In a previous article, we have already illustrated several companies that have come up with creative solutions to increase their revenue from their existing customer base (= loyalty/retention marketing). 

Heck, we even created a whitepaper that shares 23 ways big brands worldwide introduced loyalty marketing tactics. You can download it here. ⬇️


But what are cornerstones of a successful retention/loyalty strategy? We have a closer look at how these 4 pillars can help you set up a successful retention strategy :


⚡ Your Product Offering

⚡ Your Customer Proposition

⚡ Organizational Goals & KPI’s

⚡ Truly Customer-Centric Marketing


1: Product Offering

First off, your product offering should be able to cater to the needs of customers that shop regularly. It’s that simple. A few things to keep in mind here: 


  • You don’t necessarily need a broad product inventory, but one that is topped up regularly. E.g. consumption goods like health nutrition or toilet paper (great example: Dollar Shave Club). Bonus: Dollar Shave Club has the best online branding ever


  • Don’t hide behind the product or service. In a previous article, we shared examples of Mud jeans & Project Wren. If you can sell jeans or even ‘carbon neutral offset’ as a repeat purchase, you can pretty much sell anything as a subscription. 


  • You need a good understanding of products and their ‘role’ in the entire inventory. IKEA understood this and therefore opened restaurants in its stores, which customers can only visit when they walk through large parts of the stores. The ‘role’ of their restaurant is to get people to walk through their new inventory from time to time. They literally use meatballs as bait for hungry customers. Genius if you ask me.


Successful companies like Bol, Amazon, and others have introduced subscription/repeat purchase models to an otherwise non-subscription / repeat purchase based business to increase customer retention/loyalty.

So why can’t you? 


2: Work on your Customer Proposition

It is not only about your product offering, but you should also have a good look at your customer proposition and ask yourself: what does a customer need to come back? Let’s look at the e-commerce business. Of course, the right inventory is a prerequisite for customer retention, but given there are almost always several providers for the same product in e-commerce, customers need more reasons to keep coming back. As Coolblue’s CEO famously once declared :

”The pictures are the same in every webshop, the buttons just need to work and that leaves the price as a competitive tool, which inevitably results in a race to the bottom.”

And yet, every day, 1200 people order a washing machine from Coolblue. Is it just the picture, the button or the price? Or none of them?

According to CEO Pieter Zwart, it is all about asking the right questions. When buying a washing machine, customers don’t care about how it looks but they do care about the delivery process. They want to know: “Is it free and will they deliver it to my 4th-floor apartment?”

Yes, Coolblue does this. And it’s because of this customer service that really goes above and beyond that Coolblue has grown into a winning company with a high retention rate (e.g. their NPS score is +63, while the average e-commerce retailer scores +7 | source). 


3: Revise Your Organizational Goals

Goals and KPIs drive the priorities of an organization. Winning companies have therefore prioritized tracking, measuring and revising goals around customer retention and growth. They understand that the current KPI framework focussed on acquiring first-time buyers cannot be used to judge retention efforts.  That would make about as much sense as judging a fish on its ability to climb walls. Common retention KPI’s are for example: 


  • Leaky Bucket Ratio 

According to Marketing Land, ‘Leaky Bucket Ratio’ is the number of customers lost in a given period relative to the number of new ones gained. If you gained more clients than you lost clients, you are basically plugging a leaky bucket. 


  • Customer Lifetime Value (historic vs. forecasted CLV)

According to Clevertap, Customer lifetime value (CLV) is the profit margin a company expects to earn over the entirety of its business relationship with the average customer. Customer Lifetime Value and its calculation is a bit too broad to tackle in this blog but we do want to make an important distinction between historic and forecasted CLV. 

Historic CLV is the simplest way to calculate CLV, which computes CLV based on what customers have previously spent with you. We do not recommend calculating historic CLV as it puts all of your customers—new and old—into the same bucket when in fact they may behave substantially differently. 

Forecasted CLV is more complex to calculate but companies are increasingly adopting it as the threshold of machine learning is lowering. It is miles ahead of historic CLV in every way and should be the default way of calculating CLV. Calculating CLV via machine learning can be done in many different ways via many different ML models, Retention Science covers 3 common techniques here


  • Early Repeat Rate

According to Custora it is a metric that tracks what percentage of new customers have made a second purchase by a certain fixed point in time. Of course, this metric can be interpreted differently for subscription and non-subscription business’. 

Overall Repeat Rate, Customer Churn and many other interesting metrics can be included in your loyalty KPI framework.

We are working on a full document exhibiting a lot of well-known loyalty KPI’s. We hope to share it soon, please subscribe to our newsletter if you want to be kept in the loop… 


4: Make Your Marketing Truly Customer-Centric

Most companies tend to focus on reducing/optimizing current customer acquisition costs and/or ROI. As soon as they convert a visitor to a customer, they tend to forget about her/him. 

That isn’t smart. Why would you go to great lengths to convert a visitor, to then forget all about her/him once she/he has converted? 

That is why converting a visitor into a customer is only one part of a job well-done. 

100% of companies know how to convert visitors to customers. Otherwise, your company is not in business. Easy as 1-2-3.

Converting a one time customer into a repeat customer is part II

Only a small fraction of companies have an active focus on this second part (beyond sending generic mailing /unsegmented newsletters). 

However, a special thing happens when a visitor is converted into a client. We shift from cookie ID to user ID. Alongside this shift, an abundance of new marketing / analyzing opportunities open up that were simply not accessible beforehand (when your customer was just another ‘cookie’ or group of cookies). 

Some of these possibilities are : 


  • Creating a 360-degree view of your customer by combining data from multiple touchpoints (online, offline, payment, logistics, .. )
  • Creating churn models: connecting all customer data in one central view allows you to identify with great precision when a customer is about to stop doing business with you (different ways to achieve this in subscription vs. non-subscription businesses). 
  • … 

Imagine sending out an automated email to a customer who has already made multiple purchases with you when he/she visits a specific product page multiple times in 1 week. Pretty neat isn’t it? Sounds like something winning companies do isn’t it?


Summing up

One of the main ways to secure success, in the long run, is not by sticking to metrics that include: a growing customer base, counting store visits or having a laser focus on increased profits. While the ‘classical acquisition framework’ is crucial, companies that are truly winning in the long term place a retention framework adjacent to it… 

Winning companies: 

  • Know how to visualize so-called ‘big hairy audacious goals’, they dare to look at the future and understand how to break long term goals into actionable short term to-do’s.
  • They put the emphasis on boosting their knowledge about customers and thus enhance a customer-centric approach. (Read our recent blog article on this)
  • They have aligned their product offering with a long term engagement from their clients.

Companies that master the art of retention and generate truly loyal customers, will be able to secure sustainable wins. Companies that don’t, will be remembered as – to put it frankly- losers.

Final remarks. 

Retention tactics are not as important to every type of company. When launching a company, you are still testing out the market fit. In this stage, it might be useful to focus on acquiring new customers while keeping costs as low as possible. But as your business matures over time,, it’s important to start thinking about a retention strategy

Apart from prioritizing the size of your company, it’s also important to focus on the right type of retention. Should you focus on reducing churn by giving incentives to your worst or best clients? That’s something we’ll perhaps write about in the near future.


This article is inspired by this great article on medium. Be sure to give it a read.


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