Customer retention: How to keep customers happy and reduce churn

By Sarah Olson, Senior Associate, Content Marketing, @seolson5

Published March 20, 2020
Last modified July 7, 2020

Every business has a customer base that they've worked hard to attract and retain through a combination of marketing, social media and brand strategies. You invested a lot of time and effort (and probably money) to gain those customers' trust, so it makes sense that you want to keep them. That’s where a strong focus on customer retention comes in handy.

To improve customer retention, you have to look at your entire customer experience. Your customer experience encapsulates everything the customer thinks and feels when they first encounter your brand. If you create a seamless experience that makes customers happy every step the way, you'll have a much better chance at retaining them. However, if your business falls short of customer expectations, you risk losing those customers before you even have a chance to make things right.

Let’s look at what customer retention is, why it matters and some strategies that can help you improve customer retention.

What is customer retention?

Customer retention refers to the ability of a company to retain its customers over time, focusing on keeping existing customers on board by building good customer relationships. As a performance metric, it helps provide context around how well a business is keeping its existing customers satisfied with their product and the overall quality of service.

Understandably, customer retention is influenced by the customer experience, which includes anything that impacts a customer’s perception and feelings about a company. Customer-facing interactions, such as support ticket resolution or how a brand communicates its values, are just a few of the elements that can affect a buyer’s relationship with a brand.

Different from customer acquisition or lead generation, customer retention focuses solely on customers who have already completed a transaction with the brand, such as those who’ve signed up for a service or purchased a product.

But retaining customers is about more than just transactions—it’s about relationships. Research shows that customers view their relationships with brands as similar to their relationships with their friends. By focusing on the relationships you have with your existing customers, the right retention strategies can turn retained customers into loyal customers, meaning they will continue to choose your brand even when presented with other options. These long-term relationships are key to creating the kind of brand loyalty that will help you weather the ups and downs of the market.

Read on to see how implementing customer retention strategies is not only good for your customers but also good for your business.

The value of retaining existing customers

Keeping your current customers happy is generally more cost-effective than acquiring new, first-time customers. Retained customers can be easier to convert than first-time buyers because they already have a foundation of trust with the company if they’ve purchased from them previously. New customers, however, often require more convincing when it comes to that initial sale. In fact, according to the Harvard Business Review, acquiring a new customer can be anywhere from five to 25 times more expensive than retaining an existing one.

Plus, if you’re successful at fostering customer loyalty, your customers may also provide free word-of-mouth marketing to their friends and family that can move the needle even further for your brand. Read more about how to cultivate customer loyalty for long-term success.

Illustration showing man sitting atop a pile of charts and graphs

Measuring customer retention and churn

When evaluating retention efforts, there are two main metrics companies use to understand the quality of the customer service they’re providing, retention rate and churn rate. Your customer retention rate is a reflection of the number of previous customers who remained loyal to your business over a period of time. Related, your customer churn rate is the percentage of customers lost during a period of time.

If you have low retention rates or high churn rates, these could be signs that indicate something isn’t going well with the customer experience. Monitoring these retention metrics means keeping a finger on the pulse of the overall quality of customer service a company is delivering to its customers, with two primary objectives:

  • Increasing customer retention
  • Decreasing customer churn

How to increase customer retention

To retain customers, you want to provide the best possible experience at every stage of the customer journey. If you’re selling online, your website should be easy to navigate. Customers should be able to ask questions every step of the way, especially if they encounter a problem. When they do reach out for help, customers want questions answered quickly and effectively, without having to wait around or switch to a different channel. In fact, a study we conducted with Dimensional Research showed that 89% of customers believe a quick response to an initial inquiry is important when deciding which company to buy from. Improving response times is one customer retention strategy your team can focus on. You could also consider adopting omnichannel customer support, so you can respond quickly on any channel, whether it’s a traditional support platform like email or something more nuanced like a WhatsApp message.

Then, once a customer has made a purchase, you should show them that you appreciate their business. An email thank-you note is a good place to start. This is a good opportunity to ask for feedback on their experience with a customer satisfaction (CSAT) survey. You could also consider sending a special discount code for their next purchase, or invite them to enroll in a customer loyalty program that incentivizes regular purchases.

How to decrease customer churn

Another challenge is keeping customers from churning, or taking their business to a competing brand. There are a lot of things that could cause a customer to churn. Some are innocuous, like a better deal or lack of product availability in a certain store. However, a bad customer experience can also impact your churn rate. For example, if a product arrives late or is damaged in the shipping process, it could reflect poorly on your brand. Similarly, a negative customer service interaction can also diminish the customer relationships, which reduces customer loyalty and may cause buyers to look elsewhere when it comes time to buy again. In fact, data in our 2020 Customer Experience Trends Report showed that nearly half of customers would switch to a competing brand after just one bad customer service experience.

Again, the customer experience is key to reducing churn. Eliminating sticking points in your customer experience will help you stop churn before it happens. For example, one common customer complaint is having to repeat personal information over and over. With the Zendesk Support Suite, your agents can get a complete view of the customer, including their contact information, so they can provide a more seamless, personalized experience every step of the way.


6 best practices to retain customers:

1. Respond to customer support queries faster

Data shows that speedy first reply times result in higher customer satisfaction. Even if that reply is just a short message letting the customer know their question was received with an estimate for the projected time to resolution, these notifications let customers know you’re actively working toward a solution.

2. Deliver personalized support interactions with context

Customers feel frustrated when they have to explain an issue over and over. Make sure that your support agents are equipped with the tools they need to elevate the conversation and provide a more personalized support experience that will make them feel good about coming back.

3. Establish better customer service workflows

Helping your agents can help your customers too. Simple customer service workflows, fueled by the right forms and conditional form fields, help sort customer support tickets so that they can be handled by the best possible department and/or company representative right away. This means a better and faster support experience for your customers.

4. Offer omnichannel support to reach customers where they are

Omnichannel support keeps things moving with no extra effort needed from the customer. Instead of limiting your support channels to one or two select methods, give customers the freedom to choose the channel they like best, whether that’s phone, live chat, email or social media. Omnichannel support is likely to increase customer loyalty because you're decreasing the effort it takes to reach your support team.

5. Gather customer feedback on an ongoing basis

Give customers a voice via surveys or by gathering feedback from customer service team members on an ongoing basis. Customer feedback is one of the most valuable tools you have to increase retention and reduce churn, but you likely won’t get much insight unless you ask your customers directly.

6. Incentivize loyalty

Incentives include a loyalty program, discount code or special offer to motivate customers to continue buying from your business. While these tactics promise immediate results for your business, you should also strive to serve your customers by creating a good customer experience and living by your corporate values. Together, these efforts can help turn repeat customers into loyal customers.

Retaining customers and building customer loyalty doesn’t happen overnight. It will take time and effort to grow your relationship with your customers and earn their trust. One of the best ways you can earn their trust is by providing an exceptional customer experience from start to finish. Go above and beyond in your customer service, make their lives easier and maybe even have a little fun along the way.

Keep your customers coming back by investing in your customer experience. Get started with a free trial of the Support Suite today.

Build a customer experience brand

Great customer experiences lead to loyal customers, improved word-of-mouth, and increased revenue. Get started with our free guide.