Customer Retention Trends You Need to Know in 2023

Fail to build a loyal customer base and your business will seriously struggle to succeed in the long-term.

But baking the latest customer retention trends into your business strategy is an easy way to reduce customer churn.

Read on to learn everything you need to know to increase customer retention in 2023.

What is customer retention?

Before we get into exactly why it’s so important, here’s a quick customer retention definition:

Customer retention is a metric that measures how many of your customers become repeat customers. It reveals how loyal your customers are, reflects how satisfied they are with your product or service, and reveals how strong your brand is. Plus, it can be a useful metric to understand lifetime customer value.

How do you measure customer retention?

All you’ll need is these three figures to figure out your customer retention rate:

• The number of existing customers at the start of your chosen period (S).
• The number of total customers at the end of the period (E).
• The number of new customers added within the period (N).

Then simply feed those into this customer retention rate formula:

[(E-N)/S] x 100 = Your customer retention rate

What is a good customer retention rate?

The average customer retention rate across all industries is 75%, but that varies massively by vertical.

Here are the average customer retention rates across different industries to give you an idea of how yours stacks up against the competition’s:

• Media companies: 84%
• Professional services: 84%
• Automotive and transportation 83%
• Insurance industry: 83%
• IT services: 81%
• Construction and engineering: 80%
• Financial services: 78%
• Telecom industry: 78%
• Health care: 77%
• IT and software industry: 77%
• Banking: 75%
• Consumer services: 67%
• Manufacturing: 67%
• Retail: 63%
• Hospitality, travel, and restaurants: 55%

Try Assembly today to make it easy to track the customer satisfaction metrics that matter  

Why is customer retention important?

Here are just a few reasons you should pay close attention to your customer retention metrics:

It’s got a huge return on investment

Acquiring a new customer can cost five to 25 times more than keeping an existing one. And it’s 16 times more expensive to build a long-term business relationship with a new customer than it is to cultivate the loyalty of an existing customer.

That means there simply isn’t any marketing tactic that will deliver the kind of return on investment you’ll get from a well-thought-out customer retention campaign. 

It helps you quickly establish new products

Existing customers are 50% more likely than new customers to buy new products. Which means you’ll have a much easier time launching a new product or service if you’ve got a loyal base of repeat customers to market it to.

It boosts word of mouth

64% of marketers say word-of-mouth is the most effective form of marketing. And 60% of loyal customers will talk about their favorite brands to their family, friends, and colleagues. Boost customer retention and you’ll add rocket fuel to the most effective marketing channel at your disposal (and the hardest to influence). 

It drives revenue

Last but not least, companies with high customer retention rates tend to be successful. In fact, increasing retention rates by as little as 5% can improve your revenue by 25-95%.

How do you retain customers in 2023?

Whether you serve businesses or consumers, they’ll more than likely be looking to trim unnecessary expenses from their budget in 2023 given the looming recession.

So, putting the right customer retention programs in place has never been more important. Stick to these customer retention strategies to keep churn as low as you can this year: 

Go above and beyond with your customer service

It probably comes as no surprise that providing your exceptional service leads to loyal customers. In fact, customers are 82% more likely to buy from you again (or renew their subscription) if they feel like they received value from a customer service interaction.

Of course, you already know how important customer service is to your business’s success. When it comes to practical ways you can improve yours, research has revealed the top four factors that impact customer satisfaction: 

• 70.7% of people say how easy an issue is for them to resolve is one of the top three factors that impact customer satisfaction. So, make sure your customers don’t have to  jump through hoops to get any issues resolved.  
• 52.5% rate how knowledgeable your staff are as one the biggest customer satisfaction factors. Which means every dollar you spend training your frontline staff is bound to have a huge return on investment.
• 42.8% say how easy it is to contact a business about an issue is one of the top factors on their customer satisfaction. Making it easy for your customers to find everything they need to get through to the right member of staff on your website is a simple but effective way to improve the customer experience.
• And unsurprisingly, 40.5% of people say how long it takes for a query to get resolved has a major impact on customer satisfaction. So, making sure you’ve got effective customer support systems – and enough staff to quickly answer all queries – is a must.

Book a demo of Assembly to see how much support it can provide to your customer service staff.

Invest in email

One of the most powerful – and underutilized – tools in the customer retention toolbox is your email list. In fact, marketers rate email marketing as the most effective customer retention channel.

Great email marketing can quickly help you build a sense of community among your loyal customers – not to mention get retention-boosting offers and discounts in front of them.

And unlike SEO, advertising, and social media, email is a channel you 100% own. That means an algorithm change is never going to make it harder for you to keep in touch with your customers. On the other hand, to make your customer experience excellent, you shouldn't forget about search optimisation on your website, branding, and improving social media profiles.

Here are the four kinds of emails you should be sending to your customers to keep them around:

• A welcome email is the first step in building a relationship with a customer. Make sure you automatically send one to everyone who buys from your store or signs up for your service. 
• Promotional emails are the most effective way of rewarding your most loyal customers with exclusive discounts and offers – a tried-and-tested way to reduce customer churn.
• Businesses that send cart abandonment emails claw back 3%-14% of those sales. If you’re not sending these, you’re leaving money on the table.
• Feedback emails help you take the pulse of what your most loyal customers think about your product or service. Sending one out asking customers to fill out a product feedback survey can give you invaluable feedback for improving your business. 

Dig into the data

The biggest mistake you can make when you’re trying to improve customer retention is fix the problems you think are driving your customers out the door.

There are two ways to get to the bottom of what’s really happening: quantitative research and qualitative research. 

Quantitative research tells you what your customers do. This includes things like which products or services they do – and don’t – buy, at what stage of the customer journey they abandon a purchase, and how often they open your emails. Tools like Google Analytics can give you access to the quantitative data you need to track where you’re losing customers. 

Qualitative research tells you why your customers do what they do through surveys, design feedback sessions, and focus groups.

For example, Google Analytics might reveal that more than half of an ecommerce store’s customers drop out of a purchase on the payment page. But this business won’t know what it actually is about that page that’s making potential customers abandon their purchase. 

Qualitative research will reveal your customers’ explanations for why they take the route that they do and what they’re thinking each step along the way – essential data you can use to boost customer retention.

You’ll get the best results by combining quantitative and qualitative data to paint a complete picture of where your customer retention strategy is falling short.

Try Assembly today to see how easy it can make capturing qualitative data from your customers.

Roll out the red carpet treatment for at-risk customers

The fastest way to improve customer retention? Target the customers your quantitative and qualitative research reveals are close to churning.

Here are a simple ways to keep at-risk customers around:

• Proactively email or call them.
• Offer them special bundles or deals.
• If you’re a subscription service, give them the opportunity to pause or suspend their subscription – or offer them a discount at the point of cancellation
• Preempt them churning by offering them discounted pricing. 

Bake those processes into your customer retention strategy for the best chances of reducing customer churn.

The final word

Stay on top of 2023’s biggest trends in customer retention by implementing the simple tips we’ve outlined here.