While searching on the internet for a few facts and studies regarding customer retention, I found a list of studies with some interesting stats.

These relate to understanding why customers churn and the monetary benefits of retention. I found others studies specific to e-commerce and how reviews, site performance, and customer service all affect sales and retention. Here are just a few customer retention studies, I’d be interested to know if you find others and post it on the comments below.

1. A 5% increase in customer retention can increase profits by 25% to 125% – Bain & Company

2. On average, a company loses between 10% – 30% of its customers every year – McKinsey

3. The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20% – Marketing Metrics

4. A 2% increase in customer retention has the same effect as decreasing costs by 10% – Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy

5. It costs 6 – 7 times more to acquire a new customer than retain an existing one – Bain & Company

6. Customer profitability tends to increase over the life of a retained customer – Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy

7. A dissatisfied customer will tell between 9-1 5people about their experience. Around 13% of dissatisfied customers tell more than 20people – White House Office of Consumer Affairs

8. 68% of customers leave because they think that you do not care about them – Rockefeller Corporation

9. eCommerce spending for new customers is on average $24.50, compared to $52.50 for repeat customers – McKinsey

10. 63% of executives are seeing higher churn rates – CMO Council and Satmetrix

A retailer’s best asset are its own customers. Large retailers know this and apply scientific reasoning to convince shoppers to buy from them again. They understand that it is hard to change shoppers’ habits but with the right timing, product offer, and discount they can win shoppers’ loyalty.

Most online shoppers are used to searching for a product, compare prices, and purchase. Although many online retailers can replenish beauty, health, clothing, and office supplies, very few can convert the majority of their buyers to purchase more than once.

It is tough to convince a shopper to buy using email marketing. Consumers’ shopping habits and the way they check email is ingrained in them. The amount of email we receive daily is astonishing, very few get our attention. It is therefore very difficult for any marketer to change what someone is doing and convince them it is time to shop.

As many marketers know, timing is everything. There are some brief periods of time when routines fall apart and a creative and enticing offer for a much needed product can be very successful. Any successful customer retention program to entice customers back into the store needs to understand timing and when the consumer is most vulnerable to purchase your product.

Large retailers like Amazon, Target, and Walmart are known for their analytical advantage. They collect vasts amount of data for each consumer and have teams of analysts predicting when that ideal time comes when the consumer is ready for their next purchase. Linked to each consumer if not only demographic information like gender, age, marital status, and salary but also purchase information (what type of soap they use, how often they purchase) and interests (political, religious, reading habits, and hobbies).

Scientists and even corporations for many years have been studying habits. Many say that habits work in three phases. First there is a trigger that starts the habit (like “You have new mail”). Secondly, you go through your habit of checking email as you always do. Finally, you may find one message that builds curiosity and provides some kind of pleasure or reward. Data analysts at many corporations (including myself at one point) are paid to find patterns in shopping data and exploit it.

In my experience, at first it started simple. Find out which products are purchased in consecutive order, how long it takes to buy product B after product A is purchase and then provide a list of people who have bought product A so we can market them product B. Other things I worked on was studying coupon redemption by customer segments. If we found out that seniors responded well to this buy one get one free offer, then we looked for all zip codes with high percentage of seniors in them (we even found a nursing home that had its own zip code). By the end of my consulting career, we were predicting with 80% accuracy which customers were likely to disconnect a service and what promotions had the highest success by segment.

Many times retailers do not know what works and what doesn’t. The first figure out the who. Then they will send dozens of variations and understand what sticks and what fails. This process sometimes takes time and creativity to really understand what drives the shopper to click or respond. If you over do it, you will be annoying and disengage the consumer. But when done at the right time (“Aha a coupon for something I’m running out of”), the benefits go beyond that one click. Now that shopper is on your site or store and there you have other ways to entice that shopper to get other things they need.

The art of customer retention is in prediction. Prediction comes when you can send coupons or even content for things you want before you even know you want them. That’s the secret behind consumer habits: timing, prediction, and

At most, how much should you spend to acquire new customers? The answer to that question is the metric called customer lifetime value. Customer lifetime value is a function of how much on average customers spend a year, the attrition rate, and customer acquisition cost.

Lifetime value is basically how much profit should you expect from a customer during its lifetime. Although you can segment your customers and get more accurate results of lifetime value by location, products purchase, and duration of the relationship, the overall average can give you a good perspective on how much to spend in advertising and marketing for each new lead.

