5 Customer Retention Strategies for your E-commerce business

Aleksandra Velkova on March 26, 2021

If customer acquisition is the lifeblood of an e-commerce business, then solid customer retention strategies would be its backbone. 


In today’s unprecedentedly crowded business world, keeping your customers is a form of art. Knowing them well, communicating in their language and offering them a unique experience at your e-store will distinguish your business from the competition and ensure your customers become your brand ambassadors in the long run. 


The obvious question that sets the stage for deploying customer retention strategies is “what do you do with the untapped potential of the customers you spend so much resources on acquiring?”  Not having a game plan way before you even start your business, it sets you for failure and struggle to keep your business going. 


This article explores several customer retention strategies for e-commerce, as well as what customer retention means and how to properly measure your  retention efforts. 



In the article:


  • What is customer retention

  • Why is customer retention important

  • When to start focusing on customer retention

  • Ideas for ecommerce customer retention strategies

  • How to calculate customer retention rate


What is customer retention? 


If we have to define customer retention we could say it’s a combination of efforts to keep the customers you acquire and turn them into repeat customers. It’s a performance metric and essentially it shows whether your product and overall shopping experience are pleasing your customers. 


This definition emphasizes few things: 


  • The efforts to turn newly acquired customers into repeat customers 

  • A performance metric showing how much are your customers pleased with your product and shopping experience. 


While the product is super important, your customers will either love it or not. It’s the shopping experience that you need to make sure it makes an impact on them. From the moment customers first interact with your brand, to placing an order and communicating with you post-purchase to referring your brand to their friends and family; it’s up to you to design a memorable, user-friendly and functional shopping experience. 


Which brings us to the second important point of the customer retention definition. 


Why is customer retention important?


It’s at least 5 times more expensive to acquire new customers than it is to keep existing ones. 

This means you could significantly lower your marketing costs if you focus on retaining existing customers. 


Selling to new customers can be hard; they still don’t know you, there’s no trust between you and then most importantly, why should they choose you over your competitors? 

Selling to existing customers has about 60% - 70% success rate, whereas selling to new ones only 5%-25%. And that makes sense: people love to shop with brands they know and shopped with before; it gives us a sense of security and assurance that we will have the same awesome experience we did before. 


Finally, small efforts bring big results: improving your retention rate by just 5%, results in an increase in profits of a staggering 25% - 95%! 


Of course, improving the retention rate is an effort and it has to be constant, because people’s attention and love for a brand may disappear as quickly as they come; especially in times of cut-throat competition. 


When to start focusing on customer retention?

Every business has a lifecycle it goes through before it reaches a certain size, reputation and image. Thus, your focus in each of these phases will be different. 


If you’re just starting your business, you want to focus more on acquiring new customers, so you can start building your customer base. Your resources will be focused on customer acquisition only. 


Once your business gains some traction and you have customers who bought from you and gave you their trust, you want to split your resources and start your retention efforts. Remember, even if you have only 10 existing customers, you need to make sure each and everyone of them is strengthening their relationship with you with each interaction with your brand. 


Once your business is established and your customer base has grown enough, you can focus solely and heavily on retention. 


Of course, each business is different per what they sell, industry and target audience, but the basic principle of how you distribute your resources throughout the business lifecycle remains the same.


Ideas for ecommerce customer retention strategies


  1. Introduce a loyalty and referrals program for your business


Loyalty and rewards program is probably one of the most effective customer retention strategies, for several reasons:

 

  • Nearly 75% of consumers prefer companies that have a rewards program and will continue to engage with a brand that has a good loyalty program.

  • 75% of consumers are likely to come back and make another purchase after they receive an incentive from a loyalty program.

  • 79% of consumers say they’re more likely to recommend a brand that offers a good loyalty program to their friends and family. 


The statistics above show that the ROI of loyalty programs is high, especially in growing the number of returning customers and even acquiring new ones. 


Offering attractive rewards, as well as different ways for people to engage with your program strengthens the relationship between you and your customers and allows them to get to know your brand and your story in a way that works for them. 


Also, offering a VIP program in which you’re offering them even more benefits and various perks incentivizes people to spend a bit more with your store to earn those memberships.


Of course, one of the most important aspects of introducing a loyalty program to your ecommerce store is to make sure it’s easy to use by customers. 

