The average customer retention rate across industries is 75%. That number has no doubt steadily risen over the years. More companies than ever see the value of customer retention. As a result, they’ve shifted gear from acquisition-focussed models to retention strategies.
Yet, some industries simply “do” customer retention better than others. It’s our goal today to show you the retention data of 10 industries. We’ll share examples of companies that implement effective customer retention strategies. Contrasting them against industries on the whole with the lowest customer retention rates.
From there, we’ll identify what methods companies use that result in specific consumer behavioural patterns e.g., repeat purchases. Stick around if you want to see how your company and industry fares against others in retaining customers!
Contents:
Summary Table: Average Customer Retention Rate by Industry
*Percentages taken from various sources (average rate from %s in our table: 73.7%)*
|
Industry |
Average Customer Retention Rate |
|
Financial Services |
78% |
|
Insurance |
83% |
|
Telecommunications |
78% |
|
eCommerce |
30-40% |
|
Retail |
63% |
|
SaaS |
90% |
|
Hospitality & Travel |
55% |
|
FinTech |
78% |
|
Memberships |
83% |
|
Utilities |
89% |
Customer Retention By Industry
Masterclass Examples of Better Customer Retention
1) Financial Services
Financial services such as banks, lenders, and building societies are facing unique challenges retaining customers. The market is highly competitive. Challenger banks and FinTech companies offer alternative services that consumers consider more innovative and flexible.
In the US, the financial services sector sees some of the highest customer churn rates. With up to 25% of customers regularly rotating between companies offering essential financial services.
A lot of consumers feel dissatisfied with the overall customer service in the finance sector. Reports like the Edelman Trust Barometer 2022 shows us the finance sector is one of the least trusted. Coming in second to last after social media platforms.
Trust is an essential part of customer loyalty and retention. Financial services providers must adapt if they want to survive. Especially when there’s more innovative competitors on the market and tighter regulations knuckling down to protect consumers. Otherwise, financial services companies risk losing a quarter of their customer base to competitors that offer better experiences and value.
Vanguard
Jack Brennan the former CEO of Vanguard in an interview with the Harvard Business Review shared his thoughts on loyal customers. He called his retention strategy the “virtuous cycle” of customer loyalty. It transformed from an intuitive idea to a conceptual goal and operational procedures to cut down acquisition costs.
Vanguard noted that acquisition costs a lot more than retention. Customers they lose due to lack of retention strategies need replacing. Therefore, Jack Brennan devised a method of analysing loyalty metrics and word-of-mouth marketing to mitigate cost-per-acquisition (CPA).
Since its innovative approach to retaining loyal customers, Vanguard is considered a trustworthy financial services provider.
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2) Insurance
According to Deloitte the UK’s insurance sector has the second lowest customer retention rates. Although there’s a high demand for products, customer satisfaction in the insurance industry is low.
Pricewalking has punished customers for their loyalty for far too long. In response, new regulations aim to ban price walking in order to protect consumers. Particularly for those in countries like the UK that’s suffering a particularly acute cost-of-living crisis.
In the same Deloitte report, it’s reported that 41% of all customers feel negative sentiments towards insurance companies. Much of that is owed to notoriously poor customer service.
Every aspect of the customer journey should enhance the experience of policyholders. From onboarding to post-coverage customer support. Great customer service should also be available any time the customer needs it. Therefore, it should be supported by omnichannel and 24/7 VAs and chatbots.
NFU Mutual
You need only check out the customer reviews for NFU Mutual. An overwhelming majority are over the moon at the level of service this insurer provides. They provide policies for a niche target audience, specifically rural communities and agricultural businesses.
They personalise their service by operating through a network of local agencies. Dedicated agents and customers foster deep relationships. This creates a quick and efficient service. Whether that’s roadside recovers or prompt claims processing.
Policyholders also get an opportunity to have a say in the company’s decisions. This is a great retention strategy as feedback has been proven popular amongst consumers.
According to Forbes, 77% of consumers positively regard brands that ask for feedback or give their customers a say.
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3) Telecommunications
If there’s a sector due to improve customer retention rates, it’s telecommunications. A US survey found huge red flags in the industry that cause high customer churn…
Poor customer service made 37% of respondents feel they waited too long for a resolution to their issue. Just over half (51%) had to call more than once to talk to the right person. Similarly, another 37% reported that agents were untrained or even rude. A lack of self-service led to 14% of customers churning.
Telecommunications companies are often huge, some would argue too big to fail. However, in Western Europe, customer churn rates are on the rise. PWC claims that 1 in 3 customers leave Telecom companies due to poor customer service.
Similarly, Reloadly discusses the “dissatisfaction journey” in prepaid-based markets. Dissatisfied customers demonstrate behaviours, such as low engagement with content correspondence and complaining on social media or forums.
