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[Report] State of B2C Customer Retention

Retaining customers and growing customer lifetime value is more important than ever in today’s economic climate. 

That’s why companies are turning to more sustainable growth strategies, one of which is customer retention.

But it’s not easy to be a retention marketer. Channels that were once effective are not what they used to be. Data privacy restrictions are making it harder than ever to get to know customers. 

How do retention marketers move the needle on their customer retention efforts? 

You can read the full ungated report below from our B2C customer retention report of 300 marketers from around the world:

  • Why customer retention is more important than ever 
  • What is the most effective customer retention channel 
  • What are customers’ top priorities 
  • Thoughts on privacy and data collection online

Download the report

CONTENTS

A Word From Our CEO

max koziolek pofile photo
Max Koziolek
Spectrm | CEO

How do you keep customers coming back to you and how do you turn them into lifelong fans of your brand?

It’s a question every marketer asks. And today’s economic climate is forcing companies to turn to more sustainable growth strategies, one of which is customer retention.

Retaining customers and growing customer lifetime value is more important than ever in 2023. Growth at all costs is dead. Efficiency is the name of the game.

But how do you engage with customers when channels that were once effective are not what they used to be? How can you provide personalized offers and experiences to customers when data privacy restrictions are making it harder than ever to really know who you’re speaking to? How can you build those long-term relationships when you lack the tools and insights on what’s going to be effective?

It’s not an easy time to be a retention, lifecycle, or CRM marketer. However, marketers that build strategies for successful customer retention efforts create a massive boost for revenue, brand loyalty, cost savings, and growth. The marketers who stand out against their competition today have found ways to engage with customers one-to-one and build those lasting relationships.

How are marketers doing today in their customer retention efforts? We asked 300 marketers across the globe who are directly responsible for retaining existing customers to share with us what they’re doing to move the needle on their customer retention efforts — and where they’re running into challenges that need solutions.

We hope these insights help you as you build and improve upon your customer retention efforts in 2023.

Key Findings

The marketers we surveyed gave us the following insights into their customer retention efforts.

For 86%, customer retention is more important today than a year ago. The top ways they’re measuring customer retention are through repeat purchase rate, customer lifetime value, engagement rates, customer churn, and average order value.

Social media is the most effective customer retention channel. The most effective channel for customer retention is social media, whereas email is the least effective channel for customer retention and the top channel in decline.

Returning customers are making companies a lot of money. 59% say returning customers constitute a quarter to half of the company’s revenue and 29% say they’re between half and three-quarters of their company’s revenue.

Customers’ high expectations create big challenges. 63% say it’s a major challenge to manage customer expectations. Other major challenges include managing customer churn, managing limited budgets and resources, managing customer data, and managing a fragmented customer journey.

Understanding their customers is top priority. When it comes to their customer retention efforts, respondents say their top priorities heading into the future are being able to better understand their customers and identifying new channels through which to engage with them.

90% say their retention tech is generating a positive ROI. 65% are using between six and fifteen tools in their customer retention technology stack. 86% say they have the tools they need to be as successful as possible at customer retention.

State of Customer Retention

Being able to retain customers and keep them coming back drives revenue, brand loyalty, and growth — but it’s not always an easy or straightforward venture for marketers. How are marketers today approaching their customer retention efforts?

86% say customer retention is more important today

For 86% of respondents, customer retention is more important for their company today than it was 12 months ago. Only 13% say it’s just as important, and 1% say it’s less important today than a year ago.

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Top 5 Customer Retention Metrics

Marketers are using the following metrics to determine the effectiveness of their retention efforts (and they selected all that applied):

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They also measure time between purchases (39%), reachability (36%), product return rate (32%), retention rate for apps (26%), and the Net Promoter Score (19%).

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Top 5 Channels for Customer Retention

Respondents say their customer retention efforts depend on these top channels (and they selected all that applied):

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Other channels they also use include content (33%), paid search (31%), organic search (30%), affiliate (27%), and offline (3%).

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Top 5 Most Effective Channels for Customer Retention

When it comes to retaining customers, respondents say these channels are the most effective (and they only chose one):

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Other effective channels include content (8%), influencer (7%), paid search (5%), affiliate (2%), organic search (1% tied), and offline (1% tied).

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Top 5 Least Effective Channels for Customer Retention

Marketers are finding less success in these channels, the least effective in for customer retention (and they only chose one):

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Other channels include influencer (8% tied), organic search (8% tied), content (6%), app push notifications (5%), social media (4%), and messaging app, including Facebook Messenger, WhatsApp, and Instagram (1%).

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Top 5 Channels in Decline

Over the last year, respondents have seen the following channels decline the most (and they only chose one):

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Other channels include organic search (8%), influencer (6%), content (5%), app push notifications (4% tied), messaging app, including Facebook Messenger, WhatsApp, and Instagram (4% tied), and offline (3%).

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88% say returning customers constitute a quarter to three-quarters of the company’s revenue

59% of respondents say their returning customers constitute a quarter to half of the company’s revenue, and 29% say they’re between half and three-quarters of their company’s revenue. 7% say they’re over three-quarters of their company’s revenue, and 6% say they’re less than a quarter of revenue.

