When was the last time you tried to re-engage your customers and bring them back to purchase again? If it’s been a while, then time to start building a new eCommerce customer retention strategy.
See, these days, customer retention is one of the most underrated growth tactics out there.
Seriously, a mere 5% increase in customer retention can boost your profitability by up to 95%. And in an increasingly competitive eCommerce arena, encouraging your current customers to spend more tends to deliver a far higher ROI than acquiring new ones.
This post will break down eCommerce customer retention and show you how to develop a robust strategy that delivers actual results.
We’ll look at:
Ready to get started? Let’s get to it!
What is eCommerce Customer Retention?
When we talk about retention in eCommerce, we’re talking about a collection of coordinated tactics that encourage existing customers to buy again.
In a nutshell, it’s about persuading one-time shoppers to become regular shoppers and eventually brand advocates.
Unlike customer acquisition, which creates new customers, retention maximizes the value of each customer.
As a merchant, you’re probably wondering when the best time to focus on retention is – let’s unpack that now.
When Should You Focus on Customer Retention?
To maximize growth, you need both a well-rounded acquisition and retention strategy.
However, how much of your resources you allocate to each strategy depends heavily on your store’s lifecycle stage.
When you’re a young eCommerce business, your focus should be almost entirely on acquiring new customers. After all, you can’t retain what you don’t have.
As you grow and have a steady stream of new customers, you should think about implementing some simple strategies to keep them coming back—something like a retention email or SMS flow, for example.
As your business matures further, your focus should shift to almost a 50/50 split between acquisition and retention tactics. Here, establishing a loyalty program might be a smart move.
When your business is fully developed (say after five years of consistent growth), retention should become your primary goal.
That’s not to say you should throw in the towel on acquisition. It’s essential to replace customers who’ll inevitably churn.
But, at this stage, maximizing your profitability won’t be found in one-off sales.
To illustrate, look at the chart below – notice that between months 0-20, there’s no considerable difference in revenue between a five and ten percent retention rate.
But as you grow, see how a 5% increase in retention rate compounds overtime to deliver over 10x the revenue:
Ok, but aside from your store’s growth stage, what you sell can also dictate how much you need to focus on retention.
Let’s explore which industries and stores need to focus more on retention.
Who Should Focus Most On Customer Retention?
In truth, pretty much everyone should have a retention strategy in place.
However, businesses with a higher purchase frequency stand to gain the most by focusing on retention via a large customer lifetime value.
For example, coffee giant Starbucks has an average order value of around $8.
However, Starbucks’ customer purchase frequency, combined with their retention strategy, nets the business roughly $25,000 in customer lifetime value. Crazy!
Here’s a graph to outlining the relationship between purchase frequency and retention-focused marketing:
If your business falls into the right-hand side of the matrix, you need to think about shifting your focus from retention to acquisition (assuming you’re not a new business).
But no matter where you fall on the matrix, you should never neglect either acquisition or retention.
You’ll always need new customers – it’s just about shifting your focus and balancing your priorities to generate maximum results.
What Are The Benefits of Customer Retention?
The thrill of seducing a new customer is hard to beat.
But established brands know that the real money lies in getting customers to come back again. Here’s why:
1. Customer Retention Maximizes Profits
Let’s suppose you spend $30 to acquire a customer on Facebook ads.
Now let’s imagine they spend $35 on your store. That’s a tidy $5 profit. That’s good, but nothing to write home about, right?
Now suppose, you can send them an email for $0.001c that encourages them to come back and spend another $35. Your profit margin has now increased by around 700%.
See where I’m going with this?
Once you win a customer, you’ve fought the majority of the battle.
What’s more, we know that happy customers spend more (up to 260% more) revenue than moderately satisfied customers.
So, with a proper retention strategy in place, you no longer have to be perpetually fighting rising ad costs and running through audiences to generate minuscule profits.
2. Retention Allows You to Outspend Competitors
Retention and acquisition are two sides of the same coin. By maximizing the value of each customer, you can spend more acquiring new ones.
For example, let’s suppose your customers spend an average of average $70/year.
That means you can afford to pay that much to acquire them. Even if customers only spend $30 the first time – you’ll still turn a profit in twelve months.
Contrast this with your competitors who don’t focus on retention. They’ll scramble to get their cost per acquisition below $30 in an attempt to eek out some front-end profit.
But it ain’t their lucky day. With you outspending them, they’ll get dismal results.
As the old saying goes, ‘he who spends most the most to acquire customers, wins.’
3. Retention is Easier Than Acquisition
Most brands are so fixated on acquiring new customers that they don’t realize they’re doing things the hard way.
According to research from Invesp, It’s up to 3.5 times easier to sell to existing customers than new shoppers.
And that makes sense when you think about it – existing customers already know who you are, what you sell, what you stand for, and so on.
The fact that they already bought from you once means there’s no reason they wouldn’t do it again.
So, if easy sales are your jam, build a retention program that packs a punch.
4. Retention is (Dirt Cheap) Marketing in Disguise
Think about a brand or service that you love – especially one that’s gone out of its way to make you feel valued.
