Ecommerce brands are addicted to paid marketing.
I have seen brands with even 60% revenue coming from Facebook alone in their google analytics.
That’s a highly unstable business model.
I have nothing against paid marketing channels, but I am against heavy reliance on them. You need a healthy mix of customer acquisition and customer retention strategies to increase profits,
Growth via paid acquisitions becomes challenging and costly as you scale. They are good to start but can become very costly once you have exhausted your core niche audience.
Acquiring a new customer costs 5 times as much as retaining an existing one. The cost of paid ads continues to grow as more and more brands are competing for ad space. Paid marketing leads to unsustainable growth.
With Amazon monopolizing the low-end market, it becomes a race to the bottom to see who can offer the biggest discounts. Most lower-end markets tend to commoditize in long run, leaving you very little margin for profits.
Customer retention is a requisite since heavy competition continues to increase in every industry. Platforms like BigCommerce, Shopify continue to make it easier and more accessible for anyone to start their own ecommerce store.
In a long run, only working on acquiring customers will slow down the efficiency of your business. However, retaining them increases the customer’s lifetime value, profits, and overall stability of the business.
To read more about the negative effects of paid marketing on startups.
Benefits Of Working On Customer Retention
More than avoiding the pitfalls of the acquisition mindset, working on retention brings more benefits.
Increasing customer retention by just 5% led to an increase in profits of 25% – 95%.Famous Study By Bain Consulting published in HBR back in 1990
Tangible benefits and their impact on important KPIs.
- Easier to sell again
- Spend more with each purchase
- Likely to shop again and again
- Low Cost To Serve
- Word Of Mouth
|Easier To Sell Again||Higher Conversion Rate|
|Spend More With Each Purchase||Higher Average Order Value (AOV)|
|Likely to shop with you again and again (Loyalty)||Higher Lifetime Value (LTV)|
|Low Cost To Serve||Less Operational Costs|
|Word Of Mouth||Reduced Customer Acquisition Cost (CAC)|
Intangible benefits of working retention –
- More profits
- Happy Customers
- Higher employee satisfaction
- Future proof your business.
- Spend at key times
- Steady Income
- Easy to cross sell new products or categories.
A repeat customer is easier to sell to
Repeat customers are easier to sell to. When you’ve set customer expectations and built up trust, customers feel more confident in your brand and take less work to sell to. Plus they tend to spend more on each purchase.
“A repeat customer has a 60 to 70% chance of converting.”
Paul Farris (Marketing Metrics)
Repeat customers are 9 times more likely to convert than a first-time shopper.
Repeat customers spend more on each purchase
The number of previous purchases and how long they’ve been a customer directly impacts how much a repeat customer spends.
Repeat purchasers spend 67% more than new customers and thus, have the potential to generate larger transactions. Loyal customers also increase the cross-selling purchase rate.
A repeat customer is more likely to shop with you again and again
And the best part probability increases over each time.
For brands, one-time customers are expensive, since acquisition costs can’t be spread over time.
Cost to serve
Repeat customers have lower operational costs.
In ecommerce, returns and customer support lead to higher operational costs and eats from your margin.
Low friction in customer experience means a less costly relationship for both your customers and your company.
Repeat customers share your store more
Repeat customers give free word-of-mouth referrals. There’s no better marketing strategy than happy customers, who will recommend your products or services to family, friends, work colleagues, or share it on social media.
Loyal customers frequently refer new customers to your business, providing another rich source of profits.
Customers refer more people to a brand when they have made more purchases with that store.
Repeat customers spend more at important times. Running a Christmas special or Black Friday deal? Your repeat customers tend to spend more during these kinds of promotions.
Repeat customers bring a steady income. With a stable customer base you can rely on consistent revenue without having to worry so much about customer churn, or any discounts your competitors may be running.
Loyal customers will buy other products from you. They can help you with feedback, recommendation, and trials for new products.
Employees are happier to serve loyal customers. Good customer retention strategies result in low employee turnover, especially in customer-facing roles.
Customer Retention Metrics
For ecommerce brands, you should monitor the following metrics –
- Retention Rate
- How many customers stay with you during a particular time period.
- Churn Rate
- How many customers leave with you during a particular time period.
