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Customer Retention 101: Back to Basics for Ecommerce Brands

Sep 13, 2021

Ecommerce businesses typically have a “growth, growth, growth” mindset, always testing new acquisition channels and ad models to try and find that new customer. This leads some ecommerce companies to lose sight of the opportunity right in front of them: the customer they’ve already won. 

Not all growth has to come from new customers. Selling to existing customers is cheaper, converts better, and is a more profitable and efficient way of growing revenue. 

And, while retention is a very different challenge from acquisition, marketing to existing customers isn’t wholly dissimilar from marketing to prospective customers. Ultimately, it’s about centering your brand values and narrative, making sure customers feel seen and heard, and showing that you’re willing to go the extra mile. 

Maximizing retention means putting the same care and energy into customer support and the post-purchase experience as you do into acquisition. If done correctly, your support & post-purchase efforts become marketing in themselves. And, with the right tools and software in your arsenal you can automate both to keep your support burden low and customer satisfaction high (which then leads to high retention). 

So how do you do that? In this article we’ll explain how online brands can keep customer churn low and what the future holds for sellers vying to outlast the competition.

Why Should Ecommerce Companies Care About Customer Retention?

In a nutshell, customer retention is how many customers a company hangs onto over a certain span of time. This means that people are becoming repeat purchasers, staying subscribed to your services, and beyond. If a customer keeps putting money in your pocket, that’s great news.

Some everyday examples of good customer retention are:

  • An online cosmetic store sees the same shoppers purchasing their same color and brand of makeup when they run out several times a year. 
  • A crafter selling handmade birthday cards has one customer who places a large order year after year for all their birthday needs!
  • An ecommerce marketplace sees massive retention rates for its two-day shipping membership and suddenly takes over the world. 

The gist of customer retention is getting the same customers to keep coming back instead of fleeing for the competition. And in the dawn of increased ecommerce spending and more stores opening their digital doors every day, brands that can keep retention high are the ones that’ll stick around for the long haul.

But who really cares about all this? Why does customer retention even matter?! There are a few reasons you, dearest seller, should give a darn.

1. Customer retention is critical for growth.

An ecommerce merchant might have the greatest ads of all time. They might get thousands of new, first-time customers every month. Maybe their new subscription rate is off the walls. Or maybe they have more free trial users than they can shake a stick at.

All of that sounds dreamy, but the truth is, none of that matters if retention is low. An ecommerce brand could have every person one earth shop once, but it’ll still be a flash in the pan if retention rates are nil. Instead of bragging about outstanding acquisition numbers, ecommerce merchants should look toward retention as their key to scaling and longevity.

The average retention rate for ecommerce stores is around 30%. While that may fluctuate depending on your specific vertical or the age of your store, using it as a guiding metric could help you determine if your retention rate is thriving or needs a helping hand.

2. Retaining customers costs less than finding new ones.

Have you checked out your CAC lately? That is, your customer acquisition cost. If you’ve been keeping track of certain KPIs since starting your store, you should have a good understanding of how much it costs to actually earn a shopper’s hard-earned bucks.

A quick and dirty equation would be to add up all the money you put toward marketing, e.g., Facebook ads, direct mail, SMS services, the billboard on Main St.—you get the idea. Then divide that by how many new customers you acquired over a set span of time. If you spent $6,000 on paid ads in September and earned two new customers, then your CAC is $3,000 a head. Yowch.

Compare that number with your customer lifetime value (CLV), or the amount of money your most valuable customers have been spending (and cost zero dollars to acquire again). Customers with high CLV will almost always spend more than it cost to acquire them, and losing them would mean having to dish out more money to try and find another repeat customer to fill their spot.

Most studies point to the same results: It costs six to seven times more to acquire a customer versus retain a customer. For those keeping track at home, focusing solely on acquisition isn’t a cost-effective way to run your store. Ultimately, it’s costly, and if 2020 taught ecommerce merchants anything, it should be that brands should be looking to conserve costs whenever possible.

3. High retention rates are a sign of good overall brand health.

High retention rates are obviously an indicator of repeat business and probably high CLV. However, it’s an indicator of your brand’s overall health, too, and isn’t just a coupl’a good-lookin’ KPIs. 

