The Importance of Customer Retention in Ecommerce
It costs a lot more to get a customer than it does to keep one. Retaining your current customers is crucial, and not just because it’s cost-effective. Ecommerce businesses need to prioritize customer retention. Here’s how.
Customer Retention is Key for ROI
Many new ecommerce businesses are so focused on growth that they forget a customer retention strategy. It’s important to have tactics for both gaining new customers and keeping the ones you have - but many retailers focus a lot more on the acquisition piece. That means they are leaving a lot on the table.
Customer retention is crucial for several reasons. From a product perspective, it’s an indicator of how well your offerings are being received in the market. If customer retention is consistently low, you might want to take a closer look at what you’re offering - maybe your products are just missing the mark. Just as important, customer retention also increases ROI, boosts loyalty, and can even help you to obtain new customers. Research has shown that a 5% increase in customer retention can increase company revenue by more than 25%. Plus it’s several times more expensive to acquire a new customer than it is to retain an existing one.
Another interesting fact about loyal customers is that they result in more money for your bottom line. Repeat customers tend to buy more often and in bigger quantities than new customers. Think about it: they have tried your products before and are happy with the quality and service. Ecommerce is tricky when it comes to order sizes. Many people want to touch and feel items, and can be hesitant when they’re essentially buying blind. Consider your own experiences: once you’ve tried an online store before - and everything went great - you’re more likely to order additional items next time.
Loyal customers can also serve as a sort of brand ambassador, leading to new business. If someone posts about their new favorite product on Facebook and tags your online store, you’ll be exposed to an entirely new audience. Plus, word-of-mouth is still powerful, even in the digital marketplace. When people are loyal to your brand, they are more likely to tell their friends or family about it. They might even leave you positive reviews or testimonials, and that type of social proof is really impactful for new buyers. In short, loyal customers help to do your marketing for you - at very little cost.
Eight Tips for Effective Customer Retention Management
Understanding the importance of customer retention, ask yourself how much time and energy you’ve devoted to a management strategy. Customer retention can’t be a “nice to have”, or an afterthought once the sale has gone through. Here are ten strategies for proactive customer retention management.
Welcome with email - As soon as someone makes a purchase with your company, an automated email should go out to them. A welcome message should thank new customers for their purchase and offer a few options for cross or up-sells. If there are other resources that could help them, include them in the email. For example, if you offer high-end electronics, you may want the email to link to online manuals or other tutorials.
Go the extra mile - This concept shouldn’t really be a ‘tactic”, and should just be the way that you conduct business. Exceptional service will help people to remember and value your brand. Look for consistent and regular ways to delight your customers. Things like free trials or including free samples in packaging can go a long way in creating brand loyalty.
Make the most of social media - If you’re selling online, you need a strong social media strategy. This is particularly true if the customers you target are millennial or Gen Z. Make sure you have profiles on the various platforms like Instagram and Facebook, and carve out time to check them consistently. Respond to any questions that get asked on social media, and thank people who leave comments or reviews. It’s important to make sure that anyone who takes the time to engage with you on social media feels appreciated. Evaluate how people interact with your brand online by monitoring hashtags, mentions, etc.
Get serious about a rewards program - Have you thought of doing a rewards program, but never get around to it? The truth is that rewards programs give people a reason to keep coming back. Without one, you’re losing a little of that extra edge over your competitors. Everyone loves getting something for free. Customers feel great when every purchase gets them closer to something for free. Make that easier by implementing a formal system based on dollar amounts, points, or other criteria.
Make it personal - One really cool thing about ecommerce businesses is that they have more access to data than other retailers. Use that to your advantage by customizing online experiences based on purchase history. Look at what Amazon does: recommending new items based on what you have viewed before. Take things a step further and personalize email communications, blog posts, etc. You might even want to just ask customers what they want more of; they’ll appreciate feeling like an individual and not just revenue.
Have a signature brand look - As an ecommerce organization, you might not even have a physical store at all - so you’ll need to rely on other forms of branding to curate the right image. Things like color schemes, fonts, Instagram grids, and imagery are more important than ever. Even packaging can be a key part of your signature look.
Step up your game for deliveries and returns - Online shopping should be easy. That’s the reason many people do it in the first place. Make the experience as simple as possible by clearly showing the different delivery and return options you offer. Deliveries really shouldn’t have a one-size-fits-all approach. Choosing from a range of one-day, expedited, or standard shipping options is really helpful. The same goes for returns. You’d be surprised how many items get left in carts because the shopper was turned off by their options for returning products that don’t work.
Get people to create an account - You can get a lot of valuable data that will help you market to customers if they create an account with you. But how can you entice them to do so? Customers are not likely to do it just because they feel like it (hint: they don’t). Start a mutually beneficial relationship by incentivizing them to set up an account. Make the process super simple with only a field or two, and then offer perks like special discounts or early access to sales.
At the end of the day, your goal is simple: keep customers coming back. Customer loyalty creates a real revenue boost for your ecommerce company. If you think great products alone are enough to keep customers engaged, you’re wrong. Take some intentional steps to engage your target audience and make their lives easier. We promise your bottom line will notice a difference.