Retention marketing: Definition, strategies & examples

Reading Time: 10 minutes

While offering regular deals and promotions is a great way to grow your customer base, retention marketing is equally important for building loyalty with existing customers.

What is retention marketing? It’s about creating value for customers beyond discounts and incentives.

It encompasses a range of strategies aimed at building long-term customer relationships. These include personalized communication, proactive customer support, and continuous product improvement. 

This article will explain retention marketing, how it differs from acquisition marketing, why it’s essential, and how to implement effective strategies. We’ll also discuss how it can save money and turn your customers into loyal brand advocates.

What is retention marketing?

Retention marketing refers to companies keeping their existing customers happy and engaged. The aim is to inspire customers to buy things often. This helps to reduce the cost of customer acquisition and is an effective way to increase revenue.

Customer retention examples include:

• Exclusive offers for loyal and consistent customers
• Reward programs for spending more
• Regular newsletters with informative content and custom offers
• Warm welcome emails to streamline the onboarding process

Retention marketing vs acquisition marketing

There’s a question every marketer ponders: focus on nurturing existing customers or attracting new ones?

Well, both are important for a thriving and profitable business. 

Here is how these approaches compare and how you can leverage them, depending on your business needs and goals: 

Target audience

Acquisition marketing tends to target a broader audience who might be interested in your product. Conversely, retention marketing focuses on existing customers who’ve already used your services.

Marketing channels

The typical marketing channels used in acquisition marketing are social media ads, search engine marketing (SEM), content marketing, and email acquisition strategies to attract new leads. Meanwhile, retention marketing leverages email marketing, loyalty programs, and exceptional customer service to retain existing customers.

Metrics

Success in acquisition marketing is measured through customer acquisition cost (CAC), conversion rates, and brand awareness. Retention marketing focuses on metrics like customer churn rate, customer lifetime value (CLTV), and repeat purchase rate.

Cost

Acquisition marketing tends to be more expensive because you need to reach a wider audience. In contrast, retention marketing is generally less costly because it targets a pre-qualified audience of people who’ve already used your products.

Return on investment

It may take longer to see a return from acquisition marketing as you work to create brand awareness to build a customer base. On the other hand, retention marketing focuses on converting existing clients, which results in a higher return on investment.

Aspects	Retention marketing	Acquisition marketing
Primary focus	Retaining existing customers	Acquiring new customers
Key metrics	Customer lifetime value, churn rate	Customer acquisition cost, conversion rate
Strategies	Loyalty programs, tailored communication, customer feedback	Advertising, promotions, social media campaigns
Communication	Personalized	Broad
Timeframe	Long-term, relationship building	Short-term, campaign-focused

Importance of retention marketing

Here’s why retention marketing campaigns should be a key part of your marketing strategy:

• Building long-term relationships: Data-driven retention marketing helps brands build long-term relationships with customers. When customers are sure they will get the best deals from your store, they’ll have no reason to look elsewhere. This will create loyalty to your store and help you generate more sales from your existing clients. 
• Being more cost-effective than acquiring new customers: Advertising to your current customers is cheaper than acquiring new ones, making it a more cost-effective approach. Your clients already know your products and what you stand for. As such, it doesn’t take much to convince them to buy from your brand again. But with new customers, you must first earn their trust before they will buy from your brand. 
• Customers who come back again need less information about the product: When customers who have already tried your products or services want to buy again, they don’t need as much information. They already have experience with you. New customers are experiencing you for the first time.
• Increasing customer lifetime value: By using strategies to keep customers coming back, you will increase the value of each customer over time.
• Leveraging word-of-mouth and referrals: Loyal customers help brands in two ways: they buy more products and tell their network about your brand. To determine how often customers make purchases, you can divide the total number of orders by the number of customers during a certain time.

How to measure customer retention

You can measure the success of your retention marketing strategies by tracking various metrics, such as:

Repeat customer rate

RCR shows how many of your customers make more than one purchase. A higher RCR means your retention marketing strategy is doing well.

To figure out how often customers buy things, you can count how many times they placed an order in a specific time. Then, you can see how many different customers made purchases during that same time.

• Repeat customers: If you examine a particular timeframe, such as a few months or an entire year, you can identify the customers who have made a significant number of purchases.
• Unique customers: This is the count of customers who visited and made purchases during a certain time. It includes both customers who bought multiple times and those who made a one-time purchase.

RCR = # of repeat customers / # of unique customers

Purchase frequency

The purchase frequency metric tells you how often customers come back to your store.

To figure out how often customers make purchases, you can count the total number of orders placed within a certain period. Then, divide that number by the total number of customers who bought during that same time.

Purchase frequency = # of unique customers/orders placed

Average order value

The average order value (AOV) refers to how much a customer spends in your store per transaction. 

To calculate AOV, divide your total revenue earned by the number of orders placed. Merchants try to focus on and improve AOV because it’s the more direct route to increasing revenue. 

AOV = $ amount of revenue earned / # of orders

Customer value

To figure out how important each customer is, consider these two things: how often they buy from you and how much money they spend.

Multiply these numbers to see how well your marketing is working.

Customer value = Purchase frequency X Average order value

Best marketing channels to increase customer retention

How can you reach your existing customers and ensure they’re well taken care of? Here are the best channels you should try to boost customer retention: 

Email marketing

Email is a helpful way for brands to keep customers coming back. Data-driven customer retention through email marketing helps companies keep customers interested and connected to the brand.

Omnisend is a leading email marketing platform designed for the needs of all business sizes, especially small to medium-sized businesses. It offers a user-friendly interface, powerful automation features, and seamless integrations with popular platforms like Shopify, WooCommerce, Wix, and Bigcommerce.