Chances are your regularly recommend that company to others, right?
Well, you’re not alone.
ReferralCandy has demonstrated that retention-focused strategies actually lower your acquisition costs via word of mouth marketing.
What’s more, shoppers who are referred by a friend spend, on average, 200% more than customers who found you on their own.
With an army of brand advocates doing your marketing for you, you’ll grow rapidly and enjoy record-breaking profits.
To recap, retention allows you to:
- Maximize customer spending
- Outbid your competitors
- Sell more, with less effort
- Create a team of customer-marketers
If that doesn’t give you the impetus to shift your focus to retention, I don’t know what will!
Let’s keep going to discover how you can actually measure retention in your store.
Customer Retention Measurement: The Key Metrics
The basis of any great retention strategy is reliable data.
There are heaps of customer retention metrics you could track depending on your goals.
But for this section, we’ll cover four of the most fundamental to understanding your customer’s behavior.
Let’s tuck in…
1. Repeat Customer Rate
Let’s start with the most basic customer retention metric – repeat customer rate.
This metric is calculated by dividing your repeat customers by your total unique customers.
Knowing your repeat customer rate establishes a baseline for where you’re at right now.
Plus, tracking it over time will allow you to gauge how your retention efforts stack up.
If you use Shopify, this metric can be easily found in your analytics dashboard.
Repeat customer rate is calculated as a percentage – 100% means that all of your sales come from existing customers while 0% means all sales are from first-time shoppers.
2. Customer Purchase Frequency
Purchase frequency tells you how often customers are coming back to buy items from your store.
It’s calculated by dividing the number of unique customers by the number of orders placed over a given period of time (month, quarter, year).
Purchase frequency matters because it helps you understand your customer’s shopping behavior and plan retention strategies around it.
3. Average, Mean & Mode Order Value
Once you’ve got a decent stock of repeat customers, the next metric to focus on is average order value.
Average order value is calculated by dividing the number of orders by the total amount of revenue.
Digging into your AOV can pull the curtain on your customer’s purchasing behavior. Especially when you consider the median and mode order values too and track them over the course of the customer lifecycle.
For example, you might find that the bulk of your revenue comes from a small percentage of loyal customers and decide to offer them a VIP loyalty program.
Using your AOV in conjunction with a cohort analysis will help you pinpoint the moments when customers are likely to churn and introduce incentives to bring them back.
4. Customer Value
Customer value measures how much profit the average customer generates for your business over a given time period (month, year, lifecycle).
There are several ways to calculate CLV, but one of the simplest is:
(Average order value x Repeat Customer Rate) – Customer Acquisition cost
A low CLV means it’s high time to put more effort into retention and improving customer satisfaction.
5. Net Promoter Score
Your net promoter score (or NPS) tracks how likely customers are to recommend your brand to others – a valuable indicator of how likely customers are to hang around.
To generate your NPS, you’ll need to collect data from your customers via email, text, thank you page survey, etc.
Customers vote on a ten-point scale from ‘very unlikely to recommend you’ to ‘highly likely to recommend you.’
‘Promoters’ are those who voted nine or ten. Respondents who voted seven or eight are ‘passives,’ while people who said six and below are ‘detractors.’
The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters to give an overall picture of how customers feel about your business.
How to Improve eCommerce Customer Retention: 6 Strategies to Try
With the theory and benefits of retention under our belts, let’s explore practical tactics you can apply to keep your customers coming back.
1. Unleash Your Thank You Page
For most eCommerce businesses, their thank you page is an undiscovered treasure trove of conversion opportunities.
But this is especially true when it comes to customer retention. Here’s how to leverage it:
a. Make a Memorable First Impression
Your thank you page is literally the first point of contact between new customers and your brand.
That means it’s a hell of a place to make a killer first impression – especially when you consider that (unlike emails) thank you pages have a 100% open rate.
So, upgrade your thank you page with on-point copy, images, brand elements, or even add a video to personally welcome customers to your brand.
Maybe even add testimonials to reaffirm that your new customers made the right purchasing decision.
b. Collect Customer Feedback and Data
First impressions aside, your thank you page is also the perfect place to collect customer feedback (like your NPS) and additional data.
Quick surveys ensure high response rates from customers who still have the shopping experience fresh in their minds.
Plus, gathering extra data (like customer birthdays, shopping preferences, etc.) allows you to segment customers for sharper marketing and a higher chance of winning repeat purchases.
c. Post Purchase Offers
Sticking offers on your thank you page can turn one-time customers into repeat buyers just seconds after their first order.
Think about it, when a customer has just bought from you, they’re about as qualified as shoppers can get.
A well-crafted upsell or cross-sell is the perfect way to catch them with their card out and encourage them to buy again.
Seriously, after analyzing thousands of stores, we’ve found that a thank you page offers a boost net revenue by an average of 10-15%.
And with the likes of Amazon and eBay deploying this tactic, it’s definitely worth exploring for yourself if you haven’t already.
2. Create a Loyalty Program
There’s a burrito restaurant near where I work – and last month I spent over $120 on lunch there.
