A landmark study in the Harvard Business Review found that increasing customer retention by 5% can lead to a whopping 25%-95% increase in revenue, and these numbers have since become the guiding light of customer success organizations.

But what exactly is customer retention, and how do you increase it by 5%?

Customer retention is the strategy of getting more of your customers to stay loyal to your brand or business. And a successful customer retention strategy turns one-time shoppers into loyal, repeat purchasers that spend more, purchase more frequently, and refer friends more often than other customers.

A customer retention strategy will boost your profitability while encouraging repeat business that drives a sustainable long-term business model. Below are five tools and strategies you can use to retain customers and to keep them coming back. This includes how you can use a CRM to bond sales and customer service teams for mutually beneficial results. 

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1. Customer Loyalty Programs

A customer loyalty program is an easy way to boost customer retention. When a customer is given additional value -- by way of a points system or a VIP rewards program, for example -- for buying from you, it becomes much more difficult to choose a competitor for their next purchase.

What's more, loyalty programs allow you to reward more than just loyalty. You can reward customers for fulfilling other profitable actions like writing reviews, sending referrals to friends, and social sharing. These are just a few of many ways you can activate your customers and reward them for helping you grow your business.

Case Study: Starbucks

Starbucks offers one of the most popular loyalty programs around. On its surface, it's a simple points-based system where Starbucks drinkers earn stars for spending money at the coffee shops, receive free drinks on their birthdays, and can order ahead using the mobile app.

But the programs also rewards shoppers who engage with the mobile app more and more frequently -- offering personalized offers and challenges to earn more stars, which eventually can get the user a nice, shiny gold card -- a personalized rewards card that awards the holder with free drink refills and food offers. It's something of a running joke how pricey Starbucks drinks are, so this is an excellent reward for customer loyalty.

(Read more about these customer loyalty programs that actually add value for customers.)

2. Gamification

The application of game mechanics is not just for mobile apps and video games anymore. You can get the power of gamification working for your customer experience and purchase process. With gamification, you can encourage users and customers to complete actions by making it more enjoyable and adding a sense of competition.

Sites that incorporate gamification often have leaderboards, statuses, and badges so shoppers can showcase where they stand relative to others. This customer retention tool is also effective because it can be incorporated into other things -- like promotions and even loyalty programs.

Case Study: Autodesk

Autodesk offers a 30-day free trial of its high-tech 3-D animation and rendering software, and the company found that trial users were more likely to buy the full package if they used the free trial at least three times. To get people online and testing it out, Autodesk gamified its tutorials to reward frequent users with badges and high rankings on a leaderboard.

This experiment increased the free trial conversion rate by 15% -- and drove a stunning revenue increase of 29%.

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Source: Autodesk

3. Personalization

Personalization allows you to increase customer retention through more relevant and tailored experiences with the brand. Personalization requires you to collect data about your customers that you can later use to make recommendations and tailor promotions to each customers individual needs.

A simple way to use personalization to increase customer retention is through email. When a lead or customer is addressed by name with content they care about, they will be much more loyal to you and your brand. And if that personalized email offers a reward or benefit for your customer, so much the better.

Case Study: Cadbury

After Facebook launched its personalized video campaign, the chocolate brand, Cadbury, followed suit by engaging with its social media users in a similar way. After followers liked the company's Facebook page, Cadbury would extract data from their profiles and generate a personalized video for them. At the end of the clip, the ad would suggest a chocolate product based on the user's profile information.

This approach proved to be very successful as Cadbury observed a 65% click-through rate as well as a 34% conversion rate. People were happy to engage with the brand's content because it felt like the video was designed specifically for them.

4. CRM

CRM is a tool used to increase satisfaction by keeping track of a customer's entire journey. A CRM tool is used in tandem with other tools on this list to provide a total customer retention strategy. You can use your CRM to track which customers have received which badges with your gamification tactics -- or which customers have earned points in your loyalty program, for example.

A CRM has many operational benefits, but it also can help with customer retention. When all customer information and interactions are stored in one place, it becomes much easier to provide a cohesive and positive customer experience.

