Although new customers are important, keeping the ones who are already spending with you is significantly more profitable.

So much so that an existing customer will spend, on average, 67% more than a new customer. The new customer – it’s worth noting – will also cost you between five and ten times more to get to your site.

Retained customers are 70% more likely to purchase compared to a new customer (just 20%) and have a lifetime customer value ten times higher. 

As a result the top 8% of your customers will be responsible for 40% of your revenue. 

Despite this, very few eCommerce businesses have a robust strategy in place to keep their customers coming back.

This is a huge risk to the long-term success of the business in light of the challenges in the eCommerce industry. Not to mention growing competition in an already saturated marketplace.

The higher your retention rates, the more loyal your customers are likely to be. This makes them less likely to jump ship if a direct competitor opens up or something goes wrong with an order.

Loyal customers also advocate for you, driving more traffic to your website, growing both your customer base and your revenue. Except it didn’t cost you anything to get them there.

Customer Retention Measurements

The best customer retention strategies are underpinned by clearly defined business goals. They need to be specific and measurable so stakeholders can clearly see if the strategy is working.

There are a number of metrics you should be working from:

  • Customer Retention Rate

This is a calculation to determine how many customers you’ve retained within a specific time period. 

Total number of customers you had over a specific time period (eg a month).

Subtract the new customers who purchased on your site.

Divide this by the number of customers you had at the start of the time period.

Then multiply by 100. This will give you a percentage value of retained customers.

  • Churn Rate

A certain amount of churn is normal. You can’t stay relevant to all your audience all of the time. Needs wants and priorities change. However, if your churn rate exceeds 7% then you’ve got a problem.

Churn rate includes both customers and revenue. While some customers may not return, if your revenue remains healthy then you’ve likely replaced them with customers who spend more.

Customer churn is calculated by subtracting the number of existing customers at the end of the time period, from the number of existing customers at the start.

Then divide this by the number of customers at the start of the time period.

Revenue churn is calculated by revenue at the start of the month, minus revenue at the end of the month, divided by revenue at the start of the month.

If either of these figures produce a negative outcome these are your losses.

  • Existing Customer Growth Rate

This metric measures how much each of your returning customers are spending with you. 

If possible you need to be able to track how many promotions, incentives and offers they have engaged with as well. This will give you an indication of how well your marketing is working.

  • Repeat Purchases

Your repeat purchase ratio is worked out by dividing your returning customers for the time period by the total number of customers for the time period.

  • Active Users

Monitoring this on a daily, weekly and monthly basis gives an indication of churn. The less engagement on your site, the greater the chance customers are about to churn.

  • Lifetime Customer Value

This represents the amount of revenue generated by each of your customers. Customer lifetime value should remain flat or increase over time. If the number starts to drop it either means customers are spending less or not shopping with you any more.

To work out your LCV divide gross annual sales by unique customers then multiply that by the average lifespan of your customers.

  • Product Returns

Keeping track of your returns rate is an effective measure of customer satisfaction. According to Shopify the average return rate for eCommerce sites is 20%. This jumps to 30% during peak seasons like Christmas. 

To calculate your product return rate divide the number of items returned by the number of items sold. 

Your aim is to get this value as close to zero as possible. If your return rate is higher than average you need to investigate why.

Fundamentally, however, the goal is to turn a new customer into a retained customer as quickly and cost effectively as possible. From there you can nurture them into a loyal customer.

It’s important to understand that retained customers aren’t loyal customers. Rather they are the step in between, but just as important to your business.

Loyal customers have an emotional connection with your business, usually through sustained positive experiences. Retained customers are ones who give you repeat business. Transitioning one to the other takes time and effort on your part.

Customer Retention Strategies

There is no one size fits all customer retention strategy. Even in eCommerce there are too many variations in business model, product, customer base and more.

However there are components that make up a customer retention strategy that most businesses can apply. The ease with which these methods can be applied comes down to your willingness to engage with your customer. 

And your ability to leverage your customer data and apply it in meaningful ways to create a unique customer experience. Simple.

Build Trust

All successful relationships are built on trust. Your challenge as an eCommerce business is to create as rewarding an experience as possible for your customers. 

Considering they’re accessing a website, not visiting a store this can be difficult. However, there are ways you can build trust between your business and your customers.

Detailed product descriptions that explain the correct or best use of the item is above and beyond what most websites offer. Explainer videos are a level above again.

While this takes time compared to a short, SEO friendly paragraph, the value add for your customers can’t be underestimated. They will recognise the extra effort you have gone to to help them.

Equally, make communication as easy as possible. Email, webchat, WhatsApp, Facebook Messenger and any other channel you can think of should be available to your customers. 

One of the biggest frustrations with customers dealing with online sellers is the inability to speak to someone when there’s a problem.

The ability to chat to a person and ask questions humanises the business and helps to build an emotional connection. 

The other frustration being terrible customer service when they do. A key differentiator for your business should be a customer service team who provide outstanding customer service both before and after purchase.

The willingness to listen to and help customers not only builds trust but serves as useful insights to improve your offering.

Create an end to end Personalised Experience

Customers want to feel like they are more than a user ID. They want more than generic offers and emails that bear no resemblance to the products they buy.

