Think about the companies you buy from every year, or even every month or week. Besides grocery stores and gas stations which you likely visit out of geographic convenience, you probably have a handful that you frequently purchase from because you believe in their brand values, they have products you love, or the customer service is outstanding. All of those reasons and more lead to you being a returning customer. 

So flip that on its head and think about what makes someone want to shop with your business again.

Retention Marketing Definition

“Retention marketing simply means focusing your marketing efforts on getting repeat purchases from current customers.”

The end goal is to create happy, loyal fans that buy again and again, increasing their total lifetime value for your business. 

Why Is Customer Retention Important?

Keeping current customers coming back can actually decrease the cost to acquire new customers, which has skyrocketed in recent years. This can help you spend less than you planned if you’re a marketing pro, or stay efficient within a limited marketing budget if you’re just getting started.

Repeat customers typically spend more per visit too. First time visitors are testing you out. They may purchase a five-class pack at your gym instead of the annual membership, a four-pack of your mocktails instead of a case, or one puzzle instead of the monthly subscription. You know the 80/20 Rule? That applies to your business revenue too where up to 80% of your revenue likely comes from the top 20% of your customers. And recent data even shows that 41% of your revenue could come from just 8% of your regulars.

In addition to their repeat purchases, these customers are also more likely to refer their friends and family to your business. A report from the White House Office of Consumer Affairs even states that those happy customers will each tell 4-6 people about their experience at your business.

Who Is Doing Retention Marketing Well?

Zappos: Zappos, a 20+ year old online shoe retailer, builds customer retention efforts into their marketing budget. They don’t charge for shipping in either direction, and have a 365-day return policy, making it entirely seamless for customers to make returns, therefore 50% of their customers make a further purchase after that return. They also invest heavily in customer service with a large team dedicated to talking to customers on the phone and making their experience a great one. According to a case study from Zappos, 75% of their revenue is from returning customers.

TOMS: Now turning to a specific shoe brand, TOMS has done an excellent job over the last decade learning about their specific customer segments, and making sure to cater their retention and loyalty messaging to each segment. They first have their long-time customers who love to collect different version of their famous slip-on shoes. Those customers have been with the brand for a long time and already know and love it, so TOMS makes sure to give them great loyalty perks and plenty of fun new products to collect. Then, they have anyone who is newer to their brand. For those folks, they’re educating them on the history of TOMS and its famous social responsibility (TOMS commits one-third of its profits to good causes), as well as new modern styles of shoes to build trust and loyalty that way. 

Ritz-Carlton: From the outside, Ritz-Carlton is famous for being high-end and luxury in the world of hotels, but on the inside its customers love it for a consistent, above and beyond experience that makes staying at a Ritz-Carlton so enjoyable. Per their latest metrics, 80% of Ritz-Carlton customers say that they plan to stay again. This is in large part to the hotel chain’s whole operating philosophy of treating employees with respect and dignity, while supplying them with tons of coaching to provide a consistent, above-and-beyond experience for hotel guests. At Ritz-Carlton, they focus small things from knowing guests by name, to large things like anticipating guests needs, and empowering employees to resolve problems immediately for guests without having to go through red tape to ask permission. Ritz-Carlton is a perfect example of how retention efforts bleed into an in-person experience for a business too, and aren’t just for online marketing. 

Dominos: After the pandemic, Dominos Pizza, like many delivery-focused restaurants, started to feel some stagnation in their delivery sales. They were already a leader among pizza chains for technology like their mobile app and their special order-tracking meter that customers could watch to monitor where their pizza was in the order process. They chose to double-down on customer loyalty to increase sales and are seeing big results. First, they offered $1 million in free pizza to feed their acquisition funnel into their Rewards Program, then they revamped that program to reward customers more frequently, both with smaller reward levels and more redemption options. Dominos understands that the more a customer uses a loyalty program, the longer they will stay a customer!

These brands are well known for prioritizing customer happiness and retention marketing over old-school acquisition efforts. What ideas can you apply to your own business? We’d love to help your brainstorm ideas that fit within your budget.