CRM and Customer Retention

Of all the systems listed in this post, CRMs are one of the most powerful customer retention tools. In fact, they can improve retention rates by up to 27% if they're used collaboratively between sales and customer service teams.

For example, sales reps acquire information as they close deals, and this data is stored on the customer's profile within the CRM. When the customer calls with a service inquiry, the support agent can pull up their profile and look at the information obtained by the sales rep. The support agent will know what products the customer owns, how long they've been with your business, how frequently they shop in your stores and any other personal notes that help communicate with this customer.

As the customer continues to work with your support team, your service agents can gather data as well. They can record the needs and goals that customers have and relay this information to the sales team. This helps sales reps capitalize on opportunities to upsell and cross-sell, and it helps customer success teams identify customers who are at risk of churn.

Case Study: Ceros

HubSpot offers a free CRM to manage customer relationships, track their purchases and actions, and help marketers, salespeople, and customer support reps best help people get the information and assistance they need.

Ceros, the cloud-based interactive content platform, used the HubSpot CRM to help sales reps unify company data to provide a ton of context when reaching out to new leads. The simplified UX created greater transparency between sales and marketing teams, and the CRM helped Ceros better focus on its target audiences and markets to reach out to the right leads, at the right time, to turn them into successful customers.

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Source: HubSpot

5. Customer Support

Support systems are any tools added to your site to improve customer service and satisfaction. These systems could be help desk software or live chat software, for example. All of these support systems allow you to resolve customer issues and conflicts quickly and efficiently, which provide a few key benefits.

The first benefit of support systems? They provide a one-on-one experience. You can easily address customer issues and quickly get things resolved -- which can create a lifelong customer. Second, live chat software allows you to engage with customers in real-time. Customers don't want to wait, and live chat is a direct and real-time connection to your customer to give them the help they need, the way they want to get help.

Case Study: Santa Cruz Bicycles

Santa Cruz Bicycles is a mountain bike company based in California. It prides itself on its ability to provide excellent customer service to its customers. However, as the company began to experience rapid success and growth, it quickly realized that its support team was struggling to meet customer demand. Rider Support Lead, Kyle Harder, explains this friction in the graphic below. Service Hub industry _ personas _ messaging (2)

To fix this, Santa Cruz adopted a customer support platform, which included a ticketing system and a shared inbox. This helped the team onboard new personnel and manage service cases as the customer base continued to grow. In the quote below, Santa Cruz's CRM Admin Manager, Christie Pearson, notes how change revolutionized their customer service department.

"We are growing fast, and the old way wasn't sustainable. But now we have a system, and it's easier to hire people, plug them in, and ramp them up faster."— Christie Pearson

6. Customer Feedback Collection

Customer feedback is more than just a way to survey your customers. It’s an opportunity to start a conversation with people who have a strong opinion of your business. And, this can help you prevent churn with customers who’ve recently had a negative experience with your company. After all, if they’ve gone through the effort of leaving a review, they’ll likely be interested in hearing from your customer service team. 

Even positive reviews present timely opportunities to delight customers. If a customer leaves positive feedback, you can reach back out with a thank you letter. This is a great way to go above-and-beyond for your customers and show them you really care about their business. 

Case Study: Uber

Uber offers its riders a real-time feedback tool where they can leave reviews for drivers immediately after a ride is complete. Riders can rank drivers on a one to five start system and can even leave additional “compliments” describing their experience. This provides Uber’s customer service team with both quantitative and qualitative feedback about its service. 

Companies that Use Customer Feedback

Image Source

Customer Retention Is the Key to Growth

Customer retention is the future of business growth. It's not enough to attract leads with compelling content or to close new customers with a great deal. Now, to stand out against in increasingly competitive verticals, businesses need to retain customers by helping them be so successful that they refer their friends and become brand evangelists.

These are just a few ways to keep your customers happy and coming back to purchase more or upgrade -- and, eventually, refer their friends. Let me know on Twitter if there are other customer retention tools we should write about here on the HubSpot Service Blog.

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Originally published Feb 6, 2020 8:00:00 AM, updated February 06 2020

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Customer Retention