Customer retention is a growing priority for brands in the face of economic instability. This is one of the key insights from Braze’s 2023 Customer Engagement Review, which highlights the shift in focus towards retaining customers rather than solely acquiring new ones. The report reveals a 36% rise in companies investing the majority of their marketing budget in customer retention.
In previous years, only 33% of brands spent more than half of their marketing budget on retention, compared to 45% in 2022. This indicates that brands are recognizing the importance of retaining existing customers and are allocating more resources towards this goal.
One of the significant shifts in mindset for companies and teams is the recognition that customer lifetime value (CLV) should be a top priority. CLV is a metric that measures the total value a customer brings to a business over their entire relationship. By focusing on CLV, brands can understand the long-term impact of retaining customers and make informed decisions about resource allocation.
In addition to CLV, there are other measurements that brands should consider when focusing on retention. Return on investment (ROI) is a crucial metric, as brands need to ensure that the cost of acquiring and retaining customers is justified by the revenue generated. The payback period, or the time it takes to recoup the cost of acquiring a customer, is another important measurement. Brands should aim to shorten this period to accelerate ROI.
Customer satisfaction is also a key metric for retention. Satisfied customers are more likely to remain loyal and continue purchasing from a brand. Increasing average order value is another metric to consider, as it indicates that customers are spending more with the brand over time. Net Promoter Score (NPS), which measures customer loyalty and likelihood to recommend a brand, is also valuable for assessing retention efforts.
Engagement metrics, although sometimes dismissed as vanity metrics, also have a place in measuring retention. Engagement metrics, such as click-through rates, time spent on a website, or social media interactions, show the level of interest and interaction customers have with a brand. While they may not directly indicate retention, they can be leading indicators of future conversions or repeat purchases. Brands should take engagement metrics seriously and strive to drive continuous engagement to eventually convert them into meaningful retention metrics.
Overall, the shift towards prioritizing retention reflects the recognition that retaining existing customers is more cost-effective and valuable than constantly acquiring new ones. By investing in retention strategies and measuring metrics such as CLV, ROI, customer satisfaction, and engagement, brands can build long-term relationships with their customers and create sustainable growth.