Our research team here at Mineful has developed a useful and free customer lifetime value calculator for you to compute your company’s customer lifetime value. It is very simple to use. Plug in a few numbers and see how the value of your customers change with each variation of the inputs.

The calculator also gives you a perspective on how many customers you are losing per year and how much is that costing your company. It also computes potential improvement; how much benefit you will gain if you improve customer attrition rate by a few percentage points.

Go ahead try it out, regardless of the business you manage, this calculator will be very useful. We’re also interested in hearing your thoughts about it on the comment section below. Isn’t this a nice romantic Valentine’s gift from the Mineful team?

Customer Retention and Lifetime Value Calculator

We’ve written a lot on customer retention, as have many other marketing companies. However, the approach until now has been more strategic rather than hands-on. As an analytical company, we like to roll up our sleeves and share with you a few practical rules to consider when using email marketing for customer retention.

Needless to say, there are a few “rules” that are obvious like controlling email frequency, sending targeted content, and providing valuable content. In this post, will discuss rules in the context of an email marketing rules engine and how it can be used for customer retention and engagement.

Customer retention is any activity that a company does to reduce churn. Any effort made, regardless of the channel of communication and the type of customer, to bring customers back to your online store is called customer retention. From the first communication through the entire lifetime of the relationship, companies must deal with this in a delicate manner. It is not only about the products you sell, but how you manage the relationship with each customer. Especially now in online commerce and online retail, where finding an alternative is relatively easy.

Here are a few points of engagement that you might want to consider when triggering a communication piece with each of your customers. With all the technology around us, it is very easy to measure the success of each communication piece in order to continually improve. As you’ll read, becoming proactive, solving any issues quickly, and surprising your customers will prove to increase sales and retention.

Rewarding customers after $x spent
Most online retailers provide free shipping if you spend say $50, airlines give a free flight after miles accumulate, and sandwich places give you a free sub after you eat 10. The customer then tracks this spending and eagerly waits for their free share. Very few companies reward customer without this tracking behavior. Imagine if you receive a coupon for a free t-shirt on your next purchase of $50 or more. Or if you randomly receive a package for being a loyal customer. This surprise factor can work wonders and increase someone’s chances of referring you and buying more from you.

Targeted offerings for best customers who are not so best anymore
When was the last time that one of your best customers made a purchase? Are they on track to hit their usual sales cycle. If not, they are probably looking at that other website. What if you could detect this and send them an offer they can resist just at the right time? Our research indicates that 60%, that customer goes back to your site and hits that sales goal.

Email offer after 3 days of site visit
One of your customers logs into your site and starts looking at your products. They see your prices and remembered that they might want to compare shipping prices with other providers. You know they were looking for their favorite shampoo. How could you increase your chances that they’ll buy it from you? Convince them. It may be 3, 7, 14, or 30 days depending on your product category, but by giving them a compelling reason at a time when they are ready for a purchase, again, you will see some improvements in customer retention.

React after bad feedback
When you buy something online and something goes really bad like not receiving the product or the product being damaged, most online retailers react quickly. But what if it is something “small” that might be big enough to entice that customer to shop elsewhere? For example, the order took longer than expected, the customer service was not too nice, or the product received was not exactly what I intended but whatever I’ll just stick with it. Now if you trigger a quick survey say 3 days after purchase and react to a not so good feedback provided, the customer will feel heard and might forgive you for his lack of dissatisfaction in that order. That feedback is invaluable since now you can not only make that customer happier, but fix your internal processes to ensure it doesn’t happen again.

First time buyers sensitiveness
How many people in your shopping cart have only purchased one time? My guess is that it is the majority or at least close to it. These first time purchasers are tricky. First, you don’t know who could potentially become a great customer. Secondly, they might react with an opt out after your third string of mass emails. Customer retention starts here and you need to understand how to treat this customers and personalize the communications you have based on any information you have about them. By testing various message approaches, you can decrease that number easily by 5%, and that tiny percentage means huge increases in sales and the average lifetime value of a customer.

Customer churn is an old business problem. Many online commerce sites focus on lead generation as their companies grow and do not look at customer retention until growth charts start to level off. The sooner you start your customer retention strategy the longer the impact it will have on your sales, cost of acquisition, and time spent on finding new customers.

