Top 8 Ecommerce Customer Retention Strategies

Although 2022 was a stable year for retail, UBS is anticipating that 50,000 stores in the US are expected to close by 2026. At the same time, it is projected that ecommerce sales will grow to 25% compared to in-store growth barely eclipsing 4%. What is clear is that companies are focusing their 2023 business strategies and future growth via online and digital channels – if they haven’t already. As ecommerce becomes increasingly popular and competitive, customer retention is becoming more relevant than ever. 

In today’s world of ecommerce, focusing on attracting new customers to your online store is no longer enough to guarantee your business success. The key now lies in customer retention. 

What is Customer Retention in Ecommerce?

Customer retention in ecommerce refers to the ability to keep customers coming back to your online store to purchase again. It is a critical component of any customer retention strategy – especially in ecommerce - as acquiring new customers is typically much more expensive than retaining existing ones. 

Retention in ecommerce involves creating a positive customer experience that encourages customers to continue buying from your store versus going to your competitors. This includes building strong and long-term relationships, delivering high-quality products and services, and offering outstanding customer support. 

Why is Customer Retention Important in Ecommerce?

Customer retention is important in ecommerce for several reasons. As mentioned before, it is much more cost effective to retain customers than to acquire new ones. Studies have shown that acquisition can cost up to five times more than retention. This directly affects your Return on Investment (ROI).

In addition, returning customers are more likely to repeat a purchase or even increase their cost per ticket. This will lead to higher sales and revenue, as well as indicate that your customers are satisfied with your offer. Consequently, your brand will become more trustable for other customers, increasing the number of referrals, growing your customer base, and ultimately boosting your profits.

How do you Measure Customer Retention Rate in Ecommerce?

Customer retention rate (CRR) is an essential metric for any ecommerce business. It measures the percentage of customers who return to your store to make a repeat purchase within a specific timeframe. 

Customer Retention Rate Formula:

  1. Determine the period of time to measure
  2. Calculate the number of customers who made a repeat purchase in your online store in that period of time
  3. Divide that number by the total number of customers you had at the beginning of the time period
  4. Multiply the result by 100 to get the percentage

This metric indicates if your retention efforts are having their desired effect, and if they are improving over time. In addition to customer retention rate, there are other very important metrics to keep in mind when measuring customer loyalty. Some of these include:

  • Repeat Purchase Rate: percentage of customers who made a purchase more than once over a given period of time.
  • Churn Rate: percentage of customers that stopped purchasing over a given period of time.
  • Revenue Churn Rate: amount of revenue lost from existing customers who stopped purchasing over a given period of time.
  • Customer Lifetime Value: total amount of revenue each customer is expected to bring to a company over the whole period of them being customers.
  • Net Promoter Score: predicts how likely a customer is to recommend a brand to a friend measuring trust and satisfaction.
  • Average Order Value: average amount of money customers spend per order when shopping online.
  • Profitability per Order: profit generated by a single order, taking into account costs associated such as shipping or delivery.
  • Loyal Customer Rate: percentage of customer base that is considered loyal, being loyal to someone that makes repeat purchases over time based on product and service quality, satisfaction and positive customer experience.

What’s the Average Ecommerce Customer Retention Rate?

The average ecommerce customer retention rate varies depending on the industry. