Marketing Automation

4 Effective Ways to Improve Customer Retention Rate in 2022

  • Aanchal Agrawal
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  • 10 June , 2022
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    • 4 min read

While acquiring new customers is important, retaining earlier customers is also equally vital for any business. In fact, it’s a more cost-efficient way to scale. Hence, most brands of today are focusing to improve their customer retention rate.

Such customers know the service they receive from your business better than the newer customers. Moreover, their trust and experience with you make them potential advocates of your business. Therefore, your chances of gaining new loyal customers accelerate!

But before moving forward further, let’s define customer retention and how you can improve it. You can also visit our D2C centre of excellence, D2Scale for more info.

What is Customer Retention Rate?

Customer retention rate helps a business understand the percentage of existing customers that a brand was able to retain over a given period of time. A good retention rate is one of the initial aspects that help a business maintain long-term growth!

While there are multiple factors that affect the customer retention rate of a company, Research Gate highlights some of the prime ones: Service quality, satisfaction, trust, and commitment. These are the major aspects to check from the customer’s perspective. Once aced, the chances of improving the retention rate increase by a massive difference!

Why is Customer Retention so Important?

Analysis of the rate at which a company retains its customers is not just limited to determining its ability to consistently provide value to them. In fact, it helps boost the company’s Return on Investment (ROI), improves trust and loyalty and thereby fetches new customers. It mainly prepares the company for long-term growth by maintaining healthy relationships with its buyers.

Let’s have a deeper look at why customer retention rate is so important for a business.

  • More Cost-Effective

The cost of retention is extremely lower than acquiring new buyers. Experts say that finding a new customer is at least 6 times more expensive than retaining an existing one. Generally, the existing customers are deep into the funnel and are already familiar with the brand’s products/services. Hence, you don’t have to reach them through awareness campaigns and the like. So, brands can look into ways to enhance the four factors that affect their customer retention rate.

  • Increase in Return on Investment (ROI)

Generally, return customers tend to transact more with a brand they know over time. And as they buy more, that company’s operating costs to maintain or serve those customers decrease. Hence, as Bain’s Research tells us, a 5% improvement in retention rate generates around a 25% boost in profit!

  • Improves Trust and Loyalty

Return customers generally pay more or upgrade their payment plans over time rather than choose your competitor who they aren’t acquainted with. Once they understand the value of your products/services and your deep commitment to them, they would find it comfortable. This will lead them to come back again to transact even more.

  • Customers turn into Advocates of your brand

If customers are satisfied, they become advocates of your brand naturally. They would refer your services to a friend or family as they highlight to them the major resolutions they found while doing business with you! The new potential customers collect feedback about the services from people they trust to seriously consider. So, with a low cost of retention, you welcome new customers for absolutely free!

Customer Retention Rate Formula

Before jumping straight into any retention strategy, let’s first understand where your current customer retention rate stands. First, take a time period, let’s say quarterly or yearly. And then consider the fundamental customer retention rate formula:

[(No. of Customers at the End of Period - No. of Customers Acquired  During the Period)/ No. of Customers at the Start of the Period] x 100.

So, let’s consider a scenario. At the start of the time period, you had 40 customers, acquired 5 new customers within that time and the 2 customers drop off from doing business with you. Using the customer retention rate formula, the retention rate would stand as:

[(43 - 5) / 40] x 100 = 95% retention

Now that you understand where your customer retention rate stands, you can assess the reasons for the attrition rate. This would help you understand the potential scope of improvement and thereby reduce the attrition rate further.

Also read our guide on : Customer Lifecycle Value vs Cost of Acquisition in Ecommerce

4 Ways on How to Improve your Customer Retention Rate

Using a few strategic customer engagements, you can retain more customers within a given time frame. Here are some ways to improve customer retention for any company. You can try and test out any of the following to see the results.

1. Adjust Prices for Return Customers

You can look into adjusting the charges in a way that’s not hurting your profit but also shows your appreciation towards your customers. For eg, if you have an e-commerce business, you can make adjustments like allowing free delivery or other coupon options. Or, you can provide a cost-effective and smart subscription that helps them cut down costs as they buy more from you.

2. Design a Roadmap for the Future Relationship

It’s a thoughtful practice to show the customers where their relationship with the company is heading. If it’s just the regular transactions and nothing more to it, it will appear as nothing special. This makes customers fall off as they start considering other better options.

Hence, a clear next step in the relationship can provide them with a sense of being a priority or valuable customer. A regular revisiting of the roadmap helps develop new initiatives that serve the goals of both parties mutually. Thus, you can boost your customer retention rate with this future roadmap strategy.

3. Feedback and Action

Asking for feedback doesn’t stop things just there. The answers from both leaving customers and existing customers provide clear scopes of improvement! If you don’t understand the reasons why customers leave, you will never act upon the problems. Once you receive feedback, your team can look into the issues that customers highlight and take proactive measures to bring the problem under control.

If customers see visible differences regarding those issues in a short span of time, they are more likely to continue with you.