- Repeat Purchase Rate
- How many customer purchased again during a particular time period. More easy and actionable.
- Purchase Frequency
- How many time customer buys from you during a time frame.
- Time Between Purchases
- Duration between multiple purchases. Related to purchase frequency.
- Average Order Value
- Average transaction value
- Customer Life Time Value
- Total time value during a time frame of customer.
The most confusing part is choosing the right time frame for most metrics. It depends on product lifecycle, niche purchase frequency, price point, etc.
Mobile phones have 18 months buying cycle compared to 1-2 months for cosmetics.
Mobile accessories depending on quality and price might last from 6 months to 5 years.
So choose a timeframe wisely but 6 months is a good starting point for most. Anything more than 12 months is very tough to work and see improvement on.
Once you’ve settled on a period of time you’ll need three bits of info:
- The number of existing customers at the start of the chosen period
- The total number of customers at the end of the chosen period
- The number of new customers added in the chosen period
Rather than calculating the number of customers who stay loyal to your business, you’re calculating the number that leaves.
Repeat Purchase Rate
The number of customers who bought more than one vs the total number of customers.
Typically, any repeat purchase rate in the 20-40 percent range is viewed as being successful. But you know your business better than anyone else, so measure accordingly.
How often do customers (first time or otherwise) return to make a purchase?
To calculate purchase frequency, just divide the number of orders by the number of unique customers over a specific period of time.
Average repeat frequency = Number of orders in the last 365 days / Number of unique customers.
Time Between Purchases
Time between purchases is a critical customer retention metric that measures the duration or gap between a customer’s consecutive purchases from a business.
A shorter time between purchases typically indicates higher customer engagement and loyalty, suggesting that customers are returning more frequently.
Businesses aim to reduce this time, as it often leads to increased customer lifetime value and sustained revenue.
Monitoring and optimizing this metric helps in designing effective retention strategies and maintaining a loyal customer base.
Time Between Purchases = 365 / Purchase Frequency
Average Order Value
Average order value is a crucial customer retention metric that calculates the average amount a customer spends during a single transaction with a business.
This metric helps gauge customer behavior and their willingness to invest in an ecommerce brand’s products or services.
Monitoring and increasing this value over time is essential for boosting revenue and profitability.
A higher average order value often implies stronger customer loyalty and can result in increased customer lifetime value.
Ecommerce brands use this metric to tailor marketing strategies and incentives to encourage larger purchases from their existing customer base.
Average Order Value = Total revenue / Numbers of orders taken
CLV (Customer Lifetime Value)
Customer Lifetime value = Average Order Value X Purchase Frequency
*** Most enterprises monitor this on lifetime, which might include 2-3 years or more. Strongly advise against this for small businesses as most businesses can’t invest for 3-4 years payoff. You want investment in customer to recover in 6 months – 1-year max. Anything top of that is a cherry on the cake but not something as part of the strategy.
Using CLV, you can better understand the different personas among your customers; the first step to effective targeting or personalization.– Daniar Rusnak
Finding your Customer Lifetime Value will make you think, not just about the sale, but about the full customer journey: when, where, why, for how much, and how often do your customers make a purchase. Answering these questions will bring valuable insights, and help you spot issues you may not have noticed before.
Customer Retention Strategy Framework
The framework is helpful to come up with your own customer retention strategies. Also helps to see how strategies fit together with each other.
Customer Retention Strategy Framework Starts With –
- Customer Journey Mapping
- Customer Journey Analytics
- Customer Journey Orchestration
As per Customer Retention Leading Expert, Joey Coleman recommended customer journeys stages
- Stage of customer looking in the market to see the options available.
- Once the customer have taken the trial or bought the product.
- Once they have affirmed the decision once more after their initial purchase or trial taken.
- Once they have started using the product.
- Once they really see the value of the product.
- They are comfortable with the product and now using it to solve their problems. Also they start seeing themselves as the part of the community.
- Now they have taken the adoption of the product. They are actively using and can be considered loyal
- Now they are actively advocating the product to other people.
You can read more in the book Never Lose A Customer Again.
Once we do journey mapping, you have broad stages customer goes through to get to the advocacy stage.
Now we need to set up journey orchestration to get customers to the funnel.
The goal of journey analytics is to get a clear picture of customer movement along the complete customer journey.
