Retention Over Engagement: Why It's More Important Now

Marketers have long relied on engagement metrics, such as likes, shares, and comments, to measure the success of their campaigns. And don’t misunderstand us: engagement is indeed important. It measures how actively and positively customers interact with a brand's content and indicates their interest and connection with the brand. Thus, high engagement levels can lead to increased brand awareness, loyalty, and the likelihood of customers sharing the brand with others, driving organic growth and visibility.

However, as competition for consumer attention intensifies, retention is becoming a more critical metric. Retention, as a marketing metric, refers to a business's ability to keep its customers over a specific period. It focuses on maintaining customer relationships and encouraging repeat business rather than just acquiring new customers. 

Why keeping old customers is as important as attracting new ones

At first sight, it may seem unclear why we shouldn't prioritize gaining new customers over holding on to the old ones. However, statistics say that every client you lose and replace costs your company 5-10 times more than retaining an old client would cost. These are the more reasons retention focus is valid:

Higher Customer Lifetime Value (CLV): Retained customers are more likely to make repeat purchases, leading to a higher overall value per customer.

Brand Loyalty: Long-term customers are more likely to become brand advocates, promoting the brand to others and providing positive word-of-mouth referrals.

Stable Revenue: Consistent repeat business from loyal customers provides a stable revenue stream, making the business more resilient to market fluctuations.

How to measure retention and what is CRR

How do we extract the KPI of customer retention? For this purpose, a formula exists. Customer Retention Rate (CRR) measures the percentage of customers a company retains over a specific period. It is calculated as:

CRR = ((E - N) / S) * 100

Where:

E = Number of customers at the end of the period

N = Number of new customers acquired during the period

S = Number of customers at the start of the period

How to increase the retention

Now we know how to calculate retention, let’s try several approaches that businesses are likely to adopt in order to keep their customers:

Personalized Customer Experiences

Personalization has always been a key aspect of successful marketing, but its importance in retention strategies is set to grow even further. By leveraging data analytics and AI, businesses can create highly personalized experiences for their customers. This may include creating content that is specifically relevant to individual customers, customized offers, personalized communication, and others.

As an example, remember Spotify Wrapped, which happens at the end of each year. Spotify users are looking forward to their personalized music analytics and are happy to share it with other users.

Loyalty Programs and Rewards

Loyalty programs have been around for a while, but they are evolving to become more sophisticated, engaging, and encompass new technologies such as NFTs. Effective loyalty programs in 2024 will likely include offering different levels of rewards based on the customer’s engagement, gamification, and community building.

The photo entertainment website TheCHIVE is rewarding users for photo uploads and social sharing. TheCHIVE has effectively gamified its blog, placing community engagement at its core. This strategy has successfully cultivated an active and highly engaged community. TheCHIVE now attributes 6% of its annual revenue to its loyalty program, generating approximately 6,800 referred visits each month.

Seamless Omnichannel Experiences

In 2024, providing a seamless experience across all channels involves consistent branding (ensuring that the brand’s message and aesthetics are uniform across all platforms), integrating customer support that can address issues and queries across multiple channels, and using integrated data systems to track customer interactions across channels. This will allow for a more cohesive and informed approach to customer engagement.

Patagonia’s commitment to sustainability and environmental responsibility is evident in every post, campaign, and product. Patagonia’s consistent messaging and visual style across social media, advertisements, and its website strengthen its brand values and resonate deeply with its audience.

Post-Purchase Engagement

Engaging with customers after they’ve made a purchase is essential for retention. Don’t forget about follow-up/thank-you emails, and personalized recommendations based on the recent purchase. Another good idea would be to provide content that helps customers get the most out of their purchase, such as tutorials, usage tips, and maintenance advice.

For example, Dyson offers detailed user manuals and instructional videos on its website for all of its products. These resources help customers understand how to assemble, use, and maintain their devices, ensuring they get the best performance from their Dyson products.

Leveraging Customer Feedback

No doubt, listening to and acting on customer feedback is crucial for improving retention rates. This can be achieved by conducting regular customer satisfaction surveys, monitoring social media channels for customer feedback, and implementing feedback loops.

Ben & Jerry's approached this with creativity and created a Flavor Graveyard, where the flavors of ice cream that are no longer in production are placed. However, if flavors receive enough votes from customers, they can be “resurrected” and added to the product line again.

As we move further into 2024, the focus on retention will continue to grow. Marketers will need to develop strategies that not only attract new customers but also foster loyalty and repeat business. By creating personalized experiences, enhancing loyalty programs, providing seamless omnichannel experiences, engaging post-purchase, leveraging feedback, and continually improving products, businesses can build lasting relationships with their customers and thrive in an increasingly competitive market.