What is customer retention?
Customer retention is akin to a long-lasting relationship – if you compare the process of acquisition of a new customer to retaining the one you have already acquired with long-lasting relationships and a series of Tinder dates.
Indeed, dating is a lot of fun – there are no commitments, a new dose of fresh emotions every time and all the diversity one can physically meet. But on the negative end of the spectrum, there are risks of getting an outright dull date, being scammed out of your money or getting handsful of unpleasant issues.
Long-lasting relationships would normally offer less excitement and fun but carry fewer risks and stress, repeat customers require commitment and investments but carry fewer risks, are more predictable in terms of costs.
On a serious note, statistically speaking, it costs 5 times as much to acquire a new customer, then to keep the one who is already a paying client. It is a no-brainer for any ecommerce business owner or marketing person, that customer retention should be a top priority and deserves a whole section on a marketing plan with specific budgets allocated to customer retention activities.
Why is customer retention important?
The marketing research in the field of “repeat client vs new client” substantiates the point of view, that a repeat client is cheaper, has a higher average check, lower return rates and brings more to the bottom line (some impressive stats below).
This is exactly why it is important to have a specially allocated action plan to retain existing customers alongside customer acquisition actions.
- If a business manages to grow customer retention rates by just 5%, the profits will increase by more than 25% /the research stipulates 25-95% in fact, but this all varies by industry, average check, etc./.
- Another marketing research on online customer loyalty mentions, that loyal customers are much more likely to refer business, bringing at least 3 more new customers to a business!
- Bain & Company customer loyalty paper also mentions the effect of the growth of customer confidence by comparing 2 half-year periods in a customer life cycle:
Loyal buyers on average will spend 67% more in the months 31-36 of their client life cycle than they spend in the months 0-6!
Simply put, if a business grows its loyal customer base, they take advantage of the snowball effect. They reach the stage of exponential growth, when existing clients act as acquisition branch of a sales department, bringing new clients on board.
Put the solid KPIs against your customer retention marketing efforts
“You can’t manage what you can’t measure”. What customer retention metrics can an ecommerce store owner use to know exactly where the business is and where it needs to be after all the marketing spend?
- Growth of repeat customers over a comparative period, № or % – most of the CRMs will have the ability to mark or segment repeat business separately. You can measure it in absolute numbers as well as in percentage. The right choice may differ from niche to niche, make sure to find the right one for your ecommerce store.
- Deviation in repeat purchase made by repeat customers – %, $, № – you can also set your metrics to gauge the growth of the items sold or revenues in the category.
- Referral dynamics – counting the new clients who were acquired via a database of existing clientele is like watching the money pile growing on its own. The below resources may help your business measure the referral clientele.
- Click through rate of your remarketing email campaigns and conversions arising from them.
- Conversion of the win-back campaigns could also serve as a sign of the efficiency of handling your repeat customer base.
Whatever metrics an ecommerce business chooses to measure and manage the existing client retention – the main thing that those KPIs get revisited systematically and are adhered to as part of an action plan.
14 ideas to increase ecommerce customer retention
Provide a positive experience
Sounds pretty simple, right?
Just like in a long term relationship you would work on creating an overall comfortable environment for coexistence, to increase client retention, an ecommerce business should focus on ensuring a positive media for cooperation. Always try to go that extra mile and cause a smile on your client’s face. Just like you would in a relationship – once in a while get a steaming hot coffee to a bedside – get your loyal client an offer of free delivery for a certain period or on certain items.
Just as you would try and make some time for a weekend break to a national park to bring in the notes of romance – go ahead and treat your loyal clients to some freebies or samples. Some of the ideas how to nurture the rapport, where a client feels cared for with a sample wording for your email marketing or a package note:
“You have purchased X items from us in the year 2019! We are grateful for your loyalty and thought to thank you with free delivery on all orders for January”
“We know you mean business when you browse our online store. We don’t offer free returns to all of our customers to avoid encouraging serial returners and protect the environment. With your purchase history, we know you will never abuse the return policy. Please enjoy more freedom with this new benefit – free return on items below 1 kg. Thank you for your loyalty.”