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Summary

Customer retention matters more today than ever before, according to most of our respondents. The good news is that retention efforts are resulting in increased revenue. What other insights do they provide? 

Retention is getting attention. 86% of respondents say that customer retention is more important for their company today than it was 12 months ago. Why? The economic climate is forcing companies to focus on profitability and sustainable growth. Since acquiring new customers is more expensive than getting more from existing customers, customer retention is now the focus. Additionally, for 88% of respondents, returning customers constitute between a quarter and three-quarters of revenue for their companies.

Social media increases while email decreases. Email has long been a top performer for retention marketers. But Apple’s Mail Privacy updates and inbox filtering for promotional emails among leading providers like Gmail means that email performance is steadily declining. It’s not just a measurement issue. Email inboxes are crowded, and younger generations are also less likely to respond to email than social and direct messages. 

Top metric is repeat purchase rate. When it comes to measuring their efforts, most marketers are looking to the repeat purchase rate to gauge which customers are coming back. They also track the customer lifetime value, and any engagement rates to see if customers are still interested in the brand.

Customer Retention Tool Stack

Marketers may know which metrics they want to measure and which channels they want to use, but do they have the right tools and technology to enable them to be successful at customer retention?

86% have tools to be successful at customer retention

86% of respondents feel that their employer provides the tools they need to be as successful as possible at customer retention, while 14% don’t feel they have the tools.

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74% are spending between $201,000 and $500,000 on customer retention technologies

When it comes to spending on customer retention technologies each year, the largest segment (29%) spends between $301,000 and $400,000. The second largest segment (25%) spends between $201,000 and $300,000, and the third largest segment (20%) spends between $401,000 and $500,000.

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90% say their current tech generates a positive ROI

90% of respondents believe their current technology tool stack is generating a positive ROI when it comes to customer retention, while only 10% do not believe it is.

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Half think their tech is a good deal, while half want more for their money

50% of respondents think they are getting a fair deal based on how much they spend on their customer retention technologies and tools. However, 49% think they should be getting more for their money. 

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65% are using between six and fifteen tools

16% use between one and five tools as part of their customer retention technology stack. 31% use between six and ten, 34% use between eleven and fifteen, 15% use between sixteen and twenty, and 3% use twenty-one tools or more.

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Top 3 Tools for Customer Retention

These are the tools respondents are using the most in their customer retention efforts (and they chose all that applied):

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They also use customer feedback (45%), personalization and recommendation engines (38% tied), SEO tools (38% tied), SMS marketing tools (38% tied), mobile marketing tools (32%), pay-per-click advertising tools (28%), analytics tools (24%), content management systems (CMS) (21%), and design tools (3%).

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76% say retention tools are becoming more consolidated

76% say that customer retention tools are becoming more consolidated, while 20% say they’re becoming more dispersed.

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Summary

Marketers need the right technology and tools to be able to get their message in front of customers and measure how effective those efforts are. From ad campaign management tools to CRM databases to analytics, marketers seem to be finding success with their retention tech stacks. 

Retention tech generates positive ROI. Retention marketing tech stacks can be complex and expensive, but they’re seen by nearly all respondents to generate positive ROI. For businesses seeking to increase profitability and double down on retention, further investment in retention marketing tech is mission critical.

Their tools could provide more value. 86% say their business provides them the tools to be successful at customer retention, and most companies are spending between $201,000 and $500,000 on customer retention technologies. However, half of respondents think that their tools should be more robust for what they’re paying.

The top tool is social media management. Respondents say that social media is the most effective channel for customer retention, so it makes sense that their top tool is for social media management. Their second most effective channel is email, and they’re also using email marketing tools as well. However, marketers are also investing in loyalty programs and referral tools to reward repeat behavior and keep customers engaged and purchasing.

Challenges to Customer Retention

Even if they have the right tools and strategy, marketers are still facing a number of challenges to effective customer retention, from managing customer data to privacy to churn.

63% are challenged with managing customers’ high expectations

63% say it’s a major challenge to manage their customers’ high expectations, while 33% say it’s a minor challenge for them. Only 3% say it’s not a challenge at all.

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61% are challenged with managing limited budgets and resources

61% say it’s a major challenge to manage limited budgets and resources, while 34% say it’s a minor challenge for them. Only 6% say it’s not a challenge at all.

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61% are challenged with managing customer churn

61% say it’s a major challenge to manage customer churn, while 36% say it’s a minor challenge for them. Only 3% say it’s not a challenge at all.

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57% are challenged with managing customer data

57% say it’s a major challenge to manage customer data, while 40% say it’s a minor challenge for them. Only 4% say it’s not a challenge at all.

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56% are challenged with managing a fragmented customer journey

56% say it’s a major challenge to manage a fragmented customer journey, while 38% say it’s a minor challenge for them. Only 6% say it’s not a challenge at all.

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55% are challenged with managing zero- and first-party data

55% say it’s a major challenge to manage zero- and first-party data, while 39% say it’s a minor challenge for them. Only 7% say it’s not a challenge at all.

