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Why customer retention should be the marketer’s North Star metric

5th December 2019

Kevin Claypoole-McCloskey

Managing Director

Marketers will be familiar with ‘the funnel’ – the marketing model that maps out the theoretical, simplified customer journey towards the purchase of goods or services, originally conceived by American advertising advocate E. St Elmo Lewis back in 1898. The funnel narrows from lead generation at its top, through consideration to conversion: the sale.

Since then, marketers stretched the funnel so that it went beyond purchase to encompass what could be called loyalty or retention – keeping customers coming back to the product, to buy it again, rather than switch to a competitor; and advocacy – telling others (evangelising even) about the product, and thus attracting further potential customers.

A business needs to acquire users to grow, it needs revenue to survive. But, as demonstrated by the likes of Uber, it can lose money and still grow. Without customer retention it is worthless. What is it about customer retention that is so important? It means people like your product or find it valuable and are willing to come back to you to use it again. And if they love it, they’ll tell others (the advocacy bit). The same principle applies whether you’re in B2C or B2B, whether you’re marketing insurance products or investment solutions, whether you’re a digital start-up or a centuries-old bricks-and-mortar banking behemoth.

And if you’re having trouble convincing your CMO that putting effort into retaining users is more valuable than spending on, say, a display advertising campaign to generate new leads, perhaps you should cc in your CFO when you remind them that it costs five times more to acquire a new user than retain an existing one.

So, for economic reasons alone, whether you’re a marketer for a tech start-up or a corporate giant, whether your product or brand is B2B or B2C, customer retention should be your North Star metric.

But in order to manage, and increase retention, you must be able to measure it. If your user activity is all online you can do so with analytics programs and martech stacks – assuming you have the right skills to use them effectively. These can help you track retention rates and see where users are dropping out of the funnel. You can then take appropriate action to retain them, such as retargeting them with personalised creative, messaging, or special offers.

But what if you can’t measure it? And even if you can measure all online activity, the majority of user activity may be ‘dark’ – i.e. it’s offline, it’s not trackable, measurable or manageable. You might be unable to trail them. They might initially activate, or convert, on one platform and disappear and reactivate on another. This could be over a period of- hours between sessions on different IP addresses, or over a longer period, for example, if they buy a debut novel on Amazon, then purchase the long-awaited follow-up in a bookshop.

One common customer retention tactic, especially in a more commoditised marketplace, is loyalty programmes. These can be effective and provide valuable customer data. However, ultimately, they are a little like bribery. They are not infinitely sticky. If you change your programme, or your competitor starts a better one, you risk losing your client.

A longer-term solution is to build loyalty by encouraging a closer, emotional relationship to your brand. This could be by giving the user the best, the most useful, the most valuable product or service. Or it could be creating engaging content that they really want to interact with and share and that ultimately increases the value of your brand in their life. You want your users to want you, to want to engage with you, again and again. If they do, they’ll come back repeatedly. And they might just tell their friends, advocate and evangelise, which will generate new users from existing, giving you, in start-up language, the viral co-efficient vital for organic growth.

So, if you can measure retention, then manage predictability with precision, manage the hell out of it with your martech stack. But if you can’t (and even if you can), go back to marketing basics. But maybe for one beautiful whiteboard brainstorm moment, forget the tech. Go back to those basics. Give your customer what they want. Give them something useful, something valuable. Make them laugh. Make them love you.

If you succeed, your CMO, and your CFO, will definitely love you.


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About the author

Kevin Claypoole-McCloskey

Managing Director

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