As we’ve mentioned before, it’s much cheaper to encourage repeat purchases than it is to find new customers. While this is true for all businesses, it’s especially true in the ecommerce space, where the costs of clicks and conversions is always climbing. These customer retention strategies are designed to increase your retention and help you boost your revenue.
What is Customer Retention?
Before we dive into the customer retention strategies, let’s briefly recap on just what customer retention is. Essentially, customer retention encompasses all of the activities a business can use to increase their number of repeat customers. It also includes the activities used to increase the profitability of current customers.
Customer retention strategies allow you to extract more value from your existing customers, as well as provide more value to them. Because you want to keep your hard-earned customers with you, you need to provide value to them, and make sure that they have a good experience. You also need to make sure that they get good value from your products and services.
Basically, customer acquisition provides the foundation of customers, while customer retention strategies are how you build your relationships and maximise revenue from them. Of course, how much time and resources you dedicate to retention depends on your business.
When to Focus on Customer Retention
The lifecycle of your store determines whether you should focus more on retention or acquisition. A store that opened yesterday, for instance, is very different from one that has been open for years. Take a look at the below timeline for a guideline:
1. Just starting: If you’ve just opened your store, you should be focused on acquiring customers. Focus on strategies to help you grow your customer base.
2. Gaining traction: Once you have a few customers and are getting at least a few sporadic sales, you can start to introduce some retention elements. These should encourage your customers to buy more. An example would be retention email campaigns which focus on encouraging past customers to purchase from you again.
3. Consistent: Once you’re getting relatively consistent sales, and your customer base is growing, you can start to think of adding more customer retention strategies. Start a referral or a loyalty program, and look into marketing automation. You should focus on maximising the profitability of each customer.
4. Established: Once you’re established, finding ways to grow can be challenging. Customer retention strategies are most important at this stage.
5. Well-established: At this point, you should already have many processes and automations in place, and should be able to focus heavily on retention. Take a look at the below graph. Each store has 100 customers, each buying one $10 item per month. The store in light purple retains 5% of the customers each month, while the dark purple retains 10%. The differences in growth can be astronomical.
Besides the current stage of your store, your strategy should also be based on what you sell.
How Your Customer Retention Strategies Fits Your Business
Obviously, what you sell can have a huge impact on the customer retention strategy you should focus on. Retailers who sell high-end leather furniture, for instance, are going to be wildly different from those selling tea.
Stores whose customers make frequent purchases of high-value items will have the highest CLV, and these have the most to gain from solid customer retention strategies. You need to find the balance of acquisition and retention that works for your business.
Customer Retention Strategies
Below, we’ve outlined a few customer retention strategies which are specific to ecommerce:
1. Use Customer Accounts
Customer accounts can be quite the double-edged sword. They can make repurchasing easier, by giving customers instant access to their previous orders and pre-filled shipping information. On the other hand, they can also be seen as too big of a commitment for new customers. Because of this, many people often choose to ‘checkout as guest’ if that option is available.
So the question becomes, how can you effectively implement customer accounts without scaring away first-time buyers?
Provide the option to create an account only after the first order has been placed.
Once a customer has placed an order, send them an email encouraging them to open or activate an account.
2. Improve Your Support
Your support systems help you to effectively communicate with your customers and give them the right level of support. If you have a live chat tool, or help desk available, you can turn customer questions into sales, or complaints into advocacy. Very often, a complaint that is swiftly and easily resolved can turn an unhappy customer into a loyal one.
And that’s not even mentioning the value of customer feedback, which is vital for improving your products and the overall shopping experience.
There is data to suggest that, though ‘delight’ is important, friendly, fast and consistent customer service is actually the gold standard. If you can help your customers to avoid problems and get the most out of your products, you’ll be doing yourself and them a favour.
Depending on your product mix, niche, and margins, you could even think of sending a small gift to your best customers. This can be a great way of encouraging them to return, while adding an element of delight and surprise – both good for customer satisfaction. Offering an unexpected gift can also play into the law of reciprocity. This refers to our tendency to respond to positive actions with another positive action.
A good example of this is a small hand-written thank you note – a good change of pace in a world where everything is done over the internet. This is a thoughtful way to show your customers that you care. In turn, this could encourage them to return to your shop to purchase from you again. The reason hand-written notes work is that they show the customer you’ve taken the time to address them personally. This attention to detail can help you to stand out from the crowd in a world of automated receipts and mass-mailers.
3. Start a Loyalty Program
Loyalty programs are another effective way to encourage increased purchase frequency. They motivate customers to make more frequent purchases with the incentive of earning valuable rewards. This can become a profitable exchange for both you and your customers. They can get more value each time they purchase, and you benefit from repeat business.
You encourage customers to invest in your loyalty program by offering welcome points when they create an account. Once they see how easy it is to earn points, they will be excited to earn more. Creating a loyalty program can be as easy as rewarding customers for their second purchase, or after a certain purchase amount.
You could also opt for automated loyalty apps which offer rewards for a variety of actions they can take in your store.
4. Send Engaging Emails
Purchase frequency is the backbone of customer retention, and email marketing is the backbone of customer engagement and your retention strategy. Emails give you the opportunity to build relationships with customers both before and after their initial purchase.
Each message you send should add value to your customer’s experience.
According to data gathered by Shopify , email has the highest conversion rate of any marketing channel, at 4.29% – with search coming in a close second.
A good way to get started is by sending follow-up emails. About a week after a customer’s first purchase, you can send them an email thanking them for buying. This acknowledgement helps your customers to feel good about their decision to buy from you. It can also make your brand seem more approachable.
To make the email more impactful, you can also add product recommendations which complement their original purchase. You can also include customer reviews, as these endorsements can increase the value of the recommended product and their desire to purchase.
After you’ve sent the initial follow-up, you should keep sending regular personalised messages. A good example of this is Beard King, who sends personalised mail with new product offers or sales every few weeks. Sending out product recommendations and notifications of upcoming sales is a great way to keep the conversation going with first-time buyers.
For perishable products, consumables, or other products which need to be repurchased over time, knowing the life-cycle of a product and sending well-timed reminders to refresh their stocks is a good way to keep customers coming back. For example, Luxy Hair mentions in their FAQ sectionLuxy Hair mentions in their FAQ section that their hair extensions can last between 6 and 12 months.
Knowing this, they could set up a series of automated reminders to go out after 3 months, 6 months and a year, highlighting the benefits of a fresh set of hair extensions. Not only could these emails educate first-time buyers, they also keep Luxy fresh in buyer’s minds. This serves to encourage repeat business, as well as provide a great customer experience.
In all of your communications, make sure to remind customers why they purchased from your brand in the first place and show them that additional purchases are worth their time and money.
5. Offer Credit or Discounts to Return
Generally, it isn’t good business practice to offer discounts. Offering discounts puts you in a perpetual race to the bottom, conditioning your customers to expect dropping prices. Ultimately, this will result in a loss of revenue for your store. When your margins are tight, discounting can be even more of a risk.
However, offering a discount to a first-time buyer can be very helpful. Offer them a discount code for their next purchase as a way to nudge them into coming back.
This can also be an effective strategy for bringing back customers who haven’t made a purchase in a while.
Strengthen this ‘nudge’ by offering a discount more than the standard 10%. According to Market Wired, once a customer makes a second purchase, they are more than 50% more likely to come back again. So think of the discount as an investment in increasing your customer retention.
You could also experiment with offering credit for customers to use at your store (i.e. $10 towards any purchase), rather than a percentage discount.