If your brand’s customer retention is above average, that means that people want to keep coming back to buy from your store. Whether it’s your products, customer experience, website interface, slick design, pricing model, or any other factor, it’s clicking for customers and they want more of it. 

Transform Ecommerce Customer Retention (and Your Bottom Line) in 8 Steps

For the future (and bottom line) of your ecommerce store, implementing strategies for retaining more customers is better done sooner than later. Increasing your retention rate is endlessly valuable when it comes to upping overall customer lifetime value, spending less on acquisition, and boosting the impact of upsells and cross-sells. 

However, it can be tough to figure out where to even begin to nudge the numbers in the right direction. Here are a few of our favorite customer retention strategies:

1. Unite Loyalty Programs With Your Brand Values

Retention is all about building a connection with your customers. Being creative and utilizing the tools at your disposal is the key to building that enduring relationship. But beyond just using different tools to set up your next great digital punch card, today’s consumers also appreciate when brands inject humanity into their loyalty strategy.   

If you don’t have a loyalty program already, build one now. Show your customers that the relationship with your brand is two-sided—a bit of a “you scratch my back, I’ll scratch yours” approach—and that your company authentically cares about this relationship instead of just trying to siphon money from the customer.

When it comes to setting up customer loyalty programs, Yotpo is a great tool to get started with. It helps you build a flexible rewards structure, gives your customers a simple UI to interact with, and provides instant visibility into customer loyalty metrics.

On average, Yotpo customers see a 900% ROI with their loyalty programs. When building your program, come up with creative perks your loyal customers get access to. Aside from typical loyalty program perks like free shipping, shoppers were most interested in having early access to sales and new products.

Companies oftentimes see members of their loyalty program make up the lionshare of their revenue. In fact, Ulta reported that their loyalty members make up 95% of their revenue and spend on average more than $100 per year in their stores.

Once you’ve developed a robust structure, use your loyalty program to help customers engage with the causes they’re passionate about.  Look for causes that resonate well with your customers that you can support.

According to Yotpo, 85% of customers say they’re more likely to be loyal to a brand that has values that align well with their own. You can capture potential customers’ attention by creating an emotional connection with them.For example, Sephora allows customers to donate their Sephora reward points to the National Black Justice Coalition, which become cash donations. The result of a socially conscious rewards program will be emotionally involved customers who are not only loyal, but also help you do good at the same time. Customers with an emotional connection to a brand have a 306% higher lifetime value than normal customers.

2. Flaunt Positive Experiences From Existing Customers

What’s one of the first things you do when checking out a new product or brand? Instantly go to the reviews. In fact, 95% of consumers read reviews before purchasing, and what they discover can make or break a sale. In case you were wondering if feedback and reviews truly have an impact, according to Harvard Business Review, businesses see a 5-9% increase in revenue for every star increase on their reviews, and more than half of customers won’t consider buying from a business with fewer than 4 stars on their reviews.

Positive reviews aren’t the only thing that can impact your bottom line. Negative reviews can be a huge hindrance to your growth since it’s been found that angry customers will share their frustrations with 9-15 people, spreading their bad experience far and wide.

At the same time, many customers actively seek out negative reviews to provide more context and insight into the product and actually get suspicious when negative reviews are sparse or nonexistent. Having a balanced, honest view of what your product is—as well as what it isn’t—will help build trust with your customers.

And once your store, products, or services have garnered a few 5-star reviews, that’s just the tip of the iceberg. It’s not enough to have a few good reviews sitting idly on your site for the rest of time. You need to maintain them, grow them, and display them, taking into consideration things like customers generally won’t consider reviews relevant if they’re older than 3 months. 

Set up automated campaigns to solicit a stream of fresh reviews from customers that had a good experience with your product. Removing tedious manual emails and messaging, Yotpo helps seamlessly collect reviews from your customer on site and via email, as well as helps you easily incentivize those reviews or respond to questions and concerns quickly.

Respond to each and every review, if possible—yes, even the good ones. Monitor and manage all of the pages where customers could be reviewing your company as it’s a lot easier for potential customers to find negative, unmonitored reviews than you’d think.

Finally, it’s time to flaunt it. Display positive reviews on your site to help potential customers know what they’re getting. We’re talkin’ home page, product pages, checkout pages—every touch point that a potential customer could notice and get that extra jolt of confidence. Yotpo is a great tool to help effectively display reviews. Yotpo uses dynamic AI technology to select the best reviews to show off, which also means you never have to sweat unsavory remarks being front and center on your website.