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53% are challenged with managing decreasing reachability

53% say it’s a major challenge to manage decreasing reachability, while 43% say it’s a minor challenge for them. Only 5% say it’s not a challenge at all.

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53% are challenged with managing privacy updates and compliance

53% say it’s a major challenge to manage privacy updates and compliance, while 41% say it’s a minor challenge for them. Only 6% say it’s not a challenge at all.

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Summary

Marketing is never easy. Being tasked with keeping customers interested and engaged with your brand, placing the right messages in front of them, measuring campaigns, and other efforts for retention come with a number of challenges. And most respondents are finding it hard to keep up.

Customer expectations create big challenges. Consumers have increasingly high expectations when it comes to personalized and seamless shopping experiences. Retention marketers are finding it challenging to meet expectations and manage churn, especially with limited budgets and resources to manage customer data across a fragmented customer journey. Increasing complexity will only add to the challenges.

Plans For the Future

As marketers look to the future, what steps are they taking to ensure that customers are satisfied and want to purchase again?

74% expect customer retention budgets to increase

74% say their budget for customer retention technology is going to increase over the next 12 months. 21% say it will stay the same, while only 5% will see it decrease.

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Top 3 Priorities for Customer Retention

Respondents are looking to prioritize these initiatives in order to improve their retention efforts (and they only chose one):

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Respondents also plan to launch loyalty programs (10%), launch customer education programs (6% tied), and reengage with inactive customers (6% tied).

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Summary

Customer retention requires a long-term strategy for long-term engagement and loyalty. How are marketers preparing for the future?

They want to better understand their customers. To meet and exceed customer expectations, retention marketers believe that having a better understanding of their customers will lead to better engagement and retention efforts. Better understanding customers relies on building a unified view of your customer and capturing first- and zero-party data on their preferences in order to deliver personalization.

They’re seeking new channels. Additionally, marketers plan to seek out new channels through which to engage with customers as well. As older channels which were once profitable decline — like email and certain social media platforms — marketers need to find ways to meet customers where they are in new and emerging channels.

Actionable Takeaways For Consumer Marketers

Customer retention matters more today than ever. It is the key to profitable and sustainable growth. So what can marketers do to be more proactive, targeted, and engaging with their efforts?

1: Make retention the heart of your marketing strategy and develop your team’s competency to grow customer LTV.

Your time to shine as a retention marketer is now. Companies are making retention a priority as they try to become more efficient and grow revenue in a challenging economic environment. Take advantage of this shift to increase your team’s role within your organization. Communicate retention marketing KPIs widely, highlight its impact on company revenue goals, and create a plan for how to invest further in retention marketing. Additionally, use your retention marketing plan to outline resources your team needs. Audit your tech stack and team competencies to identify opportunities and areas for growth.

2: Create personalized experiences and meet customers where they are in their journey with messaging.

Customers expect personalized experiences from the brand they love, on the channels where they spend the most time. You can do this by using a persistent messaging thread to unify two-way communications with your customers across their customer journey. Avoid spending all your time analyzing data from different sources, building segments, and orchestrating complex multi-channel experiences from isolated triggers. Instead, invest more time in creating better experiences on channels customers already use by engaging in two-way communication and personalizing in real-time.

3: Launch and scale new channels that enable you to better understand your customers and act on zero-party data.

Move from creating only transactional and behavior-based segments across different tools to building meaningful segments based on zero-party data customers share with you. Focus on capturing zero-party data in privacy-safe ways, like through direct messaging, which you can act on immediately in order to personalize experiences and grow customer lifetime value.

4: Stack new retention channels on top of email that are closer to social and enable two-way communication.

Grow your messaging subscriber list to offset dropping email performance and set yourself up for success in the future. Activate younger audiences on their preferred channel and engage customers where they can be reached. Also, use recurring notifications on messaging apps like WhatsApp, Instagram DMs, and Messenger to repeatedly engage and convert customers. Growing your contact list on messaging apps now means you can stack incremental revenue gains on existing channels and future-proof your retention marketing channel mix.

5: Invest more in retention marketing tech to maximize ROI.

Find out your retention marketing budget and build your case for further investment by forecasting ROI. Because CFOs care more about efficiency than ever, build your business case for retention marketing tech, like a messaging chatbot platform, by showing the short and long-term revenue impact it will have on your organization. The data is on your side, as retention marketing tech does generate positive ROI. Show why further investment in retention tech will produce more revenue and stronger ROI than investments in other areas of marketing.

Customers are looking for brands to engage with and create long-term relationships with. Yet marketers have to do the work of creating strategies that continue to engage with customers in ways that can build those relationships. This means having the tools to meet customers where they are, and getting to know them so that you can offer that personalized approach today and in years to come. Are you prepared for the future of customer retention?

Profile of Who We Surveyed: Methodology and Participant Demographics

In order to provide greater context around these findings, here are more details on who we surveyed and the methodology used. Starting on March 9, 2023, we surveyed over 300 marketers across the globe who work for B2C companies who are directly responsible for retaining existing customers. The survey was conducted online via Pollfish using organic sampling. Learn more about the Pollfish methodology here.

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