Journey analytics combines quantitative and qualitative data to analyze customer behaviors and motivations across touchpoints and overtime to optimize customer interactions and predict future behavior.
For ecommerce customer retention strategies, we should focus more on segmentation than a funnel. Start with –
- Define key KPIs and metrics around measuring retention and loyalty.
- Customer Data Platform (CDP) to capture data touchpoint information across multiple touch points.
- Finding key audience segments to work using RFM model, Cohorts and Triggers by analysis on CDP.
Customer Data Platforms are great for capturing customer data across multiple touchpoints and then segment them for usage.
Most marketing automation platforms like ActiveCampaign, Klaviyo, Marketo provide customer data platform capabilities. You can also use dedicated CDP platforms like Segment.
Journey orchestration is creating an experience for customers to reach the advocacy stage. To assist and help customers along the way to maximize their retention and experience.
In short, Journey Orchestration is customer retention strategies to deploy to improve retention. The framework helps with choosing the right strategy to work on.
To orchestrate a perfect experience, there are multiple channels –
- Product Communication
- Managing complete communication strategy on available channels like Email, SMS, push etc along the journey. Connect to the audience via Email, SMS, Push across each segments.
- Product Enhancements
- Launching multiple programs like loyalty, referral, subscription to help customer along the journey. Developing features along each segments like cross selling, loyalty, referral etc.
- Product Optimisation
- Personalize, optimise, A/B test UX experience along the journey. Make better and unique experience on Website, App or Omni channel platform.
- Operational Enhancements
- Looking at anything troubling to customer around return policy, shipping, delivery days etc. Also improving the processes for the customer support, response times etc.
Strategies To Boost Customer Retention
It’s best to look at customer retention strategies from the perspective of a framework, to get a complete overview of how things are attached to each other.
Run Post Purchase Value Realisation Sequence
This could mean sending them through a welcome sequence that interests them and actually adds value to the product they just purchased.
The goal is not to repeat purchases but value realization for the product they have just bought.
Customers will buy again only they find value with their existing purchase.
Implementation tip: For users who have just purchased a fitness product, share a quiz that helps them figure out what sort of workout program they would like to follow. Or send a detailed explanation of how to set up and use an electronics product the customer just purchased. Both of these situations would be welcomed by the customer and improvement their engagement significantly.
Product unboxing advice and recommendations.
Post sale delivery communication
Customers say they don’t want to know, but they want to know as much as they can. They want to see their money working especially once they have placed an order.
There is a gap between where the customer stands and where the business thinks they stand.
Communicate for all things related to order –
- Any delay in shipment
- Return refunds
- Order status updates
- Any other policy or product changes
They create trust for future purchases and ease any doubts in customer’s minds. Be as transparent as possible.
Dominos is a great example of telling customers every step of the tracking.
Make 1% feel special
Even if the brand does not realize, repeat customers know they are your loyal customer. They want to be seen. They want to be appreciated for their loyalty.
- Let them know they have been seen.
- Let them know they have been heard – Send them a voice note.
- Let them know they matter – Hand-written note.
You can read about complete 1% strategies over here.
Incentivize repeat purchase
This one is no brainer, incentivizing customers to make a second purchase.
Giving the user a coupon or discount code that would apply to their second purchase is a great way to get them coming back.
Using phrases like “loyal customers” helps, and you should also not overwhelm your customer with discounts to the point where they expect them.
Upload Best Audience To Google / Facebook
The goal is to align acquisition along with your retention efforts.
Using RFM segments, find your best and most loyal customers.
Feed those segments back to your paid acquisition to create look alike audience of your best loyal customers.
Remarketing to existing customers
Ideally, 20% of the marketing budget should be allocated to existing customers.
Remarketing to this valuable segment is a powerful strategy to boost customer retention.
By leveraging customer data, such as past purchase history and browsing behavior, ecommerce brands can create highly targeted and personalized campaigns.
These campaigns remind existing customers of products or services they’ve shown interest in or provide them with relevant offers.
Remarketing maintains brand awareness, encourages repeat purchases, and rekindles customer engagement.
It’s a cost-effective way to maximize the value of your existing customer base, as they are more likely to convert and continue their loyalty when presented with tailored and timely incentives.