To wrap it up, when building out your review program:

  • Do monitor and cultivate reviews on every platform possible.
  • Don’t be afraid of a few bad reviews. The nuance helps provide your customers with a better picture of your business.
  • Do respond to every review—positive or negative.

Do display your reviews wherever you can. Home page, product page, checkout, and beyond!

3. Invest In The Purchase And Post-Purchase Experiences

So, your customers trust you, they’ve browsed your site, and they plopped some stuff into their cart. Shopping is going swimmingly, but the checkout process is where you’ll lose the majority of your customers. In fact, most shoppers don’t even make it past the first step of entering some basic details in the checkout process. Cart abandonment is one of the single biggest issues facing ecommerce merchants. The average abandonment rate is 70%, which equates to a lot of potential revenue. Luckily, there are a plethora of tools out there to provide a better experience that won’t just help close the deal, but will have customers returning again and again. 

Bolt, for example, lowers the barrier for checkout to a single click instead of a painful process of re-entering the same personal information on every new site. Other tools like Klaviyo or Privy allow you to email customers who abandoned before purchasing. Test a variety of tools to fuel re-engagement and find the mix that pulls your customers back in the best.

While your customers are checking out, use all available options to reassure them that they’ve made a great choice with their purchase. Use strategically placed reviews within the checkout process and give your shoppers peace of mind for their orders by enabling Route. It covers loss, theft, and damage, and it’s an easy benefit to add to your checkout process. Best of all, it doesn’t cost you, dear merchant, a single cent.

Once your customers have made their purchase, your job doesn’t stop. The time between purchase and delivery (also known as the post-purchase experience) can make or break any loyalty you might have already accrued with this customer. Shoppers have become accustomed to the Amazon experience—that is, timely updates and easy order resolution. 

Unfortunately, the non-Amazon ecommerce experience has lagged behind and struggles to provide customers with the visibility and transparency they desire.

Ninety-three percent of consumers want full transparency on their deliveries at all times and 47% of shoppers say they won’t order from brands with poor delivery visibility. But with Route enabled on your site, your customers get access to a post-purchase experience that beats even Amazon Prime. 

Real-time package tracking updates with visual tracking are a game-changer for your customers. And if Route package protection is enabled, any issues with the shipment, whether that be loss, damage, or theft, are covered by Route. If your customer has an issue with an order, they can easily file a claim with Route for a refund or reorder. 

Nearly half of all claims are automatically resolved using Route’s resolution platform while the remaining claims are resolved manually by Route’s customer service teams. So, instead of gritting your teeth every time you send an order out and hoping nothing goes wrong, you can relax knowing Route’s got your back.

4. Maintain Customer Engagement

Ecommerce easily creates an environment that works against customer loyalty. While modern consumers are valuing brand experience more than ever, there’s still a price battle being waged. While COVID-19 has actually helped turn the tides even more as consumers look to support their favorite brands during tough times, low prices continue to pull consumers away from their favorite brands. The best way to combat consumer disloyalty is through consistent customer engagement. 

Bringing your brand to the top of your customers’ minds is a tall task though. Email marketing is the classic way to provide key information and ask for feedback from your customers. Unfortunately, just about every company in the world has realized this, making space in your customers’ inboxes difficult to come by. 

Instead, use Yotpo and other tools to target different mediums of communication. Yotpo uses SMS marketing to engage with customers, provide updates, and offer incentives. According to Yotpo, nearly 49% of consumers have signed up to receive SMS updates from their favorite brands. And SMS marketing has a higher open rate than just about any email out there. More than 90% of all messages are read within three minutes.

Meanwhile, Route’s branded profile pages are another place you can get exposure for your products. On average, customers using Route check the app more than 7x per order. When they check their order, they’re given a link to view your brand’s profile page. The CTR on that profile page to the left, for instance, is more than 25%, indicating that customers are hungry to engage, brands just have to open the door.

5. Leverage Loyal Customers

Now that you’ve provided a best-in-class customer experience from beginning to end and consistently engaged with your customers, chances are you’ve developed a pretty loyal relationship. 