If you’re using a platform like Lootly, you can build a  valuable rewards program that customers will actually use and even choose how to present it on the website to offer the best user experience for your customers.





2. Engaging and personalized email marketing campaigns


It has been proven that there is a positive correlation between personalization and customer satisfaction. And happy customers are returning customers!


There’s nothing worse than sending an email to a customer with content that is completely irrelevant to them. Those emails go straight to the trash ( you all know it, you all do it). 


However, when you see your points balance in an email telling you the available rewards that you can redeem and all the cool products you can get a discount for ( which would obviously be selected based on your preferences) then that’s a different story. 


So, harness the power of integrations and make sure you use all available data for your customers to craft the most personalized emails that your business will send. 


For example, Lootly’s Klaviyo integration allows you to see customers loyalty data in customer profiles and create segments based on which you can build your targeted email marketing campaigns. 



3. Improved customer support 


One of the main 4 reasons why customers leave a brand is that they feel like they’re not treated well and the business sees them only as a way to make profit from them. 


Customer support is a concept that works both ways - you offer guidance to customers to ensure they have the best possible shopping experience and also get insights into their needs, preferences and desires.


Let’s not forget the fact that people like to feel like they’re special to a brand, so the more information you have about your customers when they reach out to you, the more context and personalized approach you can provide. 

For example, if you’re using a chat support software like Re:amaze, you can push Lootly loyalty data about your customers into it and have a full 360 view of the person you’re talking to.



4. Automate customer outreach 


This is the era of conversational marketing, so sending the right message to the right person at the right time ensures people respond to these messages and the conversation isn’t one-sided.

 

To boost your customer retention rate, make sure you have automated communication workflows, and pay special attention to the following points in the customer journey:


  • Post-purchase communication - this is a super important moment for you as a merchant, as you can hugely capitalize on it by setting a system to ask for a referral or a review. 

These are highly valuable assets for your business and you should make sure each customer who buys from you gets the chance to refer their friends and family to your business or leave a review for the experience and product they bought from you. 

You can achieve this by setting automated email campaigns or utilize more advanced tools for referrals, such as a post-purchase referral popup



  • Birthday emails and rewards - I personally love when I receive a message from my favorite brands for my birthday. It shows the business made an effort to get a piece of personal information about you and make something special on your special day. And if that email contains a reward, such as birthday points for example, you can rest assured customers will come back to spend those points at your store. 


  • Points expiration reminder emails - sometimes people forget they hold assets at your store. It’s a mutually beneficial move to remind them their assets are about to expire and incentivize them to come back and use their points for rewards at your store. Don’t stop only at one reminder, make sure you give a second chance just a few days before expiration date. Personalize the emails and add a relevant call to action. 



    5. Discounts and deals for reactivation


Everyone has received that email with a discount code in it nudging them to go back to a store and use it. 


And that works! 


While discounting may not always be a good strategy for businesses because of potential loss of revenue, it’s actually working when applied to first time buyers. 


Give these customers a chance to fall in love with your brand by offering 10% discount or even more. You can also go with credit towards a purchase rather than a percentage discount. 


Either way, you’re making sure these buyers have a good reason to come back to your store and shop some more. 


How to calculate customer retention rate


To improve your customer retention rate, you should first know how to calculate it and measure the performance of your tactics.


There are 3 important customer retention metrics you should measure to see the effectiveness of your strategies: 


  • Repeat customer rate

  • Purchase frequency 

  • Average Order Value


Repeat customer rate is the most important metric you should follow carefully. It tells you the percentage of customers who are willing to buy from you again. 


To calculate this rate, you’d apply the following formula:



Purchase frequency tells you how often customers come back to buy from you. 


You can calculate this metric with the following formula:




Average order value tells you how much money a customer spends on each order they place with you. 


Formula to calculate AOV:



Finally, you want to know how much a customer is valuable to you, as this is essentially the ultimate goal of customer retention strategies. You can quantify this as well:




Wrap up


Customer retention is the ultimate goal of all business operations. You should aim to keep your customers and build strong relationships with them as eventually they would become the ones who help you grow your business through word-of-mouth marketing. 


So invest in customer retention marketing tools and strategies and ensure you’re creating the best shopping experience for your existing customers.







Aleksandra Velkova

Aleksandra Velkova

Aleksandra is the Customer Success Manager at Lootly