It’s common knowledge by now that it's more expensive to gain a new customer than keep an existing one. According to a joint report from Manta and BIA/Kelsey, a majority of small businesses reported that more than half of their annual revenue comes from repeat customers. In addition, existing customers spend 67 percent more than new ones.
While you don’t want to ignore attracting new customers, your marketing dollars will be well spent retaining and upselling to existing customers. Here are a few tips based on recent case studies to show how to do this well.
Tips for customer retention
1. Predict your customers’ needs
Customer retention is all about a quality user experience, and so much of that experience is about good communication. Contact your customers through social media, text, web chats, and emails—as the number and quality of communication channels increase, user expectations rise with them.
If you want to retain a customer, they need to trust you care. One way of showing this is to answer questions they didn’t even know they had.
2. Consider a tiered loyalty program
A tiered approach rewards your top customers and creates incentives for more spending.
Zappos uses a tiered rewards program where higher spending customers can earn awards like free UPS pickups for returns or early access to products and sales. After launching the loyalty program, Zappos reported between 60,000 and 70,000 sign ups to the program in the first two days. Swell Rewards platform explains part of why the program works:
“Through this multi-layered loyalty program, Zappos is able to reward consumers based on their active involvement with the brand. The top spenders on Zappos are the most highly rewarded. And these rewards stretch much further than solely monetary gains–the company offers support, the ability to suggest your own ideas, and early access to deals–all which increase consumer’s trust and loyalty to the brand.”
Successful loyalty programs boil down to whether you’re listening to what your customers want and making it obtainable.
Tips on upselling
Don’t fake the personal
Russel Lolacher offers an example of how not to do upsell. Russel is a self-described frequent Canva user—an online service to create infographics and other media. He was disappointed by an email he received from the company. The Canva email starts out:
Hey there, It’s not every day that we reach out to users personally — but I just wanted to send you a note to let you know you’re one of Canva’s most active users!
The email then goes on to attempt to sell their premium platform using a new feature. Russel explains, “When you say ‘reach out to users personally’ and then express it in a form letter that is anything but personal, you’re not showing you value me as an individual customer. ‘Hey there’ to you too.” Most marketing automation software allows you to personalize emails while still working efficiently.
Russel suggests using customer data to actually personalize the email. Create special offers or ask for feedback using this data. Creating a personal relationship creates customer loyalty which in turn leaves customers more amenable to other offers from the company.
2. Make the upsell an afterthought
While increasing revenue may be your top priority, it doesn’t need to sound like that to your customers. Communicating your company’s other values is another way of improving the relationship with your customers and increasing the possibility of upsells. This is how Karolyn Fox, owner of the apparel brand Military Hippie, turned an email communicating product shipping delays into almost $2 million in sales.
When complications with one of their manufacturers caused Military Hippie to miss a shipping deadline, Fox sent out an honest “shipping delay” email that offered $25 off any item as a form of apology.
While $25 off is no small matter, the email itself was written to communicate the brand’s values and spurred other positive results. Karolyn wrote:
A bit of an explanation on the delay, this is our first time as a company custom making larger sizes for our customers, we are aiming to offer 1x/2x in all our products in the next months, the rose sweater is the first one we tackled. In doing this we are striving for perfection to make sure the sweaters fit beautifully. The first round we asked our vendor to make a few inches bigger because we believe this was better for our customers.
While the email included a sales pitch, the overall message included the brand’s values. It read like an email to a colleague or a friend, which is one reason why readers interacted with it. The campaign had a 64.1 percent open rate and a 2.47 percent upsell conversion rate.
Customer retention and upselling both require quality, two-way communication. So before you spend a big part of your budget promoting new products or services, make sure you actually know what your customers want. But more importantly, don’t try to sell them something in a way that reads “all I care about is your money.” Any communication from your company—no matter what market you’re in—should reassure your customers that you share their values, understand their needs, and are always ready to listen.
Jera Brown is a writer for TechnologyAdvice. She left a career in UX/UI to write full-time. She believes in user-centered design and advocating for diversity in the tech field.