What Is Customer Retention?

What Is Customer Retention?

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The future of retail will be all about loyalty. You don't need a crystal ball to make that prediction. It's the living, breathing truth, especially now as our country and world are challenged to come up with new, germless, touchless, and even personless ways of performing the same vital business functions as always.

Unlike any other time in history, consumers now associate leaving their homes and entering a store as a potential risk to their health, if not their sanity. Brick and mortar retail has taken a nosedive for this reason and e-commerce sites have seen a surge in orders. For both sides of the retail coin, without customer loyalty, a store will go under very quickly, whether it's on the street or online.

Customer loyalty is an asset. Loyalty in 2020 encompasses more than shopping repeatedly at a business. It's about patronizing the business on the whole--shopping, promoting, and interacting. Yes, the foundation of customer loyalty is, has been, and will always be anchored to repeat shopping. However, customer loyalty has evolved to include habits that display a heightened level of commitment, such as shopping exclusively at a store and using social media to personally promote a store out of sheer passion. It will be this elevated level of customer loyalty that retail businesses must secure with their customers in order to financially succeed as time marches on.

The old definition of customer loyalty: a customer who chooses your retail store instead of the competition's.

The new definition of customer loyalty: a customer who loves your brand so much that they recommend your store to others, in addition to shopping exclusively with you.

This new kind of customer loyalty is the relationship direction you want your retail store to head in!

So, let's take a look at the practicalities of how to foster customer loyalty, whether you own a walk-in retail store or an e-commerce one, or your business sells products in both arenas. But before we go over the actionable steps you can take to increase customer loyalty, let's address its most important characteristic.

Customer loyalty is a symptom of customer retention. Think of it this way, you as the retailer are in control of efforts to increase customer retention. When customers experience the benefits of shopping with you, then they will demonstrate increased loyalty by continuing to return to your store.

In essence, customer retention is evidenced when shoppers return to a store time and again, which directly impacts the store's profitability.

You've probably heard the business axiom that it costs more to acquire a new customer than it does to retain a preexisting one? It's true. If a customer has walked into your store a second time, then you have a very decent chance of hooking their sustained interest, but only if you have strong customer retention strategies in place.

The main purpose of implementing retention strategies is so that you can effectively maximize the profitability of each customer. The trick, however, is that the #1 strategy to excite customers into returning and shopping more is to offer opportunities for measurable savings. How, then, does reducing prices and giving away products for free lead to profitability for your business? Seems contradictory, but it isn't.

The most powerful customer retention strategies are those that successfully invite shoppers to earn measurable savings as a reward for having spent over their previously established threshold.

So how do you get your existing customers to increase their spending thresholds? What rewards can you offer them that will be mutually beneficial?

There are three strategies that we recommend over everything else out there:

  • Increase Brand Interaction
  • Solicit & Leverage Customer Feedback
  • Understand Customer Favorites


You've probably heard how important it is to increase brand recognition for your store. Nothing has changed in this department. Customers authentically recognizing your brand is not only important, it's vital to the success of your store, whether your retail store is brick and mortar, online, or both. But in 2020, brand recognition is merely the launchpad you must use to get your sales off the ground. The real emphasis nowadays must be on brand interaction.

What do we mean by that? Let's take a look at Jeff. Jeff has a passion for animals and a big heart when it comes to rescuing them. Remember the apartment scene from the mid-90s movie, Ace Ventura: Pet Detective? If Jeff had his way--and a more understanding landlord--that's how many animals he would own. Jeff might not be housing penguins in his freezer, but he does visit your pet supply store weekly to stock up on pet food, buy the occasional pet toy, and marvel at the baby chicks while fantasizing about how he might get away with building a chicken coop on the roof… If only it weren't for his landlord!

Jeff obviously recognizes--and loves--your pet supply store, so brand recognition isn't an issue. The missed opportunity you're unaware of when it comes to Jeff, and customers like Jeff, is that he would be an excellent ambassador for your brand… but he isn't interacting with your brand.

No, it's not enough that Jeff comes into your store, or orders from you online. Walking the aisles or scrolling through webpages isn't the kind of "interaction" we're talking about. In addition to patronizing your business by shopping, you also want Jeff to interact with your brand online. In fact, you want all of your customers to do this.

Customers posting about your brand on social media, leaving comments in the comment section of your website's blog, and leaving positive reviews for your products online--this is the kind of brand interaction that you want to increase if you want to take your business to the next level.

How can you easily, effectively, and immediately get the "Jeffs" of your customer base to interact with your brand online? Simply put, you let them know that they will be rewarded for doing so. Firstly, make sure your social media accounts, website blogs, and review boards are presented appropriately to meet your target audience. Then, get into the habit of connecting with your customers on those platforms by asking questions, having conversations, and showing your brand personality.

As you do so, the potential brand ambassadors and collaborating influencers will start to emerge. These followers and customers are the ones that naturally interact with you and demonstrate enthusiasm for your brand. Do they each have a hefty number of followers? Are they excited enough about your pet supplies to rave about you online? If so, you could reward them with discounted or free products. If you offer them a free product and all they need to do is try it, photograph it with their pet, and tag you, then you will instantly have multiple channels of free marketing that increase brand interaction. Thanks, Jeff!


If you never ask your customers what they like and don't like about your products, services, prices, return policies, newsletter frequency, customer service experience... then how will you ever know what areas of your business need improvement?