In fact, over 82% of Americans say they’re loyal to product-brands. However, your job isn’t done. You’ll still have to continue nurturing the relationship with your current customers until the end of time, but as the loyalty deepens, you’re able to ask more of them. Leverage word-of-mouth from your loyal customers to access new customers and drive your cost of acquisition way down.

Customer referrals are some of the most cost-effective ways to find other customers. Potential buyers will trust their friends way more than they’ll trust you. In fact, referrals convert 30% higher than normal leads and have a much higher retention rate. Similarly, referred customers are 4x more likely to refer other customers as well. Incentivize customers with a referral program and loyal customers will only become more of a powerhouse for your ecommerce business. Use Yotpo to easily solicit customer referrals and pay out incentives without additional processes.

6. Automate manual tasks and messaging

One of the most tedious ecommerce tasks is managing customer communications. There’s no faster way to drive away a potential repeat customer than to go silent, but that might not be totally your fault. 

Especially as your store grows and you creep into being an established ecommerce brand, your inbox is going to start overflowing. If you’re just one person—or even if you have a modest team—it can be impossible to open, read, and respond to every single message. Expect your inbox to be even more stuffed, though, if you don’t have critical automation in play.

top reasons customers churn

Automating thank you emails, purchase updates, promotions, and more can cause a customer to feel forgotten about or ostracized. They trusted you with their own money and information, the least they expect is some sort of acknowledgment along the way. In fact, one of the biggest drivers of customer churn is the feeling of indifference on behalf of the store.

Nearly 70% of customers cite indifference as a reason to leave your store (and head right to your competitor). Implementing some automated emails that show acknowledgment, support, and appreciation toward you customers along their journey will help assuage any harsh feelings all while boosting retention.

Marketing automation platforms are popular tools in every marketer’s toolbox these days, and a few more popular and user-friendly options include Mailchimp and Klaviyo. Of course, it always helps to do your research and understand an automation platform that’s fit for your store’s size, budget, and industry. A little research and a small monthly budget toward automation could have you reaping massive retention benefits. 

7. Hone your retention marketing 

While you might be used to deploying loads of ads to folks who haven’t discovered your brand yet, it might be time to pump the brakes on that tactic. Instead, redirect your attention to an entirely different beast—retention marketing.

budget division between acquisition and retention

The greatest difference between the two realms is that retention marketing doesn’t have to do the legwork of introducing your brand. If someone has shopped with your store before, they know all your store, mission, and values. Instead, use these marketing dollars to promote targeted cross-sells or special discounts for existing customers. 

Or use this time to announce important store shifts, like rebranding, events, or other big news. Also, simply placing your hottest products or logo in front of existing customers could be enough to keep renting real estate in their thoughts. Not only could this drive them back through your checkout, but it will also keep your store top of mind when it comes to recommending your goods to their friends or family.   

8. Provide standout customer experiences

Lastly, our all-time favorite strategy for earning and retaining customers is simply treating them how they want to be treated—like a person. 

People are making buying decisions based on more than price or convenience. The user experience and genuine brand engagement tops the list for reasons to crack open the ol’ wallet. However, this means ecommerce merchants need to consider how they engage with their customer base along every step of their journey, from discovery to delivery (to return shopping trip). 

Route is revolutionizing how ecommerce brands control customer engagement instead of leaving it in the hands of third-party carriers, impersonal chatbots, or whatever else tries to throw a wrench in your customer relationship. With solutions like these, Route empowers any ecommerce merchant to curate enjoyable experiences:

  • Intuitive, always-learning product discovery
  • Real-time visual tracking
  • Shipping protection
  • Simple, self-serve issue resolution

When customers don’t have to worry about their package getting to them, reach out with questions, or sit in customer support purgatory if a problem happens, they remember. They remember the standout experience with your brand, driving them back to your warm ecommerce embrace again and again. This is an opportunity to turn your post-purchase experience into a well-oiled retention machine.

Ecommerce Brands Can’t Afford Not to Invest in Customer Retention

If you’re still stonecold focused on acquiring more ecommerce newcomers, consider pulling the retention lever instead.

Retaining customers, strengthening brand loyalty, and decreasing churn is more money in your pocket. Investing in low-hanging retention platforms and tactics leads to sustainable scaling for your store and happy customers each and every time.

Ready to see how simple strategies can drive retention through the roof? Try Route for Merchants and see retention skyrocket.

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