3 Tips to Increase Your Profits by Focusing on Customer Retention

If you’ve been following my blog for any length of time, you’ll know that I’m a big believer in the age-old 80 / 20 rule: approximately 80% of your revenue comes from 20% of your clients. This is an estimate of course, but one that has been proven over and over again across multiple industries.

I learned about the 80 / 20 rule in my very first Marketing Level 1 course in college, way back in 2004 (jeez, I’m starting to feel old). A decade later, Harvard Business School backed up this concept by reviewing research done by Frederick Reichheld of Bain & Company showing that increasing customer retention rates by 5% increases profits by 25% to 95%.

The bottom line?

Keeping the right customers is valuable.

Throughout my years as a marketing specialist, I’ve come to realize that many businesses, unfortunately, don’t seem to think much about what they can do to retain customers and reduce churn. Much of the time, the main goal up on the pedestal is acquisition. What can be done to acquire more leads? More sales? More customers?

Of course, acquisition is always important; your business can’t grow without a steady stream of new leads. But when it comes to profit? I think there are a lot of business owners and managers out there who would do well to remember that the customers they have in front of them are just as, if not more, important than a sea of prospects.

So, let’s talk about how to retain customers. How can YOU as business owner increase your customer retention rates? Let’s discuss!

Thank Your Best Customers With a Personal Touch

When was the last time you thanked your customers? Like, truly thanked them for their business? We spend so much of our time and energy searching out that next new lead, offering discounts and incentives and making big promises just to get prospects in the door.

But really, we should be taking the time to truly appreciate and reward the loyal customers we already have in front of us. And you know what? Sometimes a good old Thank You card will do the trick!


When I was still working full time with my family’s dance studio I had the idea to send a Thank You card to each and every family that had registered for the full dance season (not just a single semester). These families made a big commitment to us! They committed to 10 months of driving their child to classes each week, sometimes multiple times a week. They committed to sitting in the crowded lobby for an hour or more each time. To waiting for their children to hurry up and get changed after class when they’re too busy giggling in the change room instead of getting ready. I wanted to genuinely thank these families for making such a big commitment to our school.

So, I counted out every family that made this commitment and ordered a box of Thank You cards. But not just any cards… they weren’t crappy cheap cards from the dollar store. I ordered a box of beautifully handmade cards from Papyrus*. I am obsessed with these cards! Anyone who has ever received one from me has said: “OMG where did you get this?”

Papyrus Thank You Note

In each card I wrote a thank you note by hand and addressed the client by name. I didn’t just print out some generic message, because who the hell wants to receive a typed thank you card? How impersonal can you get? I thought my arm was going to fall off after writing out 100 cards but, I have excellent penmanship if I do say so myself. And it was so worth it to be able to put together a beautiful handmade and handwritten card.

After that, I had each child’s teacher(s) write a little something in the cards as well.

Finally, I included a $5 gift card for the coffee shop up the street and wrote, “Please enjoy a coffee and a treat on us next time you’re waiting for your daughter to finish her class.”

I addressed every envelope by hand (to hell with printed labels) and popped each letter in the mail. Because who doesn’t LOVE to receive a personal letter in the mail??

Altogether, the total cost for each Thank You card (including the gift card and postage) was around $10. And let me tell you, those cards were a big hit! Our customers felt truly appreciated, not like they were just a number in a computer. They felt valued and touched that we would reach out personally to thank them for their business.

So, instead of thinking up some new discount to attract a new prospect, why not put $10 into genuinely thanking those who are already doing business with you?

*Note: I am NOT a Papyrus affiliate. I just happen to really love their cards!

Offer a Discount or a Freebie to Your Lifelong Customers

Have you ever browsed sites like LivingSocial and seen all of the crazy deals that seem too good to be true? You wanna know why they seem too good to be true? Because they are – for the business owner at least.

I tried running one of these deals years ago for the dance studio. At the time, the requirement to be promoted on these sites was to offer a discount of a least 50% off in addition to paying the site (GroupOn or LivingSocial) 50% of what’s left. As a business owner, you’re pretty much offering your product or service for 75% off.

A LOT of small business really can’t afford to give away their services for so little. Why do they do it? Well, the idea is that, once you lure someone in with an incredible offer and they experience how incredibly amazing you are, they’ll tell all their friends and they’ll be dying to come back and give you all their money! You’re basically taking a loss up front and hoping you’ll make your money back later through repeat business.

The trouble is, often times these discount sites DON’T generate a return down the road. Why not? Because most of the consumers looking at these deals are looking for just that – a deal. And offering something for nothing up front just conditions the buyer to always expect something cheap. Sadly, these prospects lose interest quickly once they’re expected to pay full price. I myself am guilty of finding a new GroupOn deal every time I get my car detailed; no way I’m returning to the same place just to pay twice as much.

So, as a business owner, what can you do? Instead of suffering a huge loss by offering 75% off to someone who may or may not return, why don’t you offer something special to those who have been with you through thick and thin?

Story time!

Let me tell you about my hair stylist, Paula. She’s a little younger than I am, whip-smart and has been busting her ass for years to run her very own high-end niche salon. I’ve been with her since she was just a teenager braiding hair in her parents’ basement and I’m SO proud of how far she has come!

But with the success of her business has come increased operating costs and increased prices. Let me tell you, I don’t always love opening my wallet after a colour touch-up. But I keep going back to Paula because she does a great job and I trust her to always make me look and feel good.

This year, on my birthday, I pulled out my wallet and asked how much my new ‘do was going to cost. Instead of handing me a bill, Paula walked out from behind the cash register, wrapped her arms around me and whispered, “Happy Birthday, it’s on me!”

Imagine how special I felt at that moment and what an amazing treat it was to receive something I actually really wanted – to look beautiful on my birthday – for free!

Curly Hair Designs in Ottawa Ontario

That’s my girl Paula. She definitely understands how to retain customers! So pumped to see a successful Millennial businesswoman kicking ass!

Send that Promo Code to Your Most Engaged Email Subscribers

A common tactic to re-engage cold email subscribers is to offer them a promo code to win them back. I suppose there’s nothing wrong with trying to boost your open rates this way. But I’d much prefer to reward those who are loyal readers instead of the jerks who don’t care what I’ve got to say.


Within MailChimp you can segment your contacts by their level of engagement. Try creating a segment of just your 5-star subscribers and send them a promo code with your sincere thanks. Make them feel that they’re actually getting something really valuable by continuing to read your every e-blast. After all, isn’t that why they signed up?

I tried this out last summer when offering an early bird discount for the dance studio’s summer camp program. Looking back, our open rate on that email was over 40% – that’s double our usual!

Churn Isn’t a Given, It’s An Opportunity

Jill Avery, a senior lecturer at Harvard Business School, says one of the biggest mistakes businesses make is “taking churn rate as a given rather than as an opportunity.”

Jonah Lopin of HubSpot backs this idea:

By the time you see an increase in your churn rate, it is six or eight months after the point in time when you actually failed the customer. If churn is your only measure of customer happiness, then you’re always six months too late to influence your future.

So, what are you doing within your business to retain your most valued clients? I wanna know!

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