We all know that positive reviews can directly impact sales increases, while negative reviews--if enough of these stack up--can cause a business owner to close-up shop and reopen months later under a completely new name. Yes, reviews matter that much. And so do social media comments. A gang of dissatisfied customers can bomb your social media account with trolling comments in the blink of an eye, and guess what? It's not easy getting rid of them. Customers have a lot of power in this sense, so you want to ensure they use their forces for good and not evil…

...which, unfortunately, is not what Heather did. Born and raised in the bucolic countryside, daughter to apiculturist parents, Heather fancied herself a honey connoisseur. She loved clover honey, manuka honey, and even more experimental honeys like blueberry, acacia, and tupelo. Her love of honey and the bees that produce it inspired her to patronize just about every online honey company she could find. And she never failed to leave a thoughtful review about those she tasted and loved…

Until one day, she cracked open a brand-new jar of honey. She'd just received it in the mail from a new company she'd come across. An odd scent hit her nostrils, offended her senses, and she knew that something was terribly wrong. Why did this honey smell like old gym socks that a feral cat had...you know… all over?

A cursory Google search quickly answered Heather's question. She had been the victim of--dun, dun, dun…--buckwheat honey! Notorious for its "homeless guy on a subway smell", buckwheat honey is adored only by those who can appreciate its... let's just say, acquired taste.

Heather was not interested in acquiring a taste for that! No thank you! She called the company, complained about the taste, and was about to ask if she could exchange the volatile honey for one of her favorites, but it was then that she was met with--dun, dun, dun…--terrible customer service.

She was looking for help, understanding, and clover honey, but that's not what Heather encountered on the other end of the phone line. The customer service representative, to her horror, was condescending as he went on a long-winded diatribe about the pollination habits of bees. Heather stood up for herself and insisted that the honey tasted like how Gary Busey looked in 2016, i.e. disgusting and unfathomable. But the person she was arguing with said she was mistaken. No one saw Gary Busey that entire year… Did she mean Phillip Davis, an actor who is often mistaken for Gary Busey?

Prior to the call, Heather had not been planning on leaving bad reviews. After the call? She was ready to wage war and win. So, where did this honey company go wrong? To the untrained eye, it might seem as though the error began and ended with the customer service representative, but it goes much deeper than that. This company was not in any kind of feedback-oriented relationship with its customers. If it had been and if it was in the habit of regularly soliciting feedback and making appropriate adjustments along the way, Heather would never have bought that buckwheat honey. The company would have leveraged the customer feedback it collected about its buckwheat honey by implementing far better labeling and product descriptions. Are we saying the label would've had a skull and crossbones graphic? No, but there could've been clear and accurate information regarding the acquired taste and also the return policy. These things matter and without them, you aren't going to retain valued customers.


You aren't going to get very far in terms of understanding each of your customers' personal favorites unless you have a way of tracking their purchase history. Check to see if your in-store POS and / or online payment system has this capability. An even better technology to use for tracking purchase histories is a digital loyalty rewards program. However, whichever you use, the following is an example of what you can do once you understand customer favorites.

Meet Tanya. Tanya loves to shop, but she's thrifty. Her purchase history shows that she spends about $50 per month on personal care products at your drug store. She's already a customer, but her spending threshold is relatively low. How can you interest Tanya into spending twice or four times that amount in your store each month?

When reviewing the products Tanya favors, it's clear that she can't seem to come into your drug store without buying an $8 bottle of nail polish. In fact, when you really analyze her purchase history, the majority of items she buys at your store are nail polish.

What do we know about Tanya based on that? And how can we leverage what we know about her to incentivize her into increasing her spending threshold per month? What specific reward can we offer her if and when she reaches the higher spending threshold we have set as a goal?

Well, the girl likes her nail polish, but more importantly, we know that she doesn't go to nail salons. She isn't willing to splurge on salon treatment. However, she is willing to buy her own drug store nail polish, which means we don't want to offer her free items that she's clearly already willing to pay for.

A personalized incentive that Tanya would likely act on, and highly appreciate, could be to offer her the reward of receiving a free manicure kit that is ordinarily sold at your store as a pricier item. If you wanted to really reward her for increasing her spending threshold at your store and patronizing you more frequently, you could offer her the reward of a free nail salon mani-pedi. She would love it and there would be no risk of losing her business to the salon, because she has already proven that she will always choose doing her own nails over paying someone else to.

With either reward, whether you offered the manicure kit or nail salon experience, one thing will be certain: Tanya will feel as though you, the drug store owner, value her business. And more importantly, she will feel like you understand her as a customer and as a person. You "get" her.

Now that we've gone over the three most-effective customer retention strategies, which are, increase brand interaction, solicit & leverage customer feedback, and understand customer favorites, you are going to need a customer loyalty rewards program in place at your retail store to tie it all together.

Loyal~n~Save is an omni-channel customer loyalty solution for retailers looking to increase customer retention and new customer acquisition. If you're interested in learning about what Loyal~n~Save can do for your business, feel free to Contact Us any time!

This article was written by Loyal-n-Save, an omni-channel customer loyalty solution for retailers looking to increase customer retention and new customer acquisition.
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Douglas Nolan
Written by Douglas Nolan

He believes in solving real problems with realistic technological solutions that stand the test of time. Seeing his clients struggle to retain consumers, Douglas decided to help his clients by offering affordable and top-class loyalty solutions. Doug loves transforming the lives of his employees by assisting them to develop a solid blend of TQ (Technology Quotient) & SQ (Spiritual Quotient) to excel in their professional & personal lives.

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