Launch Subscription Program
Offering a discount for bulk or loyalty is another route you can take. Amazon does this by offering a 10-15% discount on products if the purchaser opts for “Subscribe and Save.”
The subscription works well for product niches with a repeat frequency of less than 3 months.
You can launch a monthly subscription box to lock your loyal customer, so they don’t get swayed by a price difference of 10-15% on the same product.
It’s a great moat to build around your brand.
Build an active community
To boost customer retention, building an active community is a powerful strategy. An engaged and loyal community can enhance an ecommerce brand’s connection with its customers.
By fostering open communication, collaboration, and shared experiences, ecommerce brands create a sense of belonging, making customers feel valued and understood.
Active communities provide a platform for customers to ask questions, share feedback, and connect with like-minded individuals, which can significantly improve customer satisfaction and trust.
This leads to longer-lasting relationships and repeat purchases.
Ecommerce brands can employ online forums, social media groups, or exclusive memberships to cultivate this sense of community, ultimately strengthening customer loyalty and advocacy.
Word Of Mouth Marketing
Learn 12 successful Word Of Mouth Marketing strategies over here.
Celebrate the milestones
People love celebrating milestones.
For every repeat purchase, loyalty points earned/spent, 5x repeat purchase it should feel like a milestone. Even small things like reviews can be made into a milestone.
Recognizing and celebrating these achievements not only makes customers feel appreciated but also reinforces their commitment to your brand.
Personalized thank-you messages, exclusive offers, or special rewards for hitting these milestones can go a long way in boosting customer retention.
Making customers feel valued at every step of their journey cultivates a stronger bond and encourages them to stay loyal to your business.
Launch Loyalty Program
Launching a loyalty program is a highly effective strategy to boost customer retention.
By offering rewards, discounts, or exclusive benefits to repeat customers, businesses incentivize ongoing engagement.
These programs can be tiered, providing increased benefits as customers reach higher levels of loyalty.
Such initiatives not only encourage repeat purchases but also foster a sense of belonging and appreciation among customers.
Additionally, they can provide valuable data for personalized marketing.
A well-designed loyalty program enhances customer satisfaction, increases brand loyalty, and ensures that your customers keep coming back for more, ultimately driving long-term success and revenue growth.
Friend Referral Program
Implementing a Friend Referral Program is a powerful customer retention strategy.
This program encourages existing customers to refer friends and family, creating a win-win situation.
Referrers typically receive rewards or discounts, while new customers benefit from trusted recommendations.
This approach leverages the strong bonds customers have with their social circles, making it highly effective in expanding the customer base and boosting retention.
Not only does it increase customer loyalty by rewarding advocates, but it also introduces new clients who are more likely to stick around due to the endorsement from someone they trust.
A well-executed referral program can significantly enhance customer retention and drive organic growth.
Good customer onboarding
Start with welcome series for customer onboarding.
Introduce your mission, the reason for existence, goal to the customer.
A smooth, informative onboarding process is crucial for fostering a strong initial connection. It sets the tone for a positive customer experience and builds trust.
By guiding customers through your products or services and showing them their value, you increase the chances of their continued engagement and loyalty.
A good customer onboarding experience can lead to long-term satisfaction and retention, as customers feel more confident and empowered to make the most of what you offer.
Personalise Repeat Abandon Cart
Treat your loyal customers differently even for abandoned cart flows.
Implementation tip: Not only do you know what they were about to purchase when they returned to your website, but you know what they purchased in the past. If they’ve left a review, this can be included in the abandoned cart notification, and you can even recommend other products that are a good fit with the products they already own.
Timed win back campaigns
A winback sequence can help you re-engage with customers who haven’t made a purchase in a while, increasing their likelihood of becoming repeat customers.
Timed win back campaigns involve sending targeted offers or reminders to win back lapsed customers at the right moment.
These strategically timed messages can reignite their interest, reminding them of the value your products or services offer.
By using data-driven insights and well-tailored incentives, you can recapture their attention and encourage them to return, ultimately boosting customer retention and revitalizing your customer base.
Flow sequences for VIP customers
Creating flow sequences for VIP customers is again a powerful strategy to enhance customer retention.
VIP customers represent a valuable segment of your clientele, and ensuring they have an exceptional experience is essential.
