Customer retention is a critical aspect of any successful business strategy.
While most businesses will focus on acquisition it’s the retention or keeping of customers where all of the real profit is made.
In this article, we’ll cover some ideas on how you can use email and SMS to impact retention and drive more revenue.
Email Marketing and Its Impact on Retention
Email marketing is easily one of the most popular business marketing tools to engage and retain customers.
Email allows businesses and organisations to stay top-of-mind, nurture relationships, and provide value to their audience, ultimately building customer loyalty and reducing churn.
Well-executed email campaigns can:
Nurture Leads
Not everyone is ready to buy, most new email subscribers are still in the information-gathering stage of the buying process so email does a great job of allowing you to educate and guide subscribers towards specific products.
Onboard New Customers
New subscribers can be easily overwhelmed so using email you can tell them exactly what to do next or lay out a multi-step plan to follow which removes any confusion, this quietly shows the customer that you “get” them and helps build trust right out of the gate.
Retain Existing Customers
Retaining customers is the most profitable business activity you can engage in and businesses will typically have a strategy designed specifically for this which includes newsletters, promotional offers, and targeted campaigns that can keep customers engaged, informed, and loyal to a brand.
Encourage Word Of Mouth
When you build your entire business around your customers, they feel good about talking about you to others, and word of mouth drives ready-to-buy customers straight to your business!
Strategies for Effective Email Campaigns
To maximise the impact of email marketing on customer retention, here are some good practices to follow:
Personalization and Segmentation
Your customers are not created equal.
There will be people in there who buy for different reasons, even for the same exact product.
By understanding who these people are and why they are buying that product you can segment them into groups and send super-targeted emails.
Automation and Triggered Emails
Automated and triggered email campaigns, based on customer behaviours or specific events, can deliver timely and contextually relevant communications. Examples include abandoned cart reminders, post-purchase follow-ups, and customer anniversary messages.
Content and Value Proposition
The content and value proposition of email campaigns should be carefully crafted to align with customer needs and interests. Giving valuable information, exclusive offers, or valuable resources can keep customers engaged and interested in the brand.
Frequency and Timing
Finding the right balance between sending too many or too few emails is crucial. Striking the right frequency and timing ensures that customers remain engaged without feeling overwhelmed or disinterested.
Case Studies and Examples
Sephora
Sephora, a cosmetics brand, used birthday emails to drive in-store visits and increase customer loyalty. The birthday emails encouraged customers to come into the store to receive a gift, which saved on shipping costs and increased the chance that customers would make additional purchases during their visit.
Vans
The skatewear brand Vans used email newsletters to regularly communicate with customers and keep their brand top-of-mind. The newsletters included recommendations for similar products that customers may also be interested in, helping to drive additional sales.
Spotify
Spotify uses personalization and predictive analytics to provide customers with customized music recommendations via email. This helps Spotify stay relevant to its users and retain them over time.
The key ways these businesses used email to impact customer retention include:
- Sending personalized, triggered emails like birthday messages
- Regularly communicating through email newsletters
- Offering subscription services that keep customers engaged
- Using data and analytics to provide highly relevant content and recommendations
SMS Marketing and Its Impact on Retention
While email marketing remains one of the most popular marketing trolls, SMS (Short Message Service) marketing has emerged as a channel that makes up for where email lacks.
The Advantages of SMS Marketing
High Open Rates
SMS messages boast open rates as high as 98%, far surpassing email open rates, which typically range from 20% to 30%. Imagine if your current subscribers opened up to 98% of your messages.
Would this have an instant and positive impact on your retention? I think so.
Low Inbox Competition
While your customer’s email inboxes are bursting at the seams, it’s a nice quiet place inside an SMS inbox.
Chances are, your competition is not inside your customer’s SMS inbox giving you a massive advantage to build a closer relationship with your subscribers.
No ESP
One of the little-known issues with email, is that each business who uses email will have an “email score” the lower that score the less of your emails get through. Most business are unaware that when people do not open your email or emails are incorrect this negatively impacts your delivery rate.
SMS doesn’t have this issue at all.
No SPAM filters
One of the main challenges with email is trying not to get your email binned into the spam box.
