As your business grows, so will the cost of acquiring customers.
Some of it is due to rising paid media costs. But it’s also the nature of doing business. You need more resources to reach more customers – including those unaware they even need your product.
Holding on to your customers is key to balancing out acquisition costs. This is where retention marketing comes in. According to Deloitte, an increase in retention of only 5% can grow profits from 25% to 95%.
In this article, we will dive into three strategies to amplify your retention marketing efforts – and explain what makes referrals such a potent channel to maintain your customer base.
The Importance of Retention Marketing
Retention marketing aims to engage your existing customers to increase repeat purchases.
There are many benefits to directing your marketing efforts toward your existing customers. For one, your customers are already familiar with your offerings and don’t need as much information to make another purchase.
You will lower customer acquisition costs (CAC) and build a stronger relationship with your customer base.
The more customers use your products and services, the more loyal they will be to your brand. Customer-led growth boosts lifetime value (LTV), and average order value (AOV) will increase. According to Marigold’s consumer trends research, over six in ten customers will spend more on purchases from brands they’re loyal to.
But how do you nurture loyalty? The answer lies in giving back.
Nearly 9 in 10 consumers say their favorite brand rewards them for their loyalty. So, incorporating relevant offers and promotions in your retention marketing strategy will help affirm your customer relationships.
3 Retention Marketing Strategies to Consider
As you build out your unique approach to retention marketing, consider the following strategies to increase your chances of success.
1. Referrals
Referrals are one of the most cost-effective ways to bring in new customers. But do they also bring in more loyal customers?
Before 2011, there was a lack of evidence that referrals impacted retention or delivered substantial value. Then, a research team conducted a study of about 10,000 customers of a major bank in Germany. After three years, the researchers found that the bank retained referred customers at a higher rate than non-referrals. What’s more, referred customers had at least 16% more value.
At Extole, we have also seen how referred customers bring in additional value for our clients. A furniture retailer using our customer engagement platform found that between 30% and 50% of their repeat buyers consisted of their brand advocates and the customers they referred.
One of the reasons referrals make such good customers is that advocates know precisely who in their environment would benefit most from the program. This puts your products and services directly in front of your ideal customer.
Double-sided referral programs that reward advocates and their friends are highly effective. Successful companies like Uber have used this type of incentive program to encourage adoption and gain a major business footprint.
2. Loyalty programs
Loyalty programs are everywhere, from banks to hotels. These programs are built around rewards that customers unlock with regular purchases. The rewards incentivize customers to keep coming back, increasing LTV.
The best rewards programs increase customer loyalty, brand advocacy, and purchase frequency, according to McKinsey.
However, the ubiquity of these programs means businesses need to craft compelling rewards to encourage customers to use their program instead of a competitor’s. According to Deloitte research, customers prefer rewards that consider their preferences instead of offering everyone the same benefits.
You should also balance discounts with additional exclusive experiences. Early access to new products or invites to members-only events create a VIP experience where customers feel valued.
3. Personalization
Personalization is crucial to effective retention marketing, whether you use referrals, loyalty programs, or another approach. Nearly 80% of consumers are more likely to make a repeat purchase from companies that tailor their customer engagement.
First-party data (collected directly from consumers) is needed to get personalization right. You can collect it from your website, mobile app, CRM system, and any other channel where customer interactions occur.
TaxAct, a provider of tax management software, was able to personalize its referral program with Extole. They wanted to reward their top advocates with differentiated rewards, so they implemented A/B testing to determine the best option. Collecting the A/B test data led them to create a Super Advocate program with unique rewards for their most valuable advocates.
Successful Referral Campaigns to Inspire Retention Marketing
Referral programs are a gateway to higher retention rates and LTV. Get inspired by these examples from finance, telecommunications, and travel companies.
1. Finance
In the banking industry, referrals go a long way. It’s a competitive industry, and people rarely switch financial service providers without good reason. But when a friend recommends a new product with a monetary bonus, the likelihood of signing up increases.
Take Discover as an example. Their Refer a Friend program rewards both the advocate and their friend with statement credit – a maximum of $500 per year.
Banking and investment platform Acorns gives a $5 bonus to advocates and each person they refer. Unlike many referral programs, Acorns doesn’t limit how many friends advocates can invite. Plus, advocates can earn even bigger bonuses if they invite their friends during special promotional periods.
2. Telecommunications
The telecommunications industry is equally as competitive as finance. The importance of positive word-of-mouth is essential for telecom companies to attract new customers.
In the case of e-sim provider Airalo, their easy-to-use referral program gives a $3 reward to advocates and friends.
Notice how Airalo provides both a referral code and the ability to share a link via various messaging apps to reduce friction for advocates.
3. Travel
In an industry like travel, where customers are very careful when making their travel arrangements to create a memorable holiday, referrals are worth their weight in gold.
Marriot allows customers to refer their friends as part of their loyalty scheme. When a member invites a friend to the Marriot Bonvoy loyalty program, both earn 2,000 points for each stay they can use for free hotel stays and travel experiences. Advocates can earn a maximum of 50,000 while referrals are capped at 10,000.
Boost Retention By Rewarding Brand Advocates
Every business has loyal advocates in their customer base. But you will leave money on the table if you forget to activate them.
With a referral program, you give advocates an easy way to champion your brand and get rewarded for it. This will help you retain them while bringing in more loyal customers.
Extole’s customer engagement platform allows you to find high-quality customers at scale with contests, influencers, and refer-a-friend and drop-a-hint programs. Plus, you can boost retention by giving your most loyal advocates special rewards.
Sign up for a demo to discover all the features of the Extole platform, from personalization to analytics and reporting.
