How to keep your customers II; Customer Retention

Hello team at TBCA
6 min readJul 6, 2020

24 January 2020 * 6 min read

Written by David Ekefre

In the previous post, we began a series on Customer loyalty and Customer retention. There, we learned what customer loyalty is and ways we can achieve it. We also established that customer loyalty cannot be achieved except, first, by achieving customer retention; that achieving customer retention is the first step to achieving customer loyalty. This means that every method of achieving customer retention, including those we’ll discuss here and those we would not discuss here, ultimately leads to customer loyalty.

In this post, we’ll talk about customer retention and ways to achieve this, using very practical methods and focusing on one or two business examples.

Customer Retention

Customer retention answers questions like ‘how do we get these visitors to become customers’ and ‘how do we get these customers to become Customers (no, it isn’t a typo — there are customers and there are Customers; these Customers are not yet in the loyal side of the spectrum but can be on their way there if you play your cards right)’. Let’s see how these two questions can be answered.

How do you get these visitors to become customers’?

First things first, if your product or your service is crap (excuse my lingo), there’s no turning your visitors into customers; get your house in order! if your house is in order, how can you turn visitors into customers? First, let’s define who a visitor is and who a customer is. A visitor is someone who patronizes your business regularly or someone who has just patronized your business once or twice. I’m sure by now you’re wondering how someone who patronizes your business regular can still be defined as a visitor and not a customer. I’ll tell you why they’re still visitors. They’re still visitors because 1. You have not recognized them as customers. 2. You have not recognized them as customers. 3. You have not recognized them as customers.

Until you recognize these ‘visitors’ as ‘customers’, you will still treat them as visitors, and both your business and the visitor never reaches the business-customer relationship level. From the moment they step their feet into your business premises or they make a first purchase from your business, recognize them as customers and begin retention tactics. Have you ever been to Atimbo in Calabar? (whenever you’re in Calabar, go to Atimbo) or even the market? The moment you step your feet on Atimbo premises or the market premises (Nigerians will relate) everybody starts screaming “Customer! Customer!” and I’ll tell you something, if only one or two of them out of the many does this, you will most likely pick them over the others. These market men and women understand customer retention without any degrees and / or qualifications. Recognize every visitor as a customer! You don’t have to scream Customer! Customer! But treat them like you want them back, offer them a glass of water for free, do something out of your way for them whenever the opportunity arises. Treat the first time visitor like you would treat your loyal customer!

How do you get these customers to become Customers?

This is where the real customer retention tactics take place. Turning your customers into Customers. Now we know that customers are only visitors you have recognized as customers but Customers are customers who know they are Customers. You now see the difference? The first set of people do not know that they are customers but you see them as customers while the second set of people know that they are Customers.

There are various customer retention tactics but there is one retention tactic in particular I would like to dwell on. Other customer retention tactics are:

  • Refer a Friend Customer rewards: Referral rewards on next purchase or product reward for referral
  • Membership subscription customer rewards: Membership discount fees, birthday rewards, etc
  • Promotional deals: Buy two get one free or spend up to a certain amount, get a discount on your next purchase
  • Customer profiling: know your customers and target individuals for marketing your products or services.

This ‘Impact on repurchase or recommendations’ chart is pretty much self-explanatory. It shows that, apart from offering consistent good service, customers do enjoy having businesses give them helpful information about both new and existing products and/or services.

Source: TARP Worldwide

This brings us to our main retention tactic discussion point.

Turning your customers into business partners: I am just going to explain briefly what this retention tactic means and then give a case scenario of it. If you’re running a service business it’s much easier to achieve this tactic because service businesses involve more interaction than retail businesses. For this post, I’m interested in how retail businesses can turn their customers into business partners. From the onset, we can agree that your customer is already your business partner, whether you see it that way or not. Your products are exchanged for their cash — business transactions. What I want to introduce to you in this post is how to turn these same customers into suppliers — their product exchanged for your cash/product — not damaging or stopping your already established business partnership.

Let’s go straight to the case study.

A cake shop (let’s call it Cakey, sound yummy) that sells cakes and cupcakes of all sizes. For every cake sold, Cakey (yummy) gives out a cake board (A Cake Board is that flat support placed under a cake, to make it easy to lift and transport.). The price of one of Cakey’s cakes is N3,000 and Cakey buys each cake board for N200. So Cakey’s cake pricing model looks something like this:

This cake board that makes up a good N200 in the selling price of this cake is always thrown away by most customers. Why can’t Cakey do this: create an opportunity for their customers to sell these cake boards back to them at a lesser price than what Cakey buys it for from their suppliers. Cakey also sells cupcakes for N150. Cakey can come up with a deal for the customers by repurchasing these cake boards back from them at the cost of one cupcake i.e one cake board returned for one cupcake — making N50 profit on every repurchase; Cakey can also go further and say three cake boards for two cupcakes — making N300 profit for every 3 cake board repurchase. Let’s see how much Cakey will save in the long-run by doing this:

The idea here is not just to make more money off your customers but to make them an active, contributing part of your business and business growth. Everyone loves to feel like part of something growing. People get attached to what they invest in; and if you allow your customers to invest in your business, either by this retention tactic or any other tactic, your customers will become attached to your business and be on the road to customer loyalty.

You can imagine how much money Cakey can save just by doing this. Cakey can also reduce their cake selling prices now by at least N50 because they basically get the cake boards at the price of one cupcake. Cakey can also make special cupcakes just for these deals.

I hope we’ve learned a thing or two about customer loyalty and customer retention. Increasing customer retention by just 5% boosts profits by 25% to 95%, according to the Bain & Co. and not increasing or working on customer retention can get up to 25 times more expensive to acquire new customers than retaining an existing one, depending on your industry, according to Amy Gallo from the Harvard Business Review. There are various customer retention and loyalty tactics out there you can use, find the one(s) that fits your business and use them.

David Ekefre is a Business Management consultant for Ya’ats Advisory Services Ltd, a firm that specializes in Customer Relationships; customer service, retention, loyalty and the overall satisfaction of your customers. He loves solving problems regardless of which aspect of life.