Have you ever tried to re-engage customers and get them to buy again? If it has been awhile, then it is time to create a new strategy for customer retention.
Customer retention is one of the most overlooked growth strategies.
A 5% increase on customer retention can help you boost your profitability up to 95%. In an increasingly competitive eCommerce market, encouraging customers to spend more can lead to a higher ROI than buying new customers.
This article will explain how eCommerce customers are retained and how to create a strategy that produces real results.
What is eCommerce customer retention?
Retention in eCommerce is a combination of a variety of strategies that encourage customers to purchase again.
It’s all about convincing one-time customers to become regular buyers and ultimately brand advocates.
Retention maximizes each customer’s value, unlike customer acquisition which creates new customers.
You may be wondering when is the best time for merchants to concentrate on retention. Let’s find out.
What should you do to retain customers?
You need both an effective acquisition strategy and a solid retention strategy to maximize growth.
The lifecycle stage of your store will determine how much you should allocate to each strategy.
If you are a young eCommerce company, your primary focus should be on acquiring new customers. You can’t keep what you don’t have.
You should consider simple strategies to keep customers coming back as you grow and get a steady flow of new customers. For example, a retention email, or SMS stream.
As your business grows, you should consider a 50/50 split of retention and acquisition tactics. A loyalty program could be a good idea.
Retention should be your main goal once your business has matured (say, after five years of steady growth).
However, this doesn’t mean you should abandon acquisition. It is essential to replace customers that will eventually churn.
However, this stage won’t allow you to maximize your profitability through one-off sales.
Take a look at the below chart to see how revenue is distributed between months 0-20. You will notice no significant difference between a retention rate of five percent and ten percent.
As you grow, you will see how a 5% increase on retention rate overtime can deliver over 10x more revenue.
It’s impressive, right?
Okay, so aside from the growth stage of your store, how you sell it can also determine how much retention you should focus on.
Let’s look at which industries and stores should be more focused on retention.
- Magento Pos
- Shopify Pos
- Bigcommerce Pos
- Woocommerce Pos
- Netsuite pos
- Bigcommerce automation
- Shopify automation
Who should be most concerned about customer retention?
In reality, almost everyone should have a retention plan.
Businesses with higher purchase frequency will benefit the most if they focus on retention through a high customer lifetime value.
Starbucks, for example, has an average order value around $8.
Starbucks’ high customer purchase frequency combined with their retention strategy nets them approximately $25,000 in customer lifetime worth. Crazy!
Below is a graph that illustrates the relationship between retention-focused marketing and purchase frequency.
If your business falls on the right-hand side, it’s time to shift your focus from retention to purchase (assuming that you aren’t a new company).
Regardless of your position in the matrix, acquisition and retention should always be considered.
There will always be new customers. It’s all about shifting your focus to achieve maximum results.
What are the Benefits of Customer Retention
It’s hard to beat the thrill of seducing someone new.
However, established brands understand that customers returning to their stores is the best way to make money. Here are the reasons:
1. Customer Retention Maximizes Profits
Let’s say you spend $30 on Facebook ads to get a customer.
Let’s say they spend $35 in your store. This is a tidy profit of $5. This is a good profit, but not enough to be proud of.
Let’s say you send an email to them for $0.001c and encourage them to spend $35 more. Now your profit margin is approximately 700%.
This is where you’ll find me.
Once you have won a customer, that’s the end of the battle.
We also know that customers who are happy spend up to 260% more revenue than customers who are moderately satisfied.
With a solid retention strategy, you don’t have to fight rising ad prices and run through audiences in order to make minimal profits.
2. Your retention allows you to outspend your competitors
Acquisition and retention are two sides to the same coin. You can spend more on acquiring new customers if you maximize the customer’s value.
Let’s say, for example, that your customers spend on average $70/year.
This means that you can afford to spend so much to purchase them. Even if your customers spend $30 for the first time, you will still make a profit after twelve months.
Compare this to your competitors who aren’t focused on retention. To make some profit, they will try to lower their cost per acquisition to $30.
It’s not their lucky day. They’ll be miserable if you overspend them.
According to the old saying, “He who spends the most money to acquire customers wins.”
3. It’s easier to retain than acquisition
Many brands are so focused on acquiring new customers, they don’t realize that they are doing it the hard way.
Invesp research shows that it’s 3.5x easier for existing customers to sell than to new shoppers.
This makes perfect sense if you consider that your existing customers already know who and what you sell. They also know what you stand behind.
They already purchased from you once so there is no reason why they wouldn’t buy again.
If you are a salesperson, create a retention program that is powerful.