“You have been purchasing a few items of X brand recently. We united with them to say “thank you” for your loyalty. Please enjoy this free item X we have included with your order.”
“We have packed your item into a special edition packaging, that we only send to our special clients. We hope you like the design and will be able to reuse this beautifully crafted wooden box at home. We didn’t brand it – so you are not limited with the application of its further usage – we know your loyalty is with us anyway. We love you too.”
Any of such goodies will be appreciated by a client & infuse your relationship with that special bond, that cannot be traded easily for a lower price.
Customer service quality maintenance
Customer service is there for several reasons:
- to save the time of a client reading the small print – it is easier to pick up a phone and ask, rather than to read lots of irrelevant info before hitting the sought after lines.
- to simplify things for a client – there is no need to become a Ph.D. of some technical science to press one button – only a person is capable of directing a client to press that one button without all the technical overload.
- to get feedback from a client and improve the service or product via feedback.
- to make exceptions to the rules, that exist to be broken – given the context of the request / complain. No AI is capable of doing that – this is why the level of authority of a client service agent matters.
- to upsell and cross-sell – indeed, no interaction with a client should skip the mission to increase the average check.
- to hear a client out – sometimes it just takes a client to articulate a problem for it to be resolved. Listening to a client – if to hear out frustration or a funny story – is yet another therapeutic mission of a customer service agent.
Make sure you take every interaction with a client as an opportunity not to be missed. Provide enough training for your customer service reps to be able not only to deal with technical issues but to form a warm human-to-human relation over the phone.
Going back to the importance of measuring the success of customer retention actions, it is wise to add yet another KPI for your customer service department, going above the time of call and rankings, that one that will involve separate statistics for repeat clients, who have had an interaction with the customer support.
Consider a Subscription Model
Subscription model business is not for every product, but there are many products, that are used regularly by many people and could be subject to a subscription model distribution. Now it's not only forsoftware, but for Shopify stores, d2c brands and e-commerce businesses. We bet you heard about Dollar Shave Club.
The biggest advantage of a subscription model is indeed in the highest ever possible client retention ratio. The clients stay with such businesses for months and years.
Other pluses of this distribution model are predictability of all business processes – from purchasing, production, delivery to average check. The percentage of clients, who remain with such business from month to month is so substantial, that forecasting is a piece of cake. This means well-oiled processes, smooth cash flow to start with.
On the other hand, businesses can afford to minimize the inventory due to a narrow specialty. This also is an advantage in its own right. Less inventory to manage/deliver/ analyze – less cost associated with its handling and management.
If you are considering to master subscription business, why not check out the best yet examples in this niche:
Implement a Loyalty Program
The mission to increase client retention is a non-starter without a loyalty program. They all differ in terms of how clients get thanked for loyalty, but they are all based on the “give back” principle. Giving back is rather profitable a business, figures show:
! 70% of the surveyed people mentioned, that they are more likely to recommend a brand with a loyalty program.
! Over 1/3 of clients are happy to pay for a higher tier of a loyalty program /37% on average, millennials – 46% and gen Z – 47% respectively/
So if you were to join the wise ecommerce marketers, who are happy to part with money to make even more money, go ahead and choose the type of the loyalty program best suited for your business from the options below.
Customer Loyalty programs types:
- The points-based loyalty program
- The tier-based program /actually, many of the points-based ones are tiered ones too/
- The paid loyalty program /think Amazon Prime/
- The charity loyalty program /this can be an option of a point-based program/
- Partnership program /often found in hotels as an example, whereby they partner with airlines & payment systems/
- Build long term relationships
If a buyer is emotionally connected to a brand, the lifetime value of such a client is 4 times as high as the one without emotional connection. Every brand chooses its path when it comes to nurturing that special relationship with a client.
- Genuinely care – place yourself in customer’s shoes every step of the journey.
- Be prepared to invest: what you give back returns with interest, figures show. Don’t be timid to invest in your clients and you will be rewarded.
- Communicate when you are happy and when you not, talk to a happy client and a grumpy one. In the era of data spreading at the speed of light, sincerity is priceless – face the good and the bad news with an open mind, celebrate your heights with your clients and be frank about your lows. Treat your customers as your stakeholders to create the bond to last and outlast.