There’s nothing outstanding about their burritos – the main reason I eat there over anywhere else is because every tenth burrito you buy is free.
Logically, this doesn’t make too much sense – but stick a stampable card in my hand, and dammit, I feel compelled to complete it.
And the thing is, your customers are no different.
An eCommerce example comes from The North Face:
The North Face’s XPLR Pass rewards program gives customers several reasons to keep shopping with the brand.
Redeemable points, early access to new gear, dedicated support, and birthday gifts are some of the benefits for members.
Notice how these benefits don’t just offer discounts and cash savings but also appeal to their shoppers’ emotions.
Research shows that around 75% of what drives customer loyalty are ’emotional perks’ – so incorporate a mixture of both discounts and emotionally desirable rewards for maximum results.
Creating a basic loyalty program is easy with the right Shopify app – there are several on the app store, but probably the best known is Smile.io, which lets you get started for free.
3. Send Retention Emails
Email marketing is one of the most powerful tools to keep customers engaged.
For real, a strong email marketing game lets you grow customer relationships on auto-pilot.
Plus, it’s consistently proven to have the highest conversion rate of any channel.
But you can’t just spam your list with low-quality offers (like many marketers do). Instead, you need to offer customers tangible value with each email.
Central to this is mastering the fundamentals of segmentation to ensure you’re always sending relevant content to your list.
It’s also a good idea not to endlessly pound your list with offers – mix things up by sending non-promotional emails every now and then like content from your blog.
If you’re stuck for ideas about what customer appreciation emails to send, here are some suggestions from Sleeknote:
- Special day emails (e.g., Birthday, public holidays, etc.)
- Anniversary emails (e.g., one, two, three year shopping anniversaries)
- Company milestones (e.g., five years in business)
- Exclusive offers (e.g., 20% off for being a great customer)
- Early access emails (e.g., discover these styles before anyone else)
Here’s a great example of an email from Brichbox that’ll boost the chances of your customers hanging round:
Notice how they cleverly leverage curiosity to get customers to click through to their landing page – a clever tactic to steal for your own campaigns.
4. Build a Virtual Community
One of the simplest ways to boost customer retention is to create a Facebook group.
Seriously, driving customers to a Facebook group where they can ask questions, post tips, and get help from support keeps them highly engaged with your brand.
You often see this tactic deployed by SaaS companies, but there’s no reason why physical product businesses can’t benefit from it too.
For example, check out Instapot’s 3+ million-member Facebook group. With over 10k posts per month, this is free engagement-city for Instapot.
Think about how you can build an engaged Facebook group around your brand that’ll move customers closer to your brand.
💡ProTip: Why not add a link to your Facebook Group on your order confirmation page? According to the psychological principle of consistency, it’s the best place to drive users over to your digital community.
5. Use Customer Accounts (The Right Way)
Customer accounts are a mixed blessing for merchants.
On the one hand, accounts make it easier for customers to manage their orders and repurchase items.
But mandatory accounts are also a big commitment for first-time buyers – many studies have shown they can negatively affect conversion rates by up to 35%.
So, how to solve this problem? Let customers use guest check out before buying, and then offer them the option to create an account post-purchase.
For example, here’s how Gymshark does this on their thank you page:
You could also consider sending customers an invitation to create an account via email to maximize uptake post-purchase.
Whatever you do, make sure to nudge customers towards creating an account to increases of the chances they’ll shop again.
6. Provide Outstanding Customer Support
It’s easy to think of support as being simply about ‘resolving customer issues.
But to maximize retention, you’ll need to move beyond that mindset and give customers a reason to choose you over your competitors.
There’s a lot that goes into crafting a stand-out support strategy, but here’s the minimum you’ll need to impress customers:
- Make it easy to contact you: Jumping through hoops to reach support is a pain everyone understands. Figure out which channels your customers prefer and provide speedy support every time.
- Use self-service: For simple issues, customers prefer to help themselves. A robust FAQ page or knowledge base reduces support tickets and keeps shoppers happy.
- Stay consistent across channels: Use a helpdesk like Gorgias or DelightChat to pull conversations into one place and track customer interactions.
- Go the extra mile: Finding ways to give back to customers leverages the law of ‘reciprocity.’ Use handwritten notes, surprise gifts, and social media shout-outs to turn regular customers into brand advocates.
Go Forth and Retain More Customers
For established eCommerce businesses, your customer base is the greatest asset you have.
But no matter where you are on your eCommerce journey, higher customer retention rates will boost your revenue, and more importantly, send your profits through the roof.
To recap the retention strategies we discovered in this article are:
- Upgrade your thank you page to make a great first impression
- Send retention emails (on birthdays and shopping anniversaries)
- Build an engaged virtual community
- Encourage customer’s to create accounts (but only post-purchase)
- Listen to your customers (via feedback) and provide them with mind-blowingly good service
Ultimately, customer retention is about creating a shopping experience that makes customers go ‘Wow’. Any time you make a positive impression, you stand a much greater chance of that customer coming back to spend more money.
Now over to you – what’s the most effective retention strategy you’ve tried? Did we forget any proven tactics above? Let us know in the comments below.