They want to feel like when they sign into their account, you’re on the other side of the screen welcoming them in.

Essentially, the experience of a really good department store, online.

Thanks to the data you collect on your customers this is within your reach.

Using that data, if your customer is signed in, you can push through product recommendations based on their purchase history. 

You can use the same data to tailor offers and discounts to maximise conversions.

Both of these personalisations can be applied to email marketing campaigns. Rather than the generic emails that most etailers send out, you can create highly personalised communications. 

Offering customers products that they actually might be interested in rather than what you want to sell them builds trust. Your customers feel heard and understood and that stands out when they decide where to spend their money.

Equally, if you generate content on a regular basis (and if you’re not you should be), you can share this too. Using the same principles as your sales emails, you can automate a long term nurture sequence. Using tags your customers can receive emails from the long term nurture that fits their interests based on their customer profile.

Marketing automation can be applied to re-engage your lapsed customers as well. Set a rule that states customers who haven’t purchased in X months. When that threshold is reached those customers receive highly aggressive offers based on their purchase history.

They key here is relevance. It’s not enough to send a lapsed customer a 25% discount code. It needs to be underpinned by products they may want to buy.

Create a Loyalty Programme

When it comes to customer retention strategies, loyalty programmes are a classic. The reason being: they work.

Giving customers a penny back for every euro or pound they spend is actually a pretty poor deal for the consumer but it doesn’t stop customers flocking to sign up.

One of the major UK supermarkets has 19 million customers signed up to their loyalty programme. Their points are converted into vouchers for money off their total bill. Or they can swap those points for tickets to popular tourist attractions.

This perceived value keeps customers loyal despite other supermarkets being markedly cheaper across the board. 

Extra incentives like bonus points or member only pricing helps to keep the audience engaged. And, more importantly, feeling like they’re getting a good deal.

Creating a loyalty programme as part of your customer retention strategy is relatively simple.

There are two ways of approaching it. 

In-house Loyalty Programme

Simply introduce a points system, or similar, that equates to money off.

You can also offer loyalty members free shipping on all orders, or at a lower threshold. You could offer anything from free returns to exclusive discounts. 

Some eCommerce businesses offer their loyal customers early access to their sales. This is a shrewd move as they’re not incurring any costs for doing this. Rather they’re getting a small revenue boost before the sale starts fully.

Outsourced Loyalty Programme

A third part handles everything from managing the data to communicating offers to the customers.

While this takes the logistical challenges off your hands, other than cost there are two main drawbacks.

Firstly, you don’t have the data, the prodiver does. That makes it harder for you to communicate with them about other offers.

Secondly it can create an inconsistent experience for your customers which can damage the trust between you.

Despite the obvious benefits, many businesses are reluctant to introduce loyalty programmes because of the perceived cost. While costs are involved the crucial thing to understand is most of something is better than all of nothing.

eCommerce is a red ocean space. That is to say, it’s highly competitive. That means there is no shortage of competitors waiting to lure your customers away. And the fact is it only takes a few deep discounts and a slightly better free shipping offer and they’re gone.

In a price driven economy your customers are exactly that fickle, unless you give them a reason not to be.

Loyalty programmes that are as tailored to them as your emails will delight your customer base. And keep them coming back time and again. 

Customer Retention through Gamification

Gamification as a customer retention strategy has been around for a while – with varying degrees of success.

Audible awards its customers with badges for listening to multiple books, total hours listened to etc. It’s a gimmick that doesn’t really work because there’s no status or reward associated with achieving them.

Any sense of satisfaction is minimal because the user was going to listen to the books anyway.

On the other hand, earning reward points that take customers up a tier system that earns them free items or bonus discounts is a strategy that works.

Much in the same way modern video games work, customers essentially level-up by spending money. The more they spend the faster they level-up and therefore the faster they get the big discounts or special prizes.

Some businesses take it a step further and reset progress each month, pushing customers to spend that little bit more. That way they reach the safety of the next level and all their hard work (read spending) wasn’t in vain.

Don’t take this approach lightly as it’s likely to annoy as many customers as it delights. 

You need to have deep insight into your customers and they’re spending habits before attempting something like that.

However, gamification has been proven to work. The main difference is that customers expect increasing rewards inline with their increased spend. Therefore you need to be confident your business can absorb those costs, even with the increase in sales in mind.

Happy Customers are Retained Customers

Whatever approach you choose, remember that the secret to customer retention is great customer experience.

This starts with your website and goes on through every step of the process to the customer receiving their order.

A smooth checkout process, quick dispatch with frequent updates on order status and a follow up email after delivery is the absolute minimum standard.

To delight your customers you need to invest in your customers. 

Pooling your data into a Single Customer View gives you the insight you need to make those decisions. 

Without it you’re making best guesses, rather than data backed assumptions.

That’s the difference between your retention programming working a little or a lot.

To learn more about how you can leverage your data to create customer retention strategies that work, get in touch today and a member of our team will help.

About Xtremepush

Xtremepush is the world’s leading customer data and engagement data platform. We work with various top brands within the eCommerce industry. Schedule a personalised demo of our platform to learn more about how we can help your brand drive repeat customers and increase revenue.