There is nothing wrong in trying to retain customers using various tactics that there are. However, what is futile is to believe that the customer is a fool and that he will fall prey to strategies that you have created. Marketing efforts to retain customers work only if they are genuine and if they provide real value to the customer. Some of the customer retention and loyalty tactics that you can use include:

a. Be truthful with your customers – It is important that they start seeing you as their partners in fulfilling the need that they have rather than an entity that is interested in making money off them.

b. Provide full information – Having fine print that is likely to spring itself after the sale is made is likely to leave a bad impression on the client. While hiding information may help you get a sale for the first time, retention will definitely be a challenge.

c. Confidentiality – In the world where privacy can be invaded at the drop of the hat with Internet access and more, maintaining confidentiality of the customers is something that they appreciate to a large extent.

d. Service orientation – Each and every client likes to be pampered and considered special. When you go that extra mile to please and delight customers, you are sure to ensure customer retention.

e. Flexibility – Large organizations are often associated with inflexible rules and policies that they will not budge from. Make exceptions at times and you will make the customer feel wanted and special.

f. Loyalty enhancing tactics – Use loyalty programs, special discounts and more to achieve short time loyalty as you build up your image with regards to the above mentioned aspects.

g. Study defectors – Make sure to understand and study the defectors that do leave your brand or company. You will be able to categorize them into price defectors, product defectors, service defectors, market defectors or technology defectors. When you know where the issues is you can quickly devise strategies to plug the hole.

With the large number of options that customers have today, it is becoming increasingly tough to hold their attention. The situation is so competitive that the minute they leave your website, your store or your office they are at a risk of being pried away by your competitors with some new marketing gimmick, tactic or strategy.

If you have had the good fortune of acquiring some customer and doing business with them once, you must make sure that they continue to come back for more. The need of the day is to block competitors away. However, you cannot stop the competition from approaching your customers. Therefore, you must work on your customers in order to ensure that competition cannot take them away.

The whole idea is to engage in customer loyalty marketing so that you can ensure that the customer is no longer open to the ideas that competition puts forward in front of them. By providing the best offering that the customer may want, you can change the state of mind of your consumer. It requires a receptive mind to listen to what customers are saying.

The essential steps to ensure customer retention and loyalty have been listed here. These three steps of customer loyalty marketing can ensure that your relationship with the customer becomes so strong and invulnerable that it becomes everlasting.

1. Personalized and customized communication
The Internet allows us to be far more personal than ever before. Avoid techniques that club all the customers into one large group. Segment your customers with demographics, behavior, and opinion data and then target them with the words that they want to hear. The level to which you segment depends on the kind of clientele that you have and the base that you service. If your clientele is extremely up scale and you have a few customers that give the company a large amount of profit and revenue, then individual attention and communication is necessary. In such one-on-one marketing the marketer needs to have specific information about the client’s preferences, so that you can identify the needs, differentiate your services, interact with the customer and then customize all communication accordingly.

2. Real time customer engagement
Time is extremely critical in the whole process of customer loyalty marketing. A slight slip or delay can cause competition to be on your back trying to snatch away all your clients. What marketing people need is a system that can help alert them immediately about specific aspects to look into. One does not have the luxury to wait for the month’s aggregated report to come through in order to take overall decisions. High speed analytics that can offer immediate information that needs action is the essence of the day. Delivering such speed in terms of all offerings requires the entire company to be in tune with the culture of the company so that there are no delays ever – even of a split second.

3. Customer retention and satisfaction
Customer retention is one of the aims of customer loyalty marketing and customer satisfaction is one of the various metrics that leads to a better understanding of retention. While satisfaction is a measure, retention is the goal that needs to be achieved. When you indulge in customer loyalty marketing, you focus your energies and marketing budgets towards the customers that you have. With increasing competition, stagnant or mature markets and the rising cost of reaching out to new customers, customer retention and loyalty have become extremely important. It is not right to assume that customer satisfaction is enough to achieve customer retention. It is possible to have high customer satisfaction and yet lose a customer. This is something that can happen if the product category is a low involvement product or there are various substitutes that are possible or even when the cost of switching is low.

