A recent report by Shopify notes that the cost of acquiring new customers is rising steadily. In fact, Facebook advertising costs have already equaled pre-pandemic highs.
Further, ecommerce and retail have recorded a 61% YoY growth in social media ad spend in Q4, 2020. However, many people still find digital ads to be intrusive because of how they keep tabs on your search history and online activities.
This is why small ecommerce retailers should focus on boosting customer retention and loyalty. It’s a cheaper and more authentic alternative to digital advertising and other acquisition strategies.
In this article, we’ll discuss some of the best customer retention and loyalty strategies that you can leverage to grow your ecommerce business.
Understanding customer retention and loyalty
A customer who enjoys doing business with you can fall into one of two types: retained customers or loyal customers.
Customer retention refers to the activities a brand undertakes to generate repeat business from its customers. It measures how many customers return to your brand, but it has little to do with their preference for your brand over your competitors. The last bit has to do with loyalty.
Customer loyalty is what keeps your customers engaging with your brand and choosing you over others. Loyal customers may even go as far as to advocate your brand in their social circles. Besides giving you repeat sales (which increases their lifetime value), 59.3% of loyal shoppers recommend their favorite brands to their friends and family.
Customer retention increases profitability and brand recognition, but more importantly, it’s also the first step towards creating more loyal customers. While every ecommerce brand can benefit from retention, some may find it more rewarding. Businesses that sell high-value products that are bought frequently (fashion, pet supplies, supplements, or office supplies, etc.) are likely to benefit the most.
The best retention and loyalty strategies for ecommerce
Boosting customer retention and loyalty for your ecommerce business doesn’t need to be complicated. Here are seven of the best strategies that you can leverage to grow your business.
1. Set up a loyalty program to reward customers
Loyalty or reward programs are great for increasing purchase frequency. The strategy works because customers get more than their money’s worth when they make repeat purchases from you. You can choose from a wide range of loyalty programs, from points to perks. Madewell, a jeans company, mixes different loyalty program elements in their Madewell Insider program.
2. Leverage email marketing
Email marketing gives your shoppers a direct way to communicate with you, making it a great relationship-building tool. You can nurture deeper connections with your audience by properly segregating and automating your approach, creating more loyal customers. Here are some ideas:
- Send information about new products and updates, discounts, or valuable tips on how to use your products.
- Send reminders about items they’ve left in their cart to reduce cart abandonment
- Send special offers or personalized messages on birthdays, anniversaries, etc.
Every message you send should be packed with value for your customers. If not, your strategy can backfire, and you might lose them eventually. Here’s a great example from Minny & Paul in which they inform customers about a new product.
3. Offer discounts or credits to returning customers
One way to get first-time customers to come back to your shop is to send them discounts or credits on their next purchase. Discount coupons are quite popular in the US, and research suggests that 88% of people have used them in 2020.
Ancient Greek Sandals, a handmade sandals and accessories brand, entices first-time shoppers with a 15% discount on their next order, as you can see here.
Another option is to experiment with store credits. As a small ecommerce brand, you can start by offering a $10 discount rather than a percentage discount.
4. Ask customers for their feedback
The best people to consult when creating a retention and loyalty strategy are your customers. Surveys are one of the easiest ways of finding out how satisfied they are and what you can do to improve their experiences.
Here’s how outdoor DTC brand Moosejaw cleverly conducts surveys. They incentivize it with a reward to encourage customers to engage.
5. Resolve complaints quickly and effectively
Speaking of listening to your customers, resolving complaints quickly can be a very effective strategy to boost retention and loyalty. As a small ecommerce business owner, it’s normal to face some mishaps along the way when you’re getting started. Taking a closer look at customer complaints will help you better understand what matters the most to your customers.
See how Meowbox, a subscription box for pet supplies, handled this customer complaint. They were quick to respond and eager to make up for the sub-optimal experience that this customer faced. Turns out, the customer didn’t have the right information, to begin with, but MeowBox’s thoughtful reply is something every brand can learn from.
6. Always go the extra mile
With a little extra effort, you can elevate your customer service and take it from good to exceptional. 61% of customers believe that the most effective way brands can engage with them is to surprise them with rewards for being good customers.
For example, earlier this year, Gem Box Accessories sent a customized “Thank You” note to one of their customers. It didn’t cost the owner much, but it clearly demonstrated how much they care.
noissue makes it easy to create and print customized eco-friendly “Thank You” cards that you can send to customers. You can choose from our wide range of templates and add your logo to them, or create your own design and upload it to our platform.
Another way to surprise your customers is to give them free samples or customized products the next time they do business with you again.
7. Highlight your mission
Research suggests that 77% of consumers like to buy from brands that highlight their values. Positioning your brand as purpose-driven is a great way to engage with modern shoppers and gain their trust at the same time. An emotionally connected customer has a 306% higher lifetime value and is more likely to recommend the company to others.
Here’s how jewelry brand Aurate highlights its commitment to sustainability. Customers who are environmentally conscious love the brand not just for its products but also for its values.
At what stage should you focus on retention?
After you set up shop on the internet, your primary focus should be getting customers. This isn’t the best time to set your retention strategies in motion.
Once you start to attract a few customers, you should start thinking about incorporating retention strategies. You can increase your efforts as you see more customers coming your way.
The best time to go all out is when you have an established business with a steady stream of customers.
How to measure the success of your retention and loyalty strategies
The goal of customer retention and loyalty is to ensure that your bottom line always keeps growing. So, it’s important to track how well you are doing on this front. Here are some metrics that you can use to measure the success of your efforts:
- Repeat purchase rate: This determines the number of shoppers that have bought your products more than once. A reasonable baseline rate is 25 to 30%. Here’s how to calculate this:
Repeat purchase rate = Returning customers / Total number of customers.
- Purchase frequency: Not to be confused with repeat purchase rate, this metric shows you the average number of orders per customer in a given period.
Purchase frequency = Total number of orders (in a given period) / Unique customers (in the same period).
- Redemption rate: If you have a loyalty program, this metric indicates the number of customers who have claimed their rewards.
- Average order value: This value helps retailers assess purchasing behavior. It’s important to know how much your customers spend every time they buy from you because not every repeat purchase might be a big purchase. It’s calculated as:
Average order value = Total revenue / Number of orders.
- Customer lifetime value: This refers to the income you get from each customer. Here’s how to calculate it:
Customer lifetime value = Average order value x Purchase frequency.
It makes no difference how small your ecommerce business is. As long as you have customers, you can slowly but surely develop strategies to keep them coming back to you.
Follow the tips mentioned above to build a strong community of loyal customers who can become your brand advocates. At the same time, start measuring your results to uncover opportunities for improving your strategy.