How to Effectively Improve Customer Retention
In an increasingly crowded eCommerce space, it’s far cheaper and cost-effective to retain an existing customer, than to capture a new one. It costs 5-25 times more to obtain a new customer, compared to maintaining a relationship with an already loyal customer.
Instead of regarding the initial sale as the endpoint, we’re going to delve into how to keep those customers returning time and time. Below, we’re going to break down some simple strategies of how to effectively improve customer retention, what it is, and how you can measure it.
What Is Customer Retention?
Customer retention is a metric used to measure a business's repeat customer rate over a set time period. This allows brands to set goals and adjust their strategies to ensure customers are satisfied and remain loyal to the business.
Aside from being cost-effective, loyal customers who continually support your brand can be your best cheerleaders as not only do their purchases increase your ROI but returning customers, in general, have a higher average order value, recommend you to family and friends, and provide honest feedback about their experience and the product. You can see a growth in profits by 25 to 95% with just a 5% increase in retention rates, according to Harvard Business Review.
How To Measure Customer Retention Rates?
As with any metric, it’s important to be able to measure and bookmark how your brand is currently doing. This allows you to set realistic and measurable goals, and implement new strategies to reach those accordingly. It will also allow you to distinguish which strategies work better than others and measure their effectiveness.
The standard formula for Retention Rate is:
But what do these numbers mean? That is dependent on several factors such as the industry you are in. An 80% retention rate may be excellent in one industry, but unacceptable in another. Therefore it’s important to put these numbers into perspective and remember, even just a 5% increase can result in a 25 to 95% growth in profits.
How To Effectively Improve Customer Retention?
Once your brand has the benchmark of where the current customer retention rates are, we can look at some simple yet effective strategies to keep more of your customers returning and spending more.
Offer a Seamless Checkout Experience
First impressions are everything, therefore ensure your customer's first experience with you is positive and memorable. From the moment the customer lands on the website, a clean layout is essential to helping them find the right products and information they need to reduce the risk of purchase abandonment. From clear product categories, menus, search bar options, best-seller products, size guides, and FAQs, having everything clear and available to the customer helps to guide them further along the purchase path.
Once customers have reached the checkout, using customer accounts allows returning customers to log in, view previous orders, and checkout faster by using saved payment methods and pre-filled shipping information. According to Baymard Institute, long and complicated checkout processes see 17% of US shoppers abandon their carts. However, it’s important to offer new customers the option to create an account without being too pushy, as 24% of US shoppers abandoned their carts due to the seller requiring the customer to create an account to complete their purchase.
This seamless experience will also require customer service on standby to assist with any questions they may have. Despite a large shift to online shopping, consumers still enjoy the personalized experience that comes with in-store shopping. By having an assistant on hand to help with any questions or suggestions through a live chat box or help desk tool, we can best recreate this personalized experience through our online store.
Following on from the pre-checkout journey, the post-purchase experience also needs to be seamless. Ensure customers aren’t just forgotten once they’ve hit the checkout button by making sure your customer service team is ready to reply and assist without any hiccups. Also, checking in with them to make sure they are happy with their purchase shows that your brand cares and, it’s a great time to get feedback on their experience and the product to ensure you can continue to delight customers.
Another great way to enhance the post-purchase experience is to offer Green Shipping Protection. This helps customers to shop in confidence knowing that their package is fully insured and, if any issues or damages do occur, another package will be sent out immediately at no extra charge to the customer or merchant. Additionally, the carbon associated with the shipping will be offset, helping your brand to leap toward becoming more sustainable.
Personalize the Customer Experience
As briefly mentioned above, consumers still love the feeling of having a personal shopper by their side throughout their purchase while shopping from the comfort of their own homes. We can recreate this through live chat boxes on the website, links to FAQs, size guides on the product listing itself, and by making personalized recommendations. On the product listing, you can add a “frequently bought together” or “style it with” section that recommends a product to enhance their purchase. For example, SheFit has a “you may also like” section that showcases tops, leggings, and shorts to pair with your sports bra. This also helps to boost average order value.
For repeat customers, with their order history in their customer account, you can personalize their experience by showing them more of the products that are likely to appeal to them. If they have purchased high-impact sports bras previously, you can suggest more styles of high-impact sports bras. This can be done within the website and through email communications with a personalized subject line such as “you are going to LOVE this customer name”. Not only is this a great way to continue communications with existing customers, but it also shows that your brand goes the extra mile by only sending emails with relevant products, as opposed to spamming customers. You can utilize email lists by categorizing them by purchase type, frequency, location, and so on to ensure you’re keeping communications relevant. In addition, when they create their customer account and fill out their details, you can add a birth date option so you can send a personalized email with a perk such as a discount or free shipping on their birthday.
Additionally, you can utilize the customer accounts by using a personalized welcome back message with their first name every time they return to your store. This helps the customer to feel recognized and valued every single visit.
Start a Loyalty or Referral Program
Another way to reward your repeat customers and make them feel valued is to launch a loyalty or referral program. With loyalty programs, customers are rewarded with points for every purchase and these points can accumulate towards a perk such as free shipping, free gifts, or a discount. In addition, you can implement a referral program where customers are rewarded and incentivized to recommend your products to their family and friends. This helps your repeat customers to become brand advocates and your best cheerleaders.
Outside of programs, rewarding repeat customers goes a long way. Depending on your average customer lifetime value, you can add a surprise when they place their 5th or 10th order with you. This shows that your brand is paying attention and truly values them as a customer.
Continue to Communicate with Customers
Communication is key when it comes to staying on the top of your customers' minds. Even from the moment a customer places their order, let them know it’s being processed, the team is packing it for them, and when it’s on its way. This provides them with a positive experience from the very get-go and demonstrates that your brand cares. Once their order has arrived, be sure to thank them for their custom and as a token of appreciation, you can plug a discount for their next order with you to encourage their return. It’s also the ideal time to ask for any feedback.
From here, it’s important to maintain communications with your customer to ensure your brand stays at the top of their minds. It’s crucial to only provide relevant and important information, such as suggested products, new releases, offers, product how-tos, events, and any other subjects that you feel deliver value to your customers. You can also set up a series of automated emails to check in with your customer. For example, 6 months after their first purchase, you can set up an email to go out to remind them of their favorite products or a discount code to encourage them to return. Alternatively, 2 months after their purchase, you can offer a maintenance guide on how to look after the product they purchased or suggested products that would complement their order.
In summary, numerous factors determine if a customer will return, but if your product is great and you can deliver a seamless, convenient and positive customer experience along with the points above, you are well on your way to improving your customer retention rates. However, it's important to note that this is dependent on which industry your brand is in. In some cases, a rising customer retention rate is a bad thing as it could also mean that your new customer acquisition is going down. So, to supplement you can also track new customers as a basic value or percentage, just to ensure your customer base is growing.
Anything we missed? Let us know in the comments below.