Referral Programs to Encourage Word-of-Mouth

If a full-scale loyalty program like Hotel Pink isn’t your thing, a referral program is a great alternative. Word-of-mouth is one of the oldest forms of sharing information. And because we often trust our peers’ recommendations, word-of-mouth referrals are one of the best marketing tools for your business. The sharing process is made sweeter by rewarding both the referrer and referred friend.


No matter how you get there, it’s important to maximize customer retention and encourage your loyal buyers to return again and again. By targeting these customers, you can increase sales over time and spend less on marketing to new people.  

Samuel Hum

A finalist in Esquire's Best Dressed Real Man contest, Samuel is ReferralCandy's fashion ecommerce expert and resident sartorialist. He is obsessed with human behavior and social psychology.

Latest posts by Samuel Hum (see all)