There’s so much more telecoms can do to prevent the customer journey unravelling.
Read more:
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Breaking the Churn Cycle: Building Retention in the Telecoms Industry
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4 Key Strategies for Building Customer Loyalty in Telecoms & Utilities
T-Mobile
T-Mobile is a telecom giant yet it’s known for excellent customer service, flexible un-carrier contracts, and offering customers perks and benefits. All of these are great customer retention strategies. However, it’s My T-Mobile that crafts a compelling point of difference.
After all, with a self-service portal, customers can manage every aspect of their account. They can pay bills, upgrade devices, change plans and access resources. It’s this last feature in particular that’s useful for the telecom industry to increase CRR.
Studies show that 81% of consumers want to resolve issues themselves. Telecom companies could reduce customer churn simply by implementing self-service features.
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4) Ecommerce
CRR varies between 30-40% in the eCommerce industry. This industry has the worst churn rates in this list. Which begs the question; what’s going wrong for so many eCommerce businesses?
No company wants to lose customers. Some may simply lack a comprehensive customer retention strategy. High churn rates could even be due to lacklustre products or poor marketing resulting in fewer customer acquisitions.
That’s not to say a complete reversal of customer churn is out of reach for eCommerce businesses…
Glossier
Glossier is a beauty and skincare brand. They improved customer retention and improved customer loyalty. In fact, they are the perfect case study of a transformative eCommerce brand taking incremental steps towards improvement.
Their product development is guided by a customer-centric approach. Open feedback channels give customers a voice. The shopping experience is seamless throughout, with a user-friendly website that showcases the unique brand they’ve cultivated.
Glossier has also built a brand community. Their forum gives customers a space to share experiences, beauty tips, tutorials, articles and contribute user-generated content (UGC).
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5) Retail
A study by McKiney shows that 87% of retail consumers are more likely to shop around. This overwhelmingly large consumer demographic is made up of “switchers”.
McKinsey argues that the retail sector should focus on market-growth strategies as opposed to simply relying on nurturing loyalty. As loyal customers are usually smaller segments of the customer base, albeit a highly lucrative portion.
However, retail stores need constant exposure in a highly competitive market where there’s limitless choice. McKinsey’s report advises retail stores to hone in on the consideration stage of the customer journey. Whilst mitigating costs of nurturing loyalty.
Yet, third-party loyalty platforms with integrated CRM features can catch the consumers’ attention at the consideration stage - as well as incentivise switchers to stay with the brand in return for special benefits and perks.
Nordstrom
Take Nordstrom, for example. This US retail store makes good use of loyalty programmes. Special rewards like early access, invites to special events, and personalised offers encourage customer loyalty.
Now, it’s been argued that not everything has to be personalised. That makes sense particularly during the consideration stage (as McKinsey argues). However, you should know your target audience well enough to understand their needs at the consideration stage so then you can influence their purchase decision.
Nordstrom demonstrates this understanding perfectly. On most of their product pages they include a video featuring a member of staff. They talk the consumer through the product and even offer style advice. This gives potential customers an in-house shopping experience even from the comfort of their own homes.
Offering unique experiences like this certainly grabs the attention of consumers at the consideration stage. As it shows Nordstrom willing to go the extra mile to ensure the product is a right fit for the customer. Retail companies' focus towards retention strategies should follow after acquiring new customers.
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6) SaaS
As far as retention rates by industry goes, the SaaS industry reveals some impressive figures! Anything below 90% is considered average at best. Most SaaS companies actually aim for 97% or above!
Of course, much of this higher CRR can be attributed to the subscription-based model typically seen in this sector. Ongoing updates informed by data-driven insights, continue to improve the service throughout the subscription lifecycle. Thereby insulating the existing customer base from potential competitors.
Hubspot
The market leading provider of inbound marketing software has achieved what so many other SaaS companies dream; hitting a CRR above 97%. Hubspot has done one better though with a CRR of 98%!
It would be ludicrous to suggest that this level of success is solely down to their subscription model. Hubspot provides a comprehensive platform with CRM features and automation features, helping customers seamlessly and effortlessly achieve their business goals. Plus, their focus on customer success makes clients feel valued and generates insurmountable trust between brand and customer.
Hubspot strives to constantly innovate its solution and educate its client base. Positioning themselves as a masterclass example of successful customer retention in the SaaS space.
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7) Hospitality & Travel
Hospitality relies on the quality of its services to retain customers. However, with the great resignation in full swing, it becomes harder to consistently deliver exceptional customer experiences.
Travel companies and restaurants are also struggling to retain customers. Inflation is increasing prices when expendable income for most is at an all time low. According to the US Bureau of Labor, the average price of menus increased by 7.2% in 2022.