4. Marketing in Disguise is (Dirt Cheap!) Retention
Consider a service or brand that you love, especially one that makes you feel valued.
You are likely to recommend this company to others.
You’re not the only one.
ReferralCandy’s research has shown that retention-focused strategies can actually lower acquisition costs through word of mouth marketing.
Plus, customers who were referred to you by a friend are on average 200% more likely to purchase from you than customers who came directly.
You’ll see record-breaking growth and profits with a team of brand advocates.
To recap, retention allows you to:
- Maximize customer spending
- Your competitors outbid
- You can sell more with less effort
- Establish a team with customer-marketers
If this doesn’t motivate you to focus on retention, I don’t know what else will.
Let’s continue to learn how retention can be measured in your store.
Customer retention measurement: The key metrics
Reliable data is the foundation of any successful retention strategy.
Depending on your goals, there are many customer retention metrics that you can track.
For this section, however, we will only cover the four most important aspects of understanding customer behavior.
Let’s get in there…
1. Recommendations for Customers
Let’s begin with the most basic customer retention measure – repeat customers rate.
This metric is calculated using your total unique customers divided by your repeat customers.
Your repeat customer rate is a benchmark for where you are right now.
You can also track it over time to see how your retention efforts are doing.
This metric is easily accessible if you use Shopify.
The repeat customer rate is expressed as a percentage. 100% indicates that all your sales are from existing customers, while 0% signifies all sales are from new customers.
2. Customer Purchase Frequency
The purchase frequency shows you how often customers return to your store to buy products.
This is calculated by subtracting the number unique customers from the total number of orders over a specified time period (month, quarter or year).
It is important to understand the purchase frequency of your customers so that you can plan retention strategies.
3. Average, Mode Order Values, and Mean
Once you have a good stock of repeat customers, then the next metric to look at is average order value.
The average order value is calculated when the total revenue divided by the number of orders is taken.
An AOV analysis can reveal the buying habits of your customers. It is important to consider the mode and median order values and keep track of them throughout the customer’s lifecycle.
You might decide to give a VIP loyalty program to your loyal customers if you find that the majority of your revenue comes from them.
Your AOV can be used in conjunction with a cohort study to help you identify the times when customers are most likely to churn, and to offer incentives to get them back.
4. Customer Value
Customer value is the amount of profit that an average customer makes for your business in a given period of time (month, year, or lifecycle).
There are many ways to calculate CLV. The simplest one is:
(Average order value x Repeat Customer Rate) – Customer Acquisition cost
Low CLV indicates that it is more time-consuming to retain customers and improve customer satisfaction.
5. Score of the Net Promoter
Net promoter score, or NPS, tracks how likely customers will recommend your brand to others. It is a useful indicator of how likely customers will stay with you.
You will need to gather data from customers via email, text and survey.
Customers vote using a ten point scale that ranges from’very unlikely’ to recommend you to others to ‘highly probable to recommend’.
“Promoters” are those who voted 9 or 10. Respondents who voted 7 or 8 are considered ‘passives’, while those who voted 6 or less are considered ‘detractors’.
To get a general picture of customer sentiment about your business, the NPS is calculated by subtracting detractors from promoters.
Six Strategies to Increase eCommerce Customer Retention
Let’s now look at practical strategies to retain customers.
1. Unlock Your Thank You Page
Most eCommerce businesses don’t know how to use their thank-you page as a source of potential conversions.
This is especially true for customer retention. Here are some ways to make it work:
A. Create a memorable first impression
Your thank you page can be the first contact point between your brand and new customers.
It’s an ideal place to make a great first impression, especially considering that thank you pages (unlike emails), have a 100% open rate.
You can also upgrade your thank-you page with images, brand elements and on-point copy.
You might even include testimonials to prove that your customers made the right purchase decision.
b. Collect Customer Feedback and Data
Your thank you page, aside from the first impressions, is a great place to gather customer feedback (like NPS) or additional data.
Customers who remember the shopping experience well will respond quickly to quick surveys.
You can also gather additional data, such as customer birthdays and shopping preferences. Segmenting customers allows for better marketing and higher chances of repeat sales.
c. Offers after Purchase
Your thank you page should have a list of sticking offers. This will make it easy for customers to become repeat buyers within seconds.
Consider this: A customer who has just purchased from you is about as qualified as any buyer can be.
An cross-sell or upsell well-crafted is a great way to get them excited about buying again.
After analyzing thousands upon thousands of stores, it was clear that a thank-you page can increase net revenue by an average 10-15%.
This tactic is being used by Amazon and eBay, so it’s worth looking into if you don’t know.
