Customer retention: how to keep customers coming back

Customer retention means keeping the customers you already have, so they buy from you again instead of going elsewhere. You improve customer retention with a few simple habits, such as staying in touch after the sale, fixing problems quickly and rewarding loyal customers. For example, a coffee roaster whose customers keep reordering has good retention.

What is customer retention?

Customer retention is about what happens after someone has already paid you. Retention picks up where customer acquisition, finding new customers, leaves off. Both matter, but they need different work.

You can put a number on it. Your customer retention rate is the share of customers from the start of a period who are still buying at the end of it.

Why is customer retention important?

Keeping customers matters because, in marketing terms, a customer you already have costs you less than a new one. A returning customer already knows you and your products, so you don't have to introduce yourself or market to them all over again. That makes a repeat order cheaper to earn.

Loyal customers can also become ambassadors for your brand. Customers who recommend you vouch for your quality and reliability to the people they know. They bring others with them and leave reviews, which adds to the reputation of your brand.

Retention still rests on a good product and good service, which are among the reasons customers buy from a brand again. Get those right before you spend money on discounts or emails.

What makes customers stay

Customers stay when the product is right, the service is helpful and they trust you. Products or services that are consistently good keep customers satisfied, bring repeat business and earn recommendations.

Service can undo good work quickly. Slow service, a lack of attention or a broken process can each send a customer elsewhere, while friendly, helpful service does the opposite.

Customers who keep coming back trust your products and your company. Good online reviews help build that trust.

Customer retention strategies that work for small businesses

None of the strategies below needs a big team or budget, and you can add them one at a time.

Make buying from you easy

Remove anything that could stop a customer from coming back. Walk through your own customer journey, from the first visit to the delivery, and note where it slows down. Check how simple your payment step is, how clear your delivery terms are and how easy your menu is to navigate. Fix the worst problem first.

Then think about what happens after the order arrives. A short email with tips on using the product, or a how-to guide, helps customers get more from what they bought. It also leaves a good last impression.

Use what you know about your customers

Your shop's sales data shows what each customer buys, and you can use it to make your offers more relevant. If someone bought running shoes, they may well want socks, running gear or other fitness accessories next. Recommending those shows you understand what they need.

You can also group customers by what they buy and send each group its own offer. For example, customers who often buy running products could get an exclusive discount on fitness items.

Away from your website, you can retarget visitors with ads showing the products they looked at before.

All of this is easier with your customer data in one place. A CRM, short for customer relationship management, keeps each customer's details, notes and history together. A CRM tool such as MiniCRM does this without a spreadsheet and can also remind you when a follow-up is due. If you sell through our online shop, you can see each customer and their orders from one dashboard.

Stay in touch after the sale

Customers forget about you quickly if they don't hear from you. Email marketing keeps you in mind, as long as each email gives them a reason to open it. That could be a tip, a new product they'd like or an offer only for existing customers. A birthday email with a small discount makes a customer feel valued, and it costs you very little.

SMS notifications suit short, urgent messages, such as a delivery update or a sale that ends today. Only send marketing emails and texts to customers who have agreed to hear from you. You can also message customers who bought from you about similar products, as long as you gave them the chance to opt out when you took their details. Either way, make it easy to unsubscribe from every message.

If you email customers regularly, a newsletter tool such as Ubivox helps you create and send your newsletters. It's worth sorting existing customers and prospective buyers into separate groups, so your email campaigns stay relevant to each.

Fix problems quickly and kindly

Good customer service keeps customers who would otherwise leave after one bad experience. Whoever answers questions should know your products and have the authority to put things right.

Keep the conversation in one place, too. When a customer starts in a chat and moves to email or the phone, the person helping them should see what was already said. The customer then doesn't have to explain everything twice.

For the times you can't reply straight away, set up an automatic reply that tells customers when you'll get back to them. Our guide to customer service tips goes into more detail.

Ask for feedback and act on it

Don't assume customers will tell you why they come back or why they don't. Ask them with a short survey after delivery, a one-question poll in your emails or simply in conversation with your regulars. Ask what they liked, what they missed and what you could do better, and keep it short enough to answer in passing.

Then do something with what you hear. If several customers mention slow delivery, that's your next fix. Tell customers when you've changed something because of their feedback. It shows you listen, and it makes them more likely to answer next time. Reviews are feedback too, so read them and reply to them.

Reward loyal customers

A reward, from a simple discount to a full loyalty programme, gives regular customers a reason to choose you over a competitor. You can start with one of these three.

• Loyalty discounts: offer repeat customers exclusive discounts or early access to new products. It's simple to run and easy for customers to understand.
• Points: customers earn points with every purchase and swap them for discounts, free products or other perks. Each order brings them closer to a reward, which encourages the next one.
• Referral rewards: give customers a discount or a free product when they refer a friend or family member. Keep the reward simple to claim.

Reward your regulars with discounts and offers, and keep track of their orders in the same place.

Win back customers who have gone quiet

Look through your orders for customers who used to buy regularly but have now gone longer than their usual gap between orders. Sorting your customer list by the date of each customer's last order is a quick way to spot them. Send them a friendly email with something new to see, or a small offer to come back.

It's also worth asking why they stopped. Keep it to one short question, such as "What could we have done better?"

How to measure customer retention

Start by choosing a period, such as a month or a quarter. Decide what counts as a customer, for example someone who has bought from you in the last 12 months, and use the same rule every time. Count your customers at the start, the new customers you gained during the period and your customers at the end. Then use this formula:

Customer retention rate = ((customers at the end minus new customers) ÷ customers at the start) × 100

In this example quarter, you start with 200 customers, gain 50 new ones and end with 210. Working it out gives ((210 − 50) ÷ 200) × 100 = 80%, so 160 of the 200 customers you started with are still buying.

A few other numbers show different sides of retention.

Customer retention questions

What is a good customer retention rate?

There's no single good figure, because customer retention rates differ by industry. For example, a café sees its regulars often, while a furniture shop may not see a sofa buyer again for a long time. Compare your own rate from one period to the next and aim to raise it.

Is customer retention the same as customer loyalty?

Customer loyalty and retention are related, but not the same. Retention is whether customers buy from you again, which you can measure. Loyalty means the preference behind it: a loyal customer chooses you over competitors. Your customers can keep buying out of habit without being loyal, which is one more reason to ask for feedback.

Which retention strategy should you start with?

Start with whatever loses you the most customers. To find it, work out your retention rate and ask a handful of recent customers why they did or didn't buy again. Their answers show you where to begin.

If you're not sure, we recommend starting with a follow-up email after the first order and faster answers to questions. Both cost little, and both reach customers at the moment they decide whether to come back. Add rewards once the basics work.

Once you know where to start, give your regulars an easy way to order again. If you don't sell online yet, build your online shop so they can buy from you whenever they're ready.