You can send different messages to different groups of people based on where they are in their shopping experience, which increases the likelihood of them returning to your store.

SMS marketing

Sending text messages to your customers’ mobile phones allows you to create personalized experiences for them at every stage of their engagement with your brand. 

Unlike emails, text messages grab user attention. Once the messages are delivered, most people open them right away. A SimpleTexting survey found that 80.5% of users check their SMS notifications within five minutes of receiving a text.

Vape Superstore, a UK-based vaping supplier, switched from Klaviyo to Omnisend for SMS marketing to increase customer engagement and sales. After its Omnisend integration, Vape Superstore saw a 77% increase in signup rates, up to 32% with Omnisend from 18% with Klaviyo.

Sending targeted SMS campaigns with location-based promotions was a huge success as Vape Superstore saw a rise in foot traffic to their physical stores.

Push notifications

Web push notifications are useful tools for keeping customers engaged and interested in your business. They enable you to send customized offers to your customers.

Push notifications have a high delivery rate, making them a suitable channel for retaining customers. 

PPC/retargeting ads

Retargeting ad campaigns are an excellent channel for targeting your high-intent customers. 

To understand the value of each customer, you should think about two things: how often they buy from you and how much they spend. Multiply these two numbers together to see how effective your marketing strategies are.

Social media communication

Posting updates to social media channels is an effective and free way to talk with current customers as well as people new to your business. You can share customer reviews, discounts, product launches, and behind-the-scenes content to keep the content fresh and engaging.

Omnisend offers a great marketing experience using email, SMS, push notifications, and social media retargeting. You can organize customers based on their previous purchases and interactions with your brand. When you send them personalized messages that align with their preferences, they will appreciate it more, feel valued and therefore be more inclined to make future purchases.

6 expert strategies for retention marketing

Here are the best strategies you can use to keep your existing clients and grow your sales:

1. Personalized communication and engagement

Behavioral segmentation make it easy to analyze how your customers buy. You can find your regular customers and call them loyal or VIP customers.

Once you identify your loyal customers, you can send them special messages and offers customized to their preferences. 

Personalizing messages based on what customers like increases their relevance, which means they are more likely to make repeat purchases from your store.

2. Use post-purchase messaging

This method is helpful for both first-time buyers and those who have made many purchases.

It includes promoting products you might like and giving discounts to customers who return. It also applies when delivering important messages, such as confirmation emails. You can use post-purchase messages to help improve RCR.

3. Make use of gamification

Gamification enhances the enjoyment and involvement of interacting with emails and websites. Omnisend offers the spinning Wheel of Fortune, where your site visitors spin the wheel to try and win an incentive of your choice. 

The main difference between sharing a discount code and gamification is that gamified experiences involve an element of chance or luck. As a result, each customer may receive a different code or offer, which adds a sense of unpredictability.

4. Loyalty programs

Loyalty programs are one of the best ways to keep a customer invested because you’re rewarding them for shopping with you.

You can make the program appealing by offering relevant offers, making it easy to use, and adding different levels of VIP status. You can also offer unique bonuses and products to your loyal customers.

5. Consider customer accounts

Unlike your competitors, you have the advantage of interacting with customers inside their accounts.

This gives you the opportunity to make your customer service stand out and provide better support. 

You can also tie it together with loyalty programs and the reward of earning points for using an account. 

6. Analyze customer data

Your ability to evaluate customer data and identify key metrics regarding current users will help determine how well you retain customers. This will help you understand your customers better and capitalize on retention efforts by providing appealing offers and products based on their needs and preferences.

You should analyze key customer data, such as customer lifetime value, repeat purchases, and referrals. You’ll be able to identify trends and patterns, allowing you to improve your marketing strategies, product development, and overall customer service approach.

7. Omnichannel customer support

Understanding how to contact a merchant can make or break a customer relationship. By providing omnichannel customer support, you can establish your store as available to assist customers on their preferred channels, setting yourself apart.

This sets you apart and allows you to provide better customer service. Improving your customer service can impact customer return frequency. It’s worth telling others about it, too!

Customer retention case studies and examples

Need inspiration for your customer retention strategies? Here are a few customer retention examples you can look into. 

Amazon Prime: Fostering customer loyalty through membership perks

Amazon Prime is Amazon’s subscription service with awesome perks like expedited shipping, special deals, and streaming services.

Being a Prime member comes with a lot of convenient and valuable perks, which make people want to continue using it. It’s a great way to enjoy all that Amazon offers and get the most out of your membership.

Starbucks Rewards: Incentivizes repeat purchases with a point-based reward program

Starbucks uses Starbucks Rewards to encourage customers to keep coming back. Members earn stars for each purchase, which they can redeem for free food, drinks, and personalized offers. 

The program also gives customers personalized recommendations based on their preferences and behavior. 

Spotify: Tailored music recommendations

Spotify uses an advanced algorithm to provide users with personalized music recommendations. The Discover Weekly and Release Radar feature on Spotify makes playlists for you. It chooses songs based on what you like, how you listen, and what’s popular. 

Wrap up

As you can see, retention marketing is beneficial for a business. Businesses can bring customers back by offering deals and promotions. But, there are other crucial factors to consider when building loyalty.

Creating well-thought-out customer retention plans and knowing where to start is essential. The benefits far exceed the costs by a significant margin.

After all, you’ve worked hard to attract your customers — why would you risk losing them?

Using the right tools can make retaining your customers much easier. That’s where Omnisend can step in to help and make your approach more accessible and more effective.