2. Make a loyalty program
Near my workplace is a burrito place. Last month, I spent more than $120 at the restaurant for lunch.
Their burritos are nothing special. The main reason I choose to eat there is that every tenth one you purchase is free.
This doesn’t seem to make sense. But, if I have a stampable card in hand, it makes perfect sense.
Your customers are not any different.
The North Face is an example of eCommerce:
Customers have many reasons to shop with North Face’s XPLR Pass rewards programme.
Members enjoy a variety of benefits, including redeemable points, early access for new gear, dedicated support and birthday gifts.
These benefits offer more than just cash savings and discounts. They also appeal to the shoppers’ emotions.
Research has shown that 75% of customer loyalty is driven by ’emotional benefits’. For maximum results, mix discounts with emotionally appealing rewards.
It’s easy to create a basic loyalty program with the right Shopify App. There are many on the App Store, but the most popular is smile.io. This app allows you to get started completely free.
3. Send retention emails
Email marketing is one powerful tool to keep customers engaged.
A strong email marketing strategy can help you build customer relationships on autopilot.
It has the highest conversion rate of all channels.
You can’t spam your customers with low-quality offers, as many marketers do. Customers should receive tangible value through every email.
This is central to understanding the basics of segmentation so that you can always send relevant content to your subscribers.
It is also a good idea to not bombard your list with offers. Instead, send non-promotional emails from time to time using content from your .
Here are some ideas from Sleeknote if you don’t know what customer appreciation email you should send.
- Special day emails (e.g., Birthday, public holidays, etc.)
- Emails for anniversary (e.g., shopping anniversaries of one, two or three years)
- Companies milestones (e.g. five years of business)
- Exclusive Offers (e.g. 20% discount for being a great client)
- Emails to early access (e.g., find these styles before anyone else).
This is a great example from Brichbox of an email that will increase your chances of customers staying around.
You can see how they cleverly use curiosity to get customers clicking through to their landing pages – an excellent tactic to copy for your campaigns.
4. Create a virtual community
A Facebook group is one of the easiest ways to increase customer retention.
Driving customers to your Facebook group, where they can ask questions and post tips, is a great way to keep them engaged with your brand.
This tactic is often used by SaaS companies. However, it’s not impossible for physical product businesses to benefit from it.
Check out Instapot’s Facebook group of 3+ million members. This is Instapot’s free engagement-city, with over 10k posts each month.
Consider how to build a Facebook community around your brand that will bring customers closer to you.
ProTip Add a link to your Facebook Group to your order confirmation page. It’s the best place for users to connect to your digital community, according to the psychological principle known as consistency.
5. The Right Way to Use Customer Accounts
Merchants have a mixed blessing when it comes to customer accounts.
Accounts make it easy for customers to track their orders and repurchase products.
However, mandatory accounts can be a significant commitment for first-time buyers. Many studies have shown that they can negatively impact conversion rates by as much as 35%.
How can we solve this problem? Customers can use guest checkout before purchasing, and they will then have the option to create an Account after purchase.
Here’s an example of how Gymshark does it on their Thank You Page:
To maximize customer uptake after a purchase, you might also send customers an email invitation inviting them to create an account.
To increase the likelihood of customers shopping again, you must encourage them to create an account.
6. Provide Outstanding Customer Support
Support is often viewed as a simple matter of resolving customer problems.
To maximize customer retention, however, you need to go beyond this mindset and offer customers a reason why you are better than your competitors.
While there are many factors that go into creating a strong support strategy, here’s what you need to impress your customers.
- Make it easy for people to contact you. Find out the preferred channels of your customers and offer fast support.
- Self-service: Customers prefer to solve simple problems themselves. A solid FAQ page or knowledge base will reduce support tickets and keep customers happy.
- Keep your messages consistent across all channels. Use a helpdesk such as DelightChat or Gorgias to gather conversations and track customer interactions.
- Give back to customers: Go the extra mile. Using the law of reciprocity, find ways to give back.
Keep More Customers by Going Forth
Your customer base is your greatest asset for established eCommerce businesses.
No matter where you are in your eCommerce journey, higher customer retention rates can increase your revenue and, more importantly, your profit margins.
These are the retention strategies that we have uncovered in this article.
- To make a great first impression, upgrade your thank-you page
- Retention emails sent for birthdays and shopping anniversary
- Create a virtual community that is engaged
- Encourage customers to open accounts, but only after they have purchased.
- Listen to your customers and offer them mind-blowing service.
Customer retention is all about making customers feel special. A positive customer experience will increase your chances of them returning to you for more.