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How to improve your customer retention and advocacy strategy: a 5-step process
Every business has a goal to grow revenue and expand its customer base. Business owners spend lots of money on customer acquisition through marketing channels like email, social media, and pay-per-click advertising (PPC).
But one often overlooked, practical approach to increasing revenue is leveraging existing customers.
Last updated31 Aug 2022
Reading time7 min
Customer retention and advocacy are critical for any business. It can be a challenge to maintain high levels of customer engagement, but it's worth it: according to a study by Invesp, acquiring a new customer is five times more expensive than keeping an existing one, and increasing customer retention by 5% could increase profitability by as much as 95%.
Because of such potential, one question comes to mind: how can businesses improve their retention rate and customer lifetime value?
One of the most effective ways to increase customer retention rates is to improve customer experience (CX) and satisfaction.
Recent research by Zippia shows that 96% of people believe customer service influences their loyalty to a brand—and these customers go on to share their excellent experiences with other people.
To put it another way, word-of-mouth—from your customers to their colleagues, friends, and relatives—does better at convincing 96% of customers to buy, compared to advertising.
Understanding the customer retention and advocacy strategy
Customer retention is the ability of a business to retain its customers over a specific period. One way to measure customer retention is to calculate the percentage of recurring customers you have, against the total number of buyers within a specific period:
Retention rate = total customers at the end of a period - new customers / total customers measured when the period began
A high retention rate suggests that buyers find value in your product or service, and enjoy excellent customer satisfaction. Here are some other tips to boost customer loyalty.
Reward customers: offer rewards through redeemable points or coupons on every purchase. Providing discounts for big purchases also converts them into recurring buyers.
Provide extra help: aim to exceed customers' expectations (also known as creating customer delight). Beyond pushing out quality products or services, educate customers to help them decide on their best option, and how to use it.
Invest in client experience: this involves budgeting for tools and strategies that improve customer service, like self service channels, live chat solutions, email integration, and staff training.
Be consistent: according to Zendesk's research, one inconsistent service can churn roughly 50% of customers, rising to 80% after repeated issues. One way to consistently build client loyalty is to implement a customer advocacy strategy (keep reading!).
A customer advocacy strategy is an operation plan that prioritizes customers' needs to gain their trust, build loyal customers, and actively leverage dedicated clients to promote your business.
5 steps to improve your customer retention and advocacy strategy
Regardless of the type of customers you have, your goal should be to improve your services, build a strong community, and leverage your publicity powers. This approach helps you retain even more customers, improve brand awareness, and build social proof.
Here's how you can build customer retention and advocacy that lasts:
1. Review your current strategy and set a goal
Before you can figure out how to increase customer retention, it's essential to define the problem. Ask critical questions like:
What percentage of your customers use your product?
How many of those users pay monthly for your service?
How many people return, even after their free trial has ended?
Once you have a clear picture of how many people are leaving and how often they're coming back (or not), it's time to set some goals. Your goal should be specific, measurable, and time-bound. Define how much progress you aim to achieve within a specific period, and how you plan to hit your target.
2. Prioritize customer experience
The customer experience (CX) involves all interactions clients have with your brand, including the quality of the product or service you deliver, how easy it is to use your product or service, and their experience at every touchpoint in their customer journey.
The benefit of developing a quality customer experience is far-reaching: it organically increases people’s trust in your brand and improves revenue. According to a Gartner report, customer experience is the reason behind two-thirds of customer loyalty. Twilio also confirms that 61% of people will become repeat buyers due to personalized customer service.
Seeing the importance of customer experience in building a loyal client base, the following tips will come in handy:
Collect your buyers’ opinions—in their own words—about your products and services through surveys, user feedback, and reviews to help you understand customers’ needs and pain points and address them promptly.
Create an excellent in-store and online interaction with clients. Give them a platform to share their opinions and concerns, like free chatbots, live chat widgets, and feedback emails.
Personalize the experience for each visitor and client by sending personalized emails, follow-up messages, and providing excellent assistance to in-store visitors.
3. Build an active community
Humans are social beings, and being part of a community helps create a sense of belonging towards achieving a common goal. Hubspot recently reported that customers discuss specific brands at least 90 times a week, and about 70% of people form an opinion around those discussions.
In the book Influence: The Psychology of Persuasion, psychologist Robert Cialdini explains the reason for such events and proves that community marketing and social proof are effective marketing strategies:
In general, when we are unsure of ourselves, when the situation is unclear or ambiguous, when uncertainty reigns, we are most likely to look to and accept the actions of others as correct.
Building a community around your product or service keeps current customers interested, and is a terrific way to attract new ones. Consider the following tips as you build an active community around your brand:
Define the community's goals and select a platform for members to share their experiences. For example, Inkbox hosts a vast online community that shares common values of trust, acceptance, and openness. The brand collects photos of customers with freshly applied tattoos and uploads them on their website's social media pages with the #tattoosfornow hashtag.
Create an omnichannel marketing and communication experience. One example is to allow buying online or picking in-store services.
Build a profile for all members and integrate a personalized experience. A typical approach is to send thank you, holiday, and birthday messages to customers, addressing them by their first names.
Understand your customers' tastes and create content that uniquely addresses such needs. You can use various website tracking tools to monitor your clients’ wish lists and abandoned cart items, then send them a unique offer.
Organize social events like evening fairs, book launches, and hangouts to connect with more customers. You can host online webinars to teach customers better ways to use your product, or do an Instagram live session to answer customers’ questions in real-time.
Host advocacy programs and reward loyal customers for their contribution in advertising the business to fans, friends, and relatives. One way to do this is to select brand ambassadors who will represent the business wherever they are. You can host such events as the climax of discounts and rewards programs.
4. Encourage customer feedback
One of the most effective ways to improve customer retention is to collect and analyze qualitative and quantitative customer feedback, which helps you understand whether your customers are pleased with your product or service (or not).
A practical method for getting feedback is through an on- or off-site survey. Tools like Hotjar will even help you draft the right questions for feedback campaigns and product surveys.
5. Evaluate the progress of your strategy
Once you've adopted an advocacy strategy, you need to measure its success and effectiveness based on whether it's improving your business. By evaluating your strategy's progress, you'll know what you need to improve, and how to improve it.
One way to evaluate your strategy is to send a Net Promoter Score® (NPS) survey to existing customers, and measure their loyalty and satisfaction based on their willingness to recommend your brand to other people.
Accelerate business growth through customer retention
When all is said and done, one thing remains clear: you should never sacrifice your existing customers in search of new leads. A better strategy is to incorporate both customer retention and acquisition to form a whole strategy.
Invest in satisfying your existing users, and encourage them to tell more people about their unique experiences. Such organic promotion, combined with other marketing efforts, is a sure combination for success.
Ready to increase customer retention?
Use Hotjar to learn why customers churn, and how you can improve UX to increase customer retention.