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Why is customer retention the ultimate growth strategy?

By Vikrant Kaushal 28th February 2022

The best customer strategy for your growth has been in front of you all this time: your existing customers. All you have to do is make them happy and then figure out how to provide even more value to them.  Consider the case of GrooveHQ. They enhanced client retention by 5%, which resulted in a 95% increase in profitability. Growth without retention is not growth, and retention is the single most critical growth strategy.

Customer retention | Customer Engagement automation | Hippo

Customer Retention

Customer retention refers to a firm’s capacity to retain its customers for a specific amount of time. Retained customers are those who use a product or service frequently, continue to buy, or in some other way do not defect to another product or service, or stop using it altogether.

There are several KPIs that can be used to measure customer retention and loyalty. The most popular of them are

  • Customer Retention Rate(CRR), and
  • Customer Churn Rate(CCR)

CRR reveals the percentage of customers that have been continuously engaging with you over a specific period of time, and is calculated using the formula:

CRR = [(Customers at end of the period – New customers during the period) / (Customers at the beginning of the period)] x 100

Customer Churn Rate, on the other hand, reveals the percentage of customers that have ceased engaging with your brand in a given period of time. It can be calculated using the formula:

CCR = (Customers lost during a given period / Customers at the beginning of the period) x 100

Customer retention and churn rate are crucial indicators of loyalty. However, in order to properly comprehend effectiveness, you must observe how consumer purchases evolve over time. Customer Lifetime Value (CLV) is a measurement of how much money your customers spend on your products or services over the course of their customer lives. You can compute CLV using the formula: 

CLV = Gross margin per customer lifespan x [Customer retention rate over period / (1+ Discount rate over period – Customer retention rate over period)]

Customer Acquisition 

The most common metric used to measure customer acquisition efficiency is Customer Acquisition Costs, commonly referred to as CAC. Typically CAC is calculated by dividing the marketing and sales costs for a particular initiative or time period by the number of new customers that it generated.

The formula that can be used to find CAC is:

CAC = Marketing & Sales costs / Customers acquired

CAC can be used to calculate the effectiveness of a specific campaign, such as a TV ad placement, or of general performance over a given period of time (quarter, fiscal year, etc.). It’s a powerful metric because it reflects both the number of customers acquired as well as the efficiency in which they were acquired.

Why is Customer retention better than Customer Acquisition

Customer retention vs customer acquisition | Hippo | Jungleworks

According to a KPMG study, it was found that customer retention was the most important revenue driver for businesses (KPMG’s 2014 Retail Industry Outlook). A high client retention rate can improve earnings by up to 95%. (Bain & Company). Furthermore, it can cost up to 6-7 times more to attract a new customer than it does to keep an existing one.

There’s no denying that customer retention is vital to the development of any business, whether it’s a B2B, SaaS, or retail operation. Utilizing your valuable resources to recruit new clients is not always the greatest idea. In fact, the likelihood of selling to an established customer is 60-70 percent, and the likelihood of selling to a fresh prospect is as low as 5-20 percent.

It fosters customer loyalty. When you make an effort to look after your consumers both during and after a sale, you significantly improve the customer experience and boost the likelihood of repeat purchases. Furthermore, it’s no secret that loyal, long-term customers spend more on average than newly acquired clients – 67 percent more on average!

It’s a free source of brand ambassadors. When retention is done well, your customers literally start doing your marketing for you; they become brand champions. As word of mouth spreads, this will help to minimise your initial client acquisition costs over time, cutting your overall marketing costs even further.


  • 65% of an average company’s business comes from existing customers.
  • Loyal customers spend 67% more than new ones.
  • 89% of the companies see customer experience as a key factor in driving customer loyalty and retention.
  • Existing customers are 50% more likely to try new products and spend 31% more than new customers.

How to start?