As long as your subscribers have opted in to receive your SMS messages you don’t need to worry about being sent to the spam box, you get straight through every time!
Strategies for Effective SMS Campaigns
To leverage the power of SMS marketing for customer retention, businesses should consider the following strategies:
Permission-based and Opt-in Practices
Respecting customer privacy and preferences is crucial. Implementing clear opt-in processes and obtaining explicit consent from customers ensures compliance with regulations and builds trust.
Personalization and Context-aware Messaging
Similar to email marketing, personalizing SMS messages based on customer data, behaviours, and context can significantly improve engagement and relevance. Location-based offers, for example, can be highly effective in driving customer retention.
Timing and Frequency
SMS messages should be timed carefully and sent at appropriate intervals to avoid overwhelming or annoying customers. Finding the right balance between timely communication and respecting customers’ personal space is key.
Case Studies and Examples
Subway
Subway has seen great success with their SMS marketing program, which they started in 2015. They now have over 5 million SMS subscribers with an impressive 85% retention rate. Additionally, Subway’s SMS customers are more engaged – 26% return more often, 13% spend more, and 15% make more purchases compared to before joining the SMS program.
Orangetheory Fitness
Orangetheory Fitness used SMS marketing to encourage new customers to sign up for a monthly membership. They sent potential customers an invite to a free VIP class, which led to the customer signing up for the membership. This allowed Orangetheory to convert the prospect into a paying, recurring customer.
Sephora
Sephora has an extensive SMS marketing program that allows customers to opt-in to receive personalized product recommendations, exclusive offers, and updates on their Beauty Insider rewards program. This has helped Sephora maintain a loyal customer base, with 80% of their SMS subscribers being repeat customers.
Starbucks
Starbucks has leveraged SMS to keep customers engaged with their loyalty program. They send subscribers exclusive offers, updates on their rewards status, and reminders to redeem rewards. This has contributed to Starbucks’ high customer retention rates, with 50% of their sales coming from loyalty program members
Ulta Beauty
Ulta Beauty uses SMS to send personalized product recommendations, exclusive offers, and updates on their loyalty program to customers. This has helped Ulta maintain a strong customer base, with 95% of their sales coming from loyalty program members.
Domino’s
Domino’s has an extensive SMS marketing program that allows customers to order, track, and receive updates on their pizza orders via text. This has helped Domino’s improve customer convenience and loyalty, leading to a 30% increase in repeat orders from SMS subscribers.
Integrating Email and SMS for Maximum Impact
While email and SMS marketing can be effective standalone channels, integrating them into a cohesive, multi-channel strategy can amplify their impact on customer retention.
By combining the strengths of both channels and creating seamless customer experiences, businesses can maximise engagement, personalisation, and overall effectiveness.
Email and SMS Marketing
Email and SMS marketing complement each other in several ways:
- Reach and Visibility: Email excels at delivering detailed information and rich media, while SMS ensures immediate visibility and high open rates for time-sensitive messages.
- Content and Context: Email campaigns can provide in-depth content and resources, while SMS messages can deliver timely, context-aware updates and reminders.
- Preference and Convenience: Some customers may prefer email communication, while others may respond better to SMS messages. Offering a choice caters to individual preferences and enhances overall engagement.
By using the strengths of these channels, businesses can create a more complete and effective messaging strategy that helps to connect with customer needs and preferences.
Strategies for Combining Email and SMS Campaigns
To maximise the impact of integrating email and SMS marketing on customer retention, think about these strategies:
Cross-Channel Promotion and Lead Nurturing
Email campaigns can promote SMS opt-in opportunities, while SMS messages can drive traffic to email sign-up forms or landing pages. This cross-pollination allows for a seamless transition between channels and fosters lead nurturing across multiple touchpoints.
Multichannel Customer Journeys
By mapping customer journeys across email and SMS, businesses can create cohesive, personalised experiences that engage customers at various stages of their lifecycle. For example, a welcome email series can be followed up by a timely SMS offer towards the end of that follow-up sequence.
Best Practices for Coordinating Email and SMS Marketing Efforts
- Develop a Unified Strategy: Align email and SMS campaigns with overall business objectives and customer retention goals, ensuring consistent messaging and branding across channels.
