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Guide To Automating Your Customer Retention

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The idea of acquiring new customers is exciting. But, businesses that have gone the route of focusing only on customer acquisition while ignoring existing customers will tell you how much of a bad idea it is. Customer acquisition is necessary, but it is expensive. In fact, it is up to 7 times more costly than getting repeat customers. This is what makes customer retention such a valuable strategy in marketing.

The goal of customer retention is to convert first-time buyers into repeat customers. You do this by delivering quality service that satisfies your customers. At the same time, you push yourself to remain top of their minds. Retention automation is a time-tested strategy that can boost your customer retention efforts.

What is customer retention?

As a business, you have invested a lot of time and resources into gaining new customers. It is only normal that you make every effort to hold on to these customers. This is what customer retention is all about.

Customer retention refers to how well a business can keep its existing customers. The goal is to make them continue to patronize your business rather than that of a competitor. This can mean different things to different companies. If your business runs on a subscription model, customer retention is about getting customers to always renew. But for businesses that sell goods, it's all about getting one-time buyers to return.

Winning your customer's trust will require you to make policies that encourage customers to remain in business with you. It takes a combination of a pleasant customer service experience and effective customer retention strategies to maintain a relationship with your customers.

Why is customer retention important?

At the most basic level, customer retention makes sense from an economic point of view. The cost of retaining old customers is less than the cost of acquiring new ones. So while it is okay to want to grow your company by gaining new users, you'll lose more if you don't keep more customers than you are losing. Also, you stand a higher chance of selling a new product to repeat users than new customers.

Loyal customers are also valuable to your business in other ways. As your unofficial ambassadors, they tell others about your brand and provide referrals. Retained customers also give feedback on your product or services. This way, you can improve on them. Hence, it would be best if you track your customer retention and churn rate.

How To Calculate Your Customer Retention?

There are several metrics for measuring customer retention. But the customer retention rate is the most well-known. The Customer Retention Rate (CRR) measures the number of customers that your company has been able to keep over a period of time. You measure it over a given period as a percentage of your existing customers. So if at the beginning of a month you had ten customers but lost two of them before the end of the month, your customer retention rate would be 80%.

But, there are some nuances to this calculation that you will have to account for. Businesses are not static. There's a good chance that you likely gained customers within the period under review as well. In the example above, if you gained two new customers within the same period, you are still left with the same number of customers you started the month with. Yet, your customer retention rate remains 80% rather than a perfect 100%. This is further confirmation that acquiring new customers doesn't translate to a flourishing business.

So to calculate the retention rate, you have to determine the time frame for which you're calculating. This could be annual, monthly, weekly, or even daily. The three crucial data you'll need to calculate your retention rate are:

  • The number of your existing customers at the beginning of the period under review(S)
  • The number of your total customers at the end of the time under review (E)
  • The number of new customers added to your business (N)

Based on these figures, you can calculate customer retention using the formula:

[(E-N)/S] x 100 = CRR
customer retention formula
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Identify and segment your different churn

Churn rate is another vital metric in defining customer retention. The churn rate is easier to calculate. It is simply the inverse of your customer retention rate. You can also use the formula:

(Churned customers / Original number of customers) x 100

The churn rate measures the rate at which you're losing customers within a given time frame. Yet, there are different aspects to churn that you need to understand. When your user base begins to grow, this general churn rate calculation may no longer give you an accurate picture of how you're losing customers. Significant trends about customer churn are often buried within the analysis. This is why you need to identify and segment your churn.

For instance, customers that cancel their subscription before the end of the subscription period are in a category of their own. They are different from customers that did not renew after their subscription ended. Similarly, customers on a free trial that canceled after the end of the trial period are in a class of their own as well. The impact on revenue varies for each category, even though you have failed to keep them in all cases.

churn rate formula
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Put a price on your churn rate

This is why putting a price on your churn rate is essential. Calculating the revenue churn allows you to determine how much revenue you're losing over a given period due to customer loss. This is calculated using the formula below:

(Monthly recurring revenue lost within the period / MRR at the beginning of the period) x 100

As you can see, this formula goes beyond measuring the number of users you are losing but more on the impact of the churn on your bottom line. This put's the churn in context. You get to see its impact on your revenue and also understand why you're losing customers. This way, you can implement customer retention strategies that plug these holes.