The first step is always the most difficult one. Here are a few of the most important strategies opted by the world’s most successful companies like Apple and Amazon that have a retention rate of over 90% compared to the world average of 20%:

Tailor new user experience

Every company has a new user experience to tailor, whether they sell online or operate a brick-and-mortar business. Companies should use onboarding to welcome new customers and teach them all they need to know about the brand. A personalized onboarding experience that’s simple and easy to browse can lead to higher user engagement, lower customer churn rates, and happier customers. Your new user experience should be easy to use, intuitive and personalized.

Personalise the return customer experience

Personalised experiences are a surefire way to improve the chances of a return customer. People will be more likely to return to and recommend a business if they feel appreciated and the retailer is able to automatically personalise the customer experience.

Personalised Customer Experience | Customer Retention | Hippo

Personalised shopping experiences that help shoppers find what they are looking for, purchase faster and have confidence in their transactions will improve sales and customer loyalty. You must go above and beyond to provide your customers with a stellar experience when they return to your store; whether that means sending them special offers or personally contacting them to check in on their experience.

Hippo enables you to use data from previous purchases to build a profile that will cater to their preferences and an omnichannel approach to engage with them.

Get customers’ information down before they go 

Getting customer information down early and often is key, according to one customer service expert from Intel. The more you know about the people you’re selling to, the easier it will be to keep them coming back.

Customer information is essential to a smooth customer experience. Before a customer makes his or her purchase, have them fill out their information by requiring them to sign up for an account. It will help you better engage with them and offer various incentives to make the purchases and reduce churn.

Though industry standards might be to get customer information when they buy something, many find it rude and will not fill that form out or opt for another product. Google or Facebook signup can help you get all the required information in a single click which is convenient for you as well as your customers.

Create a sense of urgency and FOMO.

FOMO | Customer Retention | Hippo

Fear of missing out (FOMO) is the fear of being excluded from something exciting or desirable. Invoking this emotional reaction can be a strong motivator for online shoppers because it causes them to rush their decision making in order to (quite literally) avoid missing out. Sometimes, you can achieve it by creating a sense of urgency through our product descriptions and messaging, such as “Available for 24 Hours Only”. 

Create a simple and easy support process

To keep customer support effective, brands should use real-time conversations to build a bond with consumers. This enables companies to create personalized interactions and help shoppers through any shopping concerns that may arise. Hippo offers you omnichannel conversational support with chatbots, online chats, phone calls, audio/video calls or social media(WhatsApp and Facebook messenger) so that you can help customers in their comfort zone. The motive of all customer support efforts should be to make customers’ life easier.

Effectively reach out to users and update them with new launches and offers.

Engage with customers and offer updates on new products and launches. You need to ensure that you are effectively and regularly reaching out to customers and communicating new product releases and sales promotions. If a customer has already purchased something from your store, they will appreciate getting notifications of deals on items they’re interested in, as well as product releases. For existing customers, it is also important to acknowledge their feedback and suggestions on improving the products.

Offer perks to your loyal customers.

It’s incredibly important to please your loyal customers. Maintaining good relationships with them will ensure that you keep a steady stream of business and do not risk losing their trust. Doing this helps reduce customer churn, reduce customer acquisition costs and increase revenues. Customer loyalty is a boon to any business. Keeping customers around can save significant money, and loyal customers are more likely to refer friends. 

Sales and Discounts | Hippo | Customer retention

Offering customers discounts, free shipping, entry into sweepstakes, giveaways or special meet-and-greets are some of the ways brands can show their appreciation. But the best way to do this is by offering a loyalty program that incentivizes repeat purchases and offers special rewards for continued engagement with the brand. Customers can earn points over time, and get a discount or extra-special access to the brand based on their past purchases.

Get Hippo today!

Hippo’s Customer Engagement Automation suite is a one-stop solution for all the above-mentioned strategies. Email marketing is on the top for retention strategies with 57% of effectiveness. You can create engaging emails with images and links on Hippo itself and shoot them in a single click to thousands of your customers. You can explore what Hippo is or read more articles that can help you grow.

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