4. Create a Customer Loyalty Program

Design a program that rewards your existing customers because of their loyalty. This strategic customer engagement  would work as a consistent incentive program for them to come back to your brand for more. You can consider adding points to their profile as and when they refer your business to their family or friends. Or, you can try sending out an appreciation email with 8-10% off on their next purchase!

Moreover, it’s important to keep things simple in conveying the incentive message and actions. It’s imperative that the customer understands the program’s value easily and at once!

Now that you can define customer retention and have a fundamental understanding of it, you can run an audit and tweak the areas to fine-tune your business and the brand! Better yet, you can Download Our Retention Marketing Playbook for D2C Brands  or visit D2Scale to gain a thorough understanding!

A Complete Guide To IP Warming

  • Lalitha Shukla
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  • 2 March , 2022
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    • 4 min read

A good email marketing strategy can help retain customers and engage with them in a productive way. However, a prerequisite to building an email marketing strategy is building a credible reputation for the IP address that will be used to send the emails out. Have you noticed that a huge chunk of emails that are delivered to you end up in your junk or spam folder while some make it to your inbox? The reason why those emails land up in your spam folder is because of a bad IP reputation. 

In today’s day and age when data privacy is so important, brands across the world are taking measures to ensure that they don’t spam their customers and if you are a brand that is new to email marketing, you need to ensure the same. IP warming is a very important activity that every brand new to email marketing must undertake to increase their email deliverability and customer engagement. Sending large volumes of emails to your subscribers without establishing a good reputation with Internet Service Providers (ISPs) will hamper your chances of reaching your customers. 

Do you need it?

Whether you need to warm your IP address depends on two key factors-

The volume of Emails - If you are sending less than 10,000 emails a month, then you may not require an IP warming exercise. ISPs usually target brands that send large volumes of emails every month to their customers. However, it is a good practice to warm up your IP address even if the volumes are low as it helps build credibility for your business. 

Dedicated IP Address - IP warming is required only if a brand is using a dedicated IP address. There are tools in the market that send emails via shared IP addresses and in those cases, brands don’t need to warm the IP address up. It is advisable for brands who send large email volumes to get their own IP address as the reputation depends solely on them. Using shared IPs can prove to be detrimental depending on the previous campaigns and reputation of the IP.

What is IP Warmup?

IP Warmup or IP Warming is the process of establishing credibility for a new IP Address or an IP that hasn’t been used in a while. The process includes sending emails from the new IP Address linked to the email account in small volumes and gradually increasing the number of emails each day or week depending on the schedule. The idea is to build credibility amongst ISPs ( Internet Service Providers) and ensure that the email is getting delivered to the subscribers’ inboxes.

Data shows that most connections from new IP addresses are attempts to deliver unsolicited spam or unwanted email. It’s important to build history when sending from a new IP Address to avoid landing in the SPAM folders of your subscribers. It’s highly recommended to gradually increase your volume of desirable mail to your subscribers to build a good reputation for your IP. Once a solid reputation has been built for your brand, you can start sending large volumes of emails to your subscribers.

How can IP Warmup help brands using email marketing?

Let’s look at how the IP Warmup exercise can help brands indulge in email marketing to engage with their customers. 

  1. Email Deliverability - Every brand’s major concern when it comes to email marketing is whether my email will reach my customer’s inbox or not. IP warming helps do that. Brands can determine the probability of emails reaching your subscribers’ inboxes and adjust the email volumes accordingly. 
  2. Optimise content for campaigns- During IP warming, when a limited volume of emails are sent, it’s easier for brands to understand what kind of content works best and optimise their future email campaigns for the entire database of subscribers.
  3. Campaign Effectiveness - IP warming helps emails get whitelisted and once that happens, brands don’t have to worry about deliverability. They can instead shift their focus to campaign effectiveness - understanding their customers better, creating retention marketing emails and focusing on customer engagement by looking at metrics like Open Rate, Click-through-rate (CTR) instead of the Deliverability rate.

IP warmup - Best Practices 

  • It takes a minimum of 3-4 weeks to establish an identity and build a credible reputation with the Internet Service Providers (ISPs)
  • The main factors that influence this are - Send Cadence, Volume of emails, Complaints, Bounces and Engagement
  • Brands should set specific volume thresholds per domain for each day of each week to follow, which building volume steadily week on week
  • Send cadence should usually be set at a minimum of 3 days a week to establish proper cadence and sending patterns
  • Brands should focus on the most engaged subscribers as it helps in limited bounces and complaints

Email Template Design for IP Warmup - Best practices 

Here are some best practices to follow while designing an email template for an IP warming exercise -

  • Subject line with maximum 60 characters & doesn’t contain SPAM words (eg. offer/buy now etc.)
  • Pre-header content should be maximum of 40-130 characters which give the subscriber snippet of overall communication
  •  Maintain a healthy Text to Image ratio – more than 60% of the overall design should be text.
  •  Single CTA button with “Non-Selling” action – (e.g. Knowmore) and should be on the first fold.
  •  Minimal use of external links in the email body

If you are a brand that is looking to build an email marketing strategy to engage with your subscribers and need support in IP warming, reach out to us. Our team of experts have over 15 years of experience in creating robust email marketing strategies and have handled IP warm-ups for over 300 brands.