- Choose your channels wisely but don’t be choosy regarding your channels. Yep, make sure you talk to the audience via the channel of their preference. But then, channels get outdated, audience matures, trends change – make sure you have an Omni-channel presence to capture most reach.
- Personalize your communications
Big data is more powerful than some brands care to know. Using your clients’ names and chasing them with remarketing is only the tip of the iceberg. Go that extra mile to communicate with your loyal clients. Find your biggest social media advocates. Surprise your local community with a localized product. Arrange a top fan meet up with your top influencer.
Make sure your hosting is powerful enough to keep lots of customer data. Make sure your ecommerce provider has the option to remember the product pages viewed by a customer to recommend a customized selection. This is utilized by the biggest players, like ecommerce, like Amazon, and they know how to win in this game.
Prevent Abandoned Carts
It is a valid concern for both first-time shoppers and returning ones. Losing a client at the very last curve of the tunnel is indeed most regretful – as you have invested so much effort into getting to this final stage. So making sure you minimize people who have clicked onto the “add to cart” button but never got to a “thank you” page is both – the matter of honor and the easiest path to a sealed deal.
First of all, work on the technical reasons, like too many fields to fill in for purchase, faulty fields, poor navigation, an invisible button, huge delivery costs – that usually scare people away from your cart.
Secondly, make sure to chase those clients with remarketing and abandoned cart emails – many of them just got distracted. Some will be happy to complete a purchase with free delivery.
Whether you take preventative measures by cleaning up your buying process to convert more clients or if you try to convert them at a later stage – work with abandoned carts is indeed one of the easiest missions based on the advanced stage a client exhibits in buying intent.
Targeted Web Push Notifications
Push notifications are kinda spammy by nature, but they work too. Bulk push notifications featured 15% conversion in a survey by Localytics and the conversion grew to a massive 50%+ for segmented notifications!
Some rules of a thumb, that we find will help take the best from this technique to retain ecommerce customers:
- make sure to only send notifications to those clients who opted-in voluntarily.
- provide value time after time.
- segment your client base by as many parameters as you can and personalize messaging and offers.
- don’t send more than 2 notifications a week.
- allow buyers to customize notifications settings.
Analyze customer feedback
Customer retention strategy could start and end with this one in fact. Because listening to your customer is the one sure-fire way to know the needs, wants, pains and struggles of your buyer. Listen to your online buyers in social media, eavesdrop on them in community forums, hear them out in your customer care reports, touch base with your brand’s biggest advocates. Listen, hear, analyze and then convert to action and disperse SMART tasks among all of the respective departments. Control, Repeat.
As a customer, we feel irritated and frustrated with products and services every day. Walk in the shoes of your customers regularly. Feel their pains and laugh their smiles. We’ve found three handy tools for social listening. Check them out:
Create a community
Some brands do it better than others. Some have a massive following of ardent advocates, who will not betray the brand at any price point. Pepsi, Nikies, you know the culprits.
A community of clients takes one right message to launch and years to build and nurture. Engage your loyal clients online and offline. Create challenges that bring them together. Arrange contests that make them feel competitive. A sense of belonging is a hard currency of the marketing universe. Use it to boost ecommerce customer retention for your business.
Improve your sales processes
There is always space for fine-tuning of every process in the ecommerce business. Technology changes by the second, new tools come out, new channels emerge, old payment systems die out.
Keep your finger on the pulse. Move along with changes, set the trends.
Vivisect your weakest links in the process by analyzing customer feedback and closely looking at your figures. The market average might be a better indication than last year’s figures sometimes. If you have access to competitive reporting – make sure to buy it to keep along with the market pace.
We wanted to reward you for reading this quite a long bit of ecommerce wisdom and to illustrate the principle of gamification – killing two birds with one marketing gem so to say.
Here it goes:
- Find our article on product photography pricing in Squareshot.co blog
- Find the number of years Squareshot Lead Photographer Keith has been polishing his skills to do product shots perfectly.
- Go to our Facebook page, like it and post a comment with “Years Of Keith’s Experience” under the most recent post.