Cost increases are a serious problem for many businesses in the food and hospitality sector. As many are not cut out for sustained, accelerated prices of expenses that are essential e.g., food. As a result, consumers will vote with their feet. Choosing restaurants, hotels and travel companies that offer more value for money.
Emirates
Consumer spending in the hospitality and travel sectors is steady for airlines like Emirates regardless of the CoL crisis. That’s due to the partnership network Emirates operates in alongside partnered brands. Consumers love co-created value.
Emirates has partnered up with luxury hotel chains and fine dining establishments to offer members of their loyalty programme valuable travel packages. Members earn miles whenever they stay or dine with partnered hotels and restaurants.
In return, they receive complimentary upgrades at hotels, priority reservations at the finest restaurants and selected discounts. It’s this type of rewards off, bundled into a package that exemplifies how relevancy of rewards is crucial to customer retention. Even in industries that depend on low frequency purchases of high ticket sales during economic headwinds.
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8) FinTech
FinTech is in the midst of revolutionising how people manage their finances. Alongside Challenger Banks they’ve disrupted the status quo of a monopolised sector dominated by retail banks. It’s no wonder that FinTech CRR is on par (78%) with traditional financial services. FinTech companies have seen great success with younger digital nomads (Millennials) and natives (Gen-Zers). Yet, after 30 days retention has been known to drop to just 12% for the lowest performing apps.
So, how can FinTech companies ensure they survive the dreaded 30 day drop off?
Acorns
The majority of the customer base in the FinTech sector is made up of younger people. They’re used to a world of quick convenience. Accustomed to apps, instant entertainment, information and typically enjoy gaming.
Acorns has crafted a compelling point of difference in the FinTech space by implementing gamified elements in their platform. Resulting in a truly incredible CRR of 99%!
If you need to improve your financial literacy, you need educational content. Acorns has a full catalogue of educational content for its users. Keeping them engaged with quizzes, challenges and tasks. Users earn badges and rewards for passing certain milestones, growing their confidence as investors.
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9) Membership Organisations
Membership organisations cover a broad range of businesses. These include gyms and healthcare clubs, nonprofits such as charities and churches, to professional associations like unions and guilds.
For the sake of clarity, it’s any business or organisation that connects members around a particular industry, interest, mission or profession. It should come as no surprise then that CRR for membership organisations is higher compared to many other industries.
This is because the majority of people stick to what’s important to them and what they value. Which just goes to show the importance of brands aligning with the consumer ethics and values.
Project Management Institute (PMI)
The professional organisation offers members a generous roster of benefits aimed at further developing their careers and expertise. Members of the PMI can partake in certification programmes that enhance their professional credentials and career prospects.
Online courses, workshops, webinars and industry conferences allow members to continue their education and build a network of associates. They also gain exclusive access to publications as well as discounts on essential services e.g., project management software.
By offering members a chance to develop their careers, opportunities to build networks and access to exclusive resources and benefits, the PMI has built a strong value proposition. Which is essential for an unrivalled CRR.
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10) Utilities
The energy and utility sector has been at the centre of the CoL crisis as prices have ramped up. Unfortunately this is an industry-wide problem caused by macroeconomic events. Regardless who consumers switch to, prices will remain high if not higher with a new supplier. This of course has inflated retention rates.
Even before the CoL crisis energy consumers behaved like insurance customers, often switching between utility companies for a better deal. Pricewalking had conditioned them to look elsewhere at the end of contract.
However, utility businesses are now looking to shift focus from customer acquisitions to retention as they want to increase customer lifetime value.
A report by Bidgley suggests 60% of utility companies are concerned about customer retention.
Octopus Energy
Octopus Energy is a renewable energy provider known for its affordable pricing and transparent tariffs. Both of which builds trust during uncertain times for consumers that might be feeling the pinch.
An overwhelming majority of the customer base has awarded Octopus Energy five stars in their online reviews. On top of their great customer service, Octopus Energy also has a fantastic loyalty programme that rewards loyal customers.
Octopus Energy Rewards gives energy points that offset the cost of bills to brand advocates and those that they successfully refer. Members can also access partner discounts with businesses in the retail, leisure and entertainment sectors.
Prize draws keep customers delighted, excited and engaged. Plus, the loyalty programme offers energy-saving tips, tools and resources. Ticking all the right boxes for successful retention in the utilities sector. Octopus Energy is retaining customers for all the right reasons.
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Be at the top of your sector in the retention game
The bottom line is regardless of what sector you operate in, most retention strategies are universal. That’s because most consumers expect the same standards from the brands they shop with. They want to feel valued, enjoy a great customer experience, be looked after and rewarded for their loyalty.
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