Flow sequences involve crafting a personalized journey, from the initial welcoming message to ongoing interactions, exclusive offers, and recognition of their loyalty.
By consistently engaging and catering to their needs, businesses can strengthen the bond with VIP customers, increasing their loyalty and advocacy.
These sequences provide a sense of exclusivity and appreciation, making VIP customers feel valued and more likely to continue their patronage, ultimately leading to increased retention and long-term business success.
Give great customer support
Providing exceptional customer support is a cornerstone strategy for boosting customer retention.
When customers experience efficient, empathetic, and responsive support, it fosters trust and a positive relationship with your brand.
Quick issue resolution, clear communication, and a willingness to go the extra mile to address their concerns can leave a lasting impression.
Satisfied customers are more likely to stay loyal and become repeat buyers.
Additionally, excellent support can turn a one-time customer into a brand advocate, sharing their positive experiences with others, which in turn, can further enhance customer retention.
A strong customer support system is a critical asset in building long-term customer relationships.
Cross Selling – Bundling Strategy
Cross-selling through a bundling strategy is a potent method for boosting customer retention.
By offering complementary products or services bundled together at an attractive price, ecommerce brands encourage customers to explore and purchase more from their offerings.
This not only increases the average transaction value but also deepens the customer’s engagement with the ecommerce brand.
Bundles provide convenience and value, making customers more likely to return for future needs.
Moreover, by intelligently recommending bundles tailored to individual preferences, ecommerce brands can further enhance customer satisfaction and loyalty.
An effective bundling strategy can significantly improve customer retention by delivering added value and convenience to the customer.
Launch feedback system around customer journey
Run customer satisfaction surveys and ask for testimonials at key touchpoints throughout the customer journey.
By launching a feedback system that revolves around the entire customer experience, ecommerce brands gain valuable insights into pain points, preferences, and areas for improvement.
Analyzing this feedback helps in refining products, services, and processes to better meet customer expectations.
Addressing concerns promptly and proactively demonstrates a commitment to customer satisfaction.
It not only resolves issues but also strengthens trust and loyalty.
A feedback-centric approach aligns your business with customer needs, enhances their journey, and contributes to increased customer retention by showing that their opinions are valued and acted upon.
Tell Your Brand History
People want to be associated with the legacy and story behind a brand. Sharing your brand’s history is a compelling strategy to boost customer retention.
By narrating the journey, values, and milestones that have shaped your business, you establish a deeper emotional connection with customers.
This transparency and authenticity create a sense of trust and belonging, making customers feel like they are part of your brand’s narrative.
Highlighting your evolution and commitment to customer satisfaction reinforces loyalty.
Customers who understand and appreciate your brand’s story are more likely to stick around, advocate for your business, and become part of the ongoing narrative, ultimately enhancing customer retention.
Become a trusted voice
People don’t buy from generalists, they buy from specialists. They want to know you know your shit. Content marketing is the best way to showcase your brand expertise.
The most popular types of content include:
- Case studies
- YouTube videos
Go all in email marketing
Email is an extension of product communication strategy.
Email helps you with one on one communication with customers which is tough on any other channel. You can target a complete customer journey across multiple touchpoints.
It’s far better than SMS, Push, WhatsApp, Messenger with the reach and content space to communicate your thoughts.
You can run a detailed audit on email marketing to get started.
Nail the Customer Experience
“You’ve got to start with the Customer Experience and work back toward the Technology, not the other way around”— Steve Jobs
Focusing on the customer experience is a pivotal strategy to boost retention.
Providing seamless, enjoyable interactions at every touchpoint, from website navigation to product delivery, builds a strong emotional connection with customers.
Excellent customer service, user-friendly interfaces, and personalized experiences create a positive perception of your brand.
Customers are more likely to return when their needs and preferences are catered to.
Nailing the customer experience not only retains existing customers but also turns them into loyal advocates who share their positive experiences, driving sustained business growth.
In some cases, customer retention strategies are interlinked with broad brand strategies or marketing strategies.
Customer retention is not hackable. Customer retention can’t be faked.
You can get someone to buy once but building real customer retention takes effort.
What’s your favorite customer retention strategy?
What’s strategy worked for you or didn’t work well?
What strategy do you want to try next?
Drop in the comments.