- Avoid Duplicative Messaging: Coordinate email and SMS content to prevent redundant or conflicting messages, which can lead to customer fatigue or confusion.
- Respect Preferences and Consent: Maintain clear opt-in and opt-out processes for both channels, allowing customers to customize their communication preferences and ensuring compliance with regulations.
- Test and Optimize: Continuously test and optimize email and SMS campaigns through A/B testing, data analysis, and customer feedback, ensuring that retention efforts remain effective and relevant.
By effectively integrating email and SMS marketing, businesses can create cohesive, personalized, and engaging customer experiences that foster long-lasting relationships and drive improved customer retention.
Measuring and Optimizing Retention Efforts
To ensure the success of email and SMS marketing campaigns aimed at improving customer retention, it is crucial to measure their impact and continuously optimise efforts based on data-driven insights.
By tracking key metrics, analysing customer behaviour, and iterating on campaigns, businesses can maximise the effectiveness of their retention strategies.
Key Metrics for Evaluating the Impact of Email and SMS Marketing on Retention
Several metrics can provide valuable insights into the effectiveness of email and SMS marketing campaigns in driving customer retention:
Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV) represents the total revenue a customer is expected to generate over the course of their relationship with a business. Tracking CLV can help measure the long-term impact of retention efforts on customer profitability and guide resource allocation.
Churn Rate
The churn rate measures the percentage of customers who stop using a product or service within a given period. A decreasing churn rate can indicate the success of retention efforts, as it signifies that fewer customers are leaving the business.
Engagement Metrics
Engagement metrics, such as open rates, click-through rates, and conversion rates, can provide valuable insights into the performance of individual email and SMS campaigns.
High engagement rates often correlate with effective messaging, strong customer relationships, and improved retention.
Tools and Techniques for Tracking and Analyzing Customer Data
To effectively measure and optimize retention efforts, businesses should leverage the following tools and techniques:
Marketing Automation Platforms
Marketing automation platforms offer robust tracking and reporting capabilities, allowing businesses to monitor key metrics, segment customer data, and analyze campaign performance across multiple channels, including email and SMS.
Customer Relationship Management (CRM) Systems
CRM systems serve as centralised repositories for customer data, enabling businesses to track customer interactions, behaviours, and preferences across various touchpoints. This comprehensive view can inform retention strategies and personalisation efforts.
Data Analytics and Visualization
By leveraging data analytics tools and visualisation techniques, businesses can gain deeper insights into customer behaviour, identify patterns and trends, and make data-driven decisions to optimise retention efforts.
A/B Testing and Continuous Optimization
Continuous optimisation is essential for ensuring the long-term success of email and SMS marketing campaigns. By leveraging A/B testing, businesses can experiment with different variables, such as subject lines, messaging, timing, and call-to-actions, and identify the most effective strategies for improving customer retention.
Furthermore, businesses should regularly review campaign performance, analyse customer feedback, and incorporate learnings into future iterations. This iterative approach allows for continuous refinement and adaptation to changing customer needs and preferences, ensuring that retention efforts remain relevant and impactful.
By diligently measuring the impact of email and SMS marketing campaigns, leveraging data-driven insights, and continuously optimising efforts, businesses can boost the effectiveness of their customer retention strategies and foster long-lasting, profitable customer relationships.
Compliance and Privacy Considerations
While email and SMS marketing can be powerful tools for improving customer retention, it is crucial to operate within legal and ethical boundaries to protect customer privacy and maintain trust. Failure to comply with relevant regulations can result in hefty fines, damaged reputation, and customer churn.
Legal and Regulatory Requirements
Businesses must ensure that their email and SMS marketing practices adhere to various legal and regulatory requirements, which may vary depending on the region or industry.
Here in Australia follow ACMA to get clear what you can and cannot do.
As a quick idea please make sure you do the following:
- NEVER buy mobile lists.
- Always request permission from people before sending them SMS messages, this typically means that they are opt-in in with their mobile number.
- Always have an opt-out option so people can exit from your list, this is not only good for legal reasons but lowers your costs to send SMS and email campaigns.