5 Automated Customer Retention Strategies

When it comes to customer retention, selling a quality product or offering good customer service is only one-half of the equation. Gaining customers' trust also has to do with building a meaningful relationship with them. This takes a lot of effort, especially in the modern world of cut-throat marketing. You'll need to be outstanding and consistent if you want to stand out from your competitors. Your retention efforts have to be meaningful and as personalized as possible. One of the ways to maximize your customer retention strategy is through automation.

With automation, you have consistency and personalization locked down. These are essential ingredients for building and maintaining customer relationships. Here are 5 automated customer retention strategies that you will find valuable.

Use a chatbot

Chatbots can be used as communication tools to respond to customer queries and answer their questions in their most basic form. As simple as this might sound, automating communication is one of the most important ways of maintaining a relationship with your customers. Chatbots can serve as the first point of contact between you and your customers, ensuring that they always get a response anytime they reach out. This helps your customer retention strategy by providing valuable and quick answer to any issues your customer can face in this crucial testing periods of your product.

AI chatbots like Ideta kick this a notch higher. They're more than a curated list of frequently asked questions or automated responses based on keywords. Advanced chatbots like Ideta use machine learning algorithms and natural language processing to understand conversations in context. This allows them to respond as accurately as possible. It introduces a layer of personalization to automated conversations that your customers will enjoy.

What's more? Modern conversational marketing bots can be programmed to gather the information that will help you gain further insights into your customer behavior. The chatbot can pick up vital data points from user queries and analyze them to discover patterns that may be valuable to your marketing efforts.

Collect feedback

Collecting feedback is one of the most critical customer service strategies. Your marketing efforts may be a total waste of valuable resources if they are not based on the knowledge of what your customers want. By taking feedback from your customers and analyzing the data they provide, you get to learn more about them and design your strategies around their needs. This is crucial to converting them into loyal customers and even winning new customers.

Your business stands to gain a lot from automating customer feedback collection across the various communication channels and contact points. Customer feedback automation will boost engagement with your customers and encourage brand loyalty. You will also be able to modify and optimize your business model to suit the specific needs of your customer base, thereby earning them their trust.

Offer deals

Customers that patronize your business frequently need to be rewarded. It is one of the most effective ways to improve their loyalty to your brand. You can create a system that offers favorable deals, incentives, and rewards to customers automatically. These automated deals can be based on specific milestones or triggered by specific customer actions.

For instance, customers that purchase a specific amount of goods within a given period can be sent an automated reward in their mail. On the flip side, customers that have been inactive for too long can also be incentivized to make a return purchase through automated deals. These strategies help you make more sales while also improving customer satisfaction.

Automate Follow-Ups

Customers love it when you make them feel important. For instance, after purchasing a product from you, a customer gets a "thank you" email and a request for feedback about the goods or services they have purchased. They're likely to feel more satisfied and impressed with your service. Even if your initial service did not leave an impression on them, the follow-up service might.

Automated follow-ups can also be set up to get in touch with the customers again after a specific time frame. This will help keep your business top of their mind and ensure they patronize you again when the need arises. Automated messages such as shopping cart reminders can also be used to close purchases that would have otherwise remained in limbo.

Improve your customer onboarding

The onboarding process is your first point of contact with your customers. Making this stage of the customer journey as seamless as possible may affect the customer's probability of returning for another purchase.

For the best customer onboarding experience, the process must be completed as quickly as possible. At the same time, it should deliver as much value as possible within the shortest time frame. Automation allows you to do these while also reducing the amount of manual work your marketing team has to do to onboard new users.


As you can see, customer retention is a vital aspect of running a business. Keeping your existing customers while acquiring new ones is the only way to grow your business. Automation can play a crucial role in seeing this happen.

Many businesses wait till they can plan a big promotion or marketing splash to win customers back. You will find that the simple automated marketing effort will make a bigger impact. Customers will forget you if you don't stick around.

But with marketing automation using advanced AI chatbots, automated reward systems, and feedback channels, you will significantly improve customer relations. If you're already using automation in other aspects of your business, it's time to start looking towards how it can benefit your customer retention efforts as well.

customer retention guide infographic

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Written by
Max Hoffheins

Max is a professional SEO content writer who works as a freelancer on Upwork

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