How to Create a Foolproof Customer Retention Strategy

We walk through the important steps and considerations to building a retention program that works.

An 11-step guide to creating a customer retention strategy

Converting a new customer is a huge win for your business – but it shouldn’t be viewed as the finish line. To grow sustainably and stay competitive, your business needs to keep current customers from churning. And that is where a retention strategy comes into play. 

Important considerations to get started

Every step of this guide to creating a customer retention strategy requires quality data. If you haven’t established a pipeline for gathering, cleaning, and consolidating customer data from across your organization, now is the time to do so. 

Here are some helpful resources to get started:

1. Define important events in the customer journey

A customer journey is the series of interactions a person has with your business throughout their entire customer lifecycle. Certain interactions, such as user onboarding or the first subscription renewal period, are crucial to retention. Identify which interactions in the customer journey tend to be followed by either a significant drop or rise in retention rates (and that is where you should focus your efforts). 

🧠 Learn about how to map and analyze customer journeys (including B2B journeys).

2. Pick your key retention metrics and KPIs

Customer retention rate shows how many customers have stayed with your business over a period of time. It’s best to consider overall retention rates in conjunction with other metrics, like:

  • Average order value (AOV), or how much, on average, a customer spends with your business (in a given period).  If you have a consistently low AOV and decide to tweak product pricing, keep a close eye on your customer retention rate to see whether this helps customers stick around. If they don’t, consider tweaking a different marketing factor.

  • Revenue churn rate measures the percentage of recurring revenue a business loses in a given period. If the loss of a cohort of customers doesn’t significantly impact revenue churn, those customers may not have been contributing much to your revenue in the first place.

  • LTV:CAC ratio describes the relationship between customer lifetime value (LTV) and customer acquisition cost (CAC). This metric helps you compare how much a customer spends on your business over their lifetime (i.e., their LTV) and how much you spent to acquire them in the first place (i.e., CAC). As a general rule of thumb, focus on retaining customers whose LTV is at least three times their CAC.

Early stage retention

Early-stage retention focuses on getting new customers to stick around. The onboarding period is crucial for this, especially for products with a learning curve or tons of competitors.

3. Provide resources that educate customers and help them navigate your product

B2B software typically requires a learning period, as do apps for personal improvement (like meditation or financial management, as two examples). Even simpler apps like e-commerce platforms require the user to learn new actions, like adding funds to an e-wallet. Teach new signups to perform these actions through blog articles, infographics, and short videos. For products with a steeper learning curve, use longer tutorials or interactive courses.

To take this a step further, you can personalize these resources based on customer data. Say a new user of a design software indicated in your onboarding survey that they’ll primarily be creating marketing brochures. Send them tips and ideas for creating brochures during their first week to help them quickly recognize your product value.

4. Nudge new signups to take high-value product actions

When a new user performs high-value product actions, they experience the value of your product for the first time. It’s a moment of revelation – product teams call it an “aha moment” – and the customer wants more experiences like that.

Guide and nudge new users to take valuable product actions through in-app prompts, sample projects, and reminders using onboarding software like Userflow or Chameleon. Personalize the onboarding experience by tailoring your messages to the actions a new user has (or hasn’t) taken on your app. (You can gather data on the user’s actions and connect it to your onboarding software using a customer data platform like Segment.)

Middle-stage retention

Middle-stage retention focuses on keeping customers who’ve stayed with you past the onboarding period. You learn more about how these customers use your product and also monitor their satisfaction and engagement.

5. Identify actions that regularly precede churn and actions associated with retention

Inevitably, some customers will churn even after they’ve experienced your product’s aha moments. To perform churn analysis, identify churned customers’ common characteristics, as well as similar behaviors they performed or experiences they had in the days or weeks before churning.

You may discover churn indicators like:

  • Reducing purchases from 3x a month to 1x a month or less

  • Giving a net promoter score (NPS) of 6 or lower in the most recent satisfaction survey

  • Marking a query as “unresolved” after a customer support chat

Perform retention analysis by identifying the common characteristics, behaviors, and product usage habits of your longest customers. These may look like:

  • Using the product together with their personal network or with their teammates at work

  • Using core product features at least 2x a week

  • Giving you a high satisfaction rating (8+) in an NPS survey or after a customer support chat

6. Segment customers based on completion (or non-completion) of actions

Segment your customers based on how their behavior matches churn or retention indicators. For accurate segmentation, you must have a single customer view – a centralized view of customer actions across different channels. You obtain this by connecting disparate data sources to a centralized database like Segment’s customer data platform, and defining the customer actions you need to track.

A customer data platform can identify the same customer across multiple channels and reconcile their data into a customer profile. That profile, which gets updated whenever the customer performs an action you’re tracking, becomes your basis for assigning them to a segment.

To scale your segmentation process, set “if-then” workflows that automatically add a customer to a segment whenever they perform (or fail to perform) a series of actions. For example, if a customer stops logging in at least twice a week, they’ll automatically be added to a list of customers with reduced activity.

7. Automatically trigger re-engagement campaigns to prevent churn

Once a customer gets segmented as a churn risk, you can automatically trigger a campaign to win them back. For example, when a customer stops logging in at least twice a week, they’d receive a message on the channel they most recently used to interact with your business.

Journeys-example

Here’s an example of a re-engagement workflow you can implement using Segment Journeys.

You can automatically trigger such workflows by connecting marketing tools (e.g., email or SMS messaging software) to your customer data platform as data destinations.

Late-stage retention

In late-stage retention, you focus on increasing the longevity and loyalty of your regular customers.

8. Implement an omnichannel approach to customer support

An omnichannel customer engagement strategy enables customers to start a conversation on one channel and continue it on another without having to repeat their questions.

Say a customer begins a support query in a chatbox on your website. The chatbot passes the conversation to a human support rep. The customer chooses to continue the conversation over SMS. The rep has seen the salient details from the initial conversation with the chatbot and doesn’t ask the customer to repeat information they’ve already shared.

9. Gather feedback directly from customers

Talk to your customers to learn more about why they’ve stuck with your product, what parts of their experience satisfy and frustrate them, and what could make them leave your business. Look at customers who’ve recently filled out an NPS or after-support survey, as well as long-time customers who’ve discussed your product on a review site or social media, and email them to ask follow-up questions.

The insights from these conversations will help you identify areas of improvement. You’ll also learn more about the experiences that improve retention, which will help you make better decisions about how to allocate your marketing budget and efforts.

10. Create opportunities for customers to become advocates of your product

Give customers more reasons to stick with you. Common retention strategies at this stage include:

  • A loyalty program that rewards customers for their purchases and engagement

  • A referral program that gives customers discounts in exchange for introducing you to potential customers

  • The chance to shape your product by participating in focus groups and beta tests

  • A community for sharing and even selling user-generated content

11. Monitor external threats to customer retention

While you can do your best to keep customers engaged and satisfied, external threats abound: a competitor comes up with a better product or lower price, economic volatility tightens customers’ wallets, or a new manager decides to stop using some B2B products.

Keep an eye out for churn risk even among your regular customers. Sentiment analysis AI, such as Qualaroo or BrandWatch, helps you aggregate and analyze product reviews, social media discussions, media mentions, and competitor announcements in order to monitor your brand reputation and socioeconomic trends that may affect your market.


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