Customer retention is more important today than ever before. On average, attrition rates are between 10 to 30 percent, although they vary highly by industry. This is even higher if one looks at online data alone. Customer loyalty is becoming elusive. More than half the banks have seen a drop in loyalty figures in the last year. While retention scores differ among specific brands in an industry, overall there is a shift towards promiscuousness in the market.

The cost of losing a customer can mean loss of revenue and then some, in other words, loss of revenue is not the only thing that results from the loss of a customer. Companies realize the value of repeat purchase and therefore create customer retention strategies to encourage business through discounts, special services, and personal messages.

Loyalty Programs
Loyalty programs are customer retention programs that are created to ensure that customer continues to come back to a brand and to ensure that they refrain from trying out competition. Some of the basic attributes of a loyalty program include:
- Rewards, discounts, freebies, special service or upgrades
- A software that allows the marketer to keep track of personal contact details, previous purchases and details of the same
But the question is whether these loyalty programs and retention tactics work or not? Are the customers lured by frequent flier programs, frequent dining coupons, smart cards and plastic store cards? Jupiter Research states that more than 75 percent of the customers are part of some loyalty program or another. And an average family may hold more than 35 loyalty cards at one time.

The Bottom Line
There is nothing wrong in trying to retain customers using various tactics that there are. However, what is futile is to believe that the customer is a fool and that he will fall prey to strategies that you have created. Marketing efforts to retain customers work only if they are genuine and if they provide real value to the customer. With easy access to information on the internet and comparison sites, it is far easier to make the smarter choice than it was ever before. So while you may feel that you have retained the customer by offering and providing a loyalty card or a discount voucher, do not be surprised if the customer has another loyalty card of your competition too.

Companies that realize the value of customers use various customer loyalty strategies to retain customers. These marketers seem to believe that a slight show of effort to resolve a problem can ensure that 82 to 95 percent of the customers can be retained.

While there are always long term strategic decisions that a brand takes in order to engage clients and build a long term relationship with them, there are various loyalty techniques that companies take in order to retain the customer who is just about to surrender a credit card, stop a phone connection or go to the competitor.

Some of the interesting customer loyalty strategies that marketers use include:

- Discounts on progressive purchases – This is often presented in the form of a discount voucher each time a purchase is made and the voucher is always applicable for the next purchase to ensure that the customer keeps coming back.

- Special services and personal touch for long term clients – When done with a genuine attempt to understand the client, these may sometimes work for a while. Such services involve making the customer feel special by offering personalized service that the client will appreciate. Along with product customizations, these techniques tend to give the kind of respect that the customer of today demands.

- Database intelligent marketing or client contact management – Using personal details of the client to make contact periodically and offer other relevant products and services is also another technique that marketers adopt. Timing is everything, so make sure to interact with the right message at the right time.

With the explosion of the Internet, many marketers feel that reaching out to the customer is far easier than before and therefore spending dollars in trying to retain current customers is futile. However, data suggests that a customer who is unhappy is likely to talk about it to 8 to 16 people.

More than 90 percent of the people who are unhappy never go back and purchase anything from the company or brand they are unhappy with. The cost of attracting a new customer is 5 times more than that of retaining a current one. With the popularity of social networks, it is far easier to spread the word around about one mistake that a company does or one bad experience that a customer had. The network of an average customer is estimated to be about 250 people. While it is important that you do the math for your own company, a 5% increase in retention rates could up the profit by 25% to 100%.

When you lose a customer you:
- Lose an opportunity of genuine recommendation
- Attract negative word of mouth
- Increase your marketing costs
- Lose the lifetime revenue that you could have gained from this lost client and his referrals

How would your perception of Amazon change if they suddenly start charging for shipping?

Remember when airlines started charging for bags? Chaos. Many people now just pay, but many others have switched or at least look for the no bag fee service first.

Something similar happened to me this week. At a local grocery store, I asked to get a roll of quarters, something I had done before at no charge. This time, getting 40 quarters would cost me $10.25. Did you just change policy on me, why? I know a grocery store is not a bank, but it is a reason why I go to that grocery store some times and while I’m there, I might shop for a thing or two. “Sorry sir, it is company policy.” At least give the person behind the desk a better answer.

Next week I go to a nearby grocery store whose employees were so nice to do the exchange I thought for a second they would give me the roll for free.

This change in company policy has changed my purchasing pattern, perception of the company, and definitely the so important metric of likelihood to recommend. Are you listening Dominicks? Great job Trader Joe’s.