- Get a 10% discount on the number of images, that equals the number of years!
That was easy, right? Imagine how much engagement you can get with an elaborate marketing plan to gamify any of your business process stages with more time, than 5 minutes it took to write this paragraph and more budget. This article has some a.m.a.z.i.n.g. examples of brands introducing gamification into their marketing actions.
Below is our favorite, old but gold, you might say, as you probably have seen this YouTube video.
Campaign: All eyes on the S4 Galaxy by Samsung
Location: Zurich Main Station
Rules: A person, who accepts the challenge is supposed to look at the Samsung on the screen for 60 minutes to win it.
Process: Many people gather around the screen, many people started the challenge to fall prey to thoroughly prepared distracting factors like a musician walking around a player, shouting his music at the top of his voice; a hot dog chef igniting a fire just next to the player, and many more obstacles, like a quarreling couple or a motorcyclist smashing into a florist stand nearby.
Result: A Happy winner and a cheering crowd. 4,7 million views on YouTube & 1,6K comments.
And just look at this guy’s face!
By gamifying part of your business process a brand:
- becomes a trendsetter, a leader, as gamification is a premier league tool.
- grows social media reach, engagement and fans
- surprises a community molding a stronger bond & more intense emotional rapport
- increase loyalty of clients, by creating a desire to belong. People appreciate innovation and creativity – they like being part of it.
- ultimately increases customer retention.
Integrate offline experiences to an ecommerce journey of your customer
This one is a bit far-fetched and is tough to measure, we agree. But we still think the idea is worth the attention. Ecommerce is more convenient, less time consuming, quicker and in most cases cheaper, compared to offline shopping. But it is also lacking human contact & mere tactility to the process. Make sure you introduce little things, that will provide your online buyer with that emotion of surprise, the satisfaction of chatting to a friendly shop assistant.
Elaborate a personal message, think through the unpacking experience, email a follow-up message without upselling a thing or as much as asking a review.
Offer more competitive delivery and returns options
We kept this joker as our final argument. It is a heavy-weight of all methods to increase client retention, as we are saying: find ways to decrease the final cost of goods for your customer and you will win your competition.
Indeed, many ecommerce outlets offer identical pricing. And then they charge for delivery on top. If an ecommerce company finds a way to minimize or at least partially offset the shipping cost, it is sure to get the most solid advantage in comparison to the competition.
Consider providing free or discounted delivery:
- for the next purchase
- for the purchase exceeding X amount
- for the purchase from X brand /agreeing to share delivery costs/
- for the goods below X weight
- for the goods that have to be delivered in X area
- for the clients with X points accumulated in the loyalty program
- for the clients who do action X on social media
There are multiple ways to delight a client and a wise brand nurtures existing relationships as hard as it tries to attract new clients.
How to measure retention rate?
As we have covered at the beginning of the article, it is important that you set your KPIs for all departments, who have the power to increase your company’s retention rate. SMM, marketing, shipping, sales, administration all have to have the starting point and the objective for every reporting period.
Social media reach & engagement are a great metric to measure the involvement of the customers with your brand.
Dynamics of repeat purchases are a major KPI for the email marketer and administration.
Average check, return rate, and even cart abandonment can all be tied up to the goal of customer retention.
It is the mission of management to instill the culture in the company to nurture the bonds that are in place. As you would in a long-lasting relationship – diversify, keep it spiced up and ensure a new set of emotional triggers regularly.
Let’s pick 3 methods you think can bring the biggest ROI for your customer retention.
Well, now, that you have read the entire brochure of customer retention techniques, go ahead and pick just 3 of the ones, that can boost your company’s client retention rate.
Set your targets and make sure to go back to them every month. And as usual, we aren’t getting tired to repeat that:
It is a visually saturated world. Quality images are a given. A default setting. An expectation. They help to acquire clients and retain existing customers.
If you are an ecommerce business, chances are, your online store needs product photography. A New York-based product photography studio with an impeccable reputation, decades of experience and know-how. Ask us how we can help you retain your clients – check out our portfolio and give Squareshot service a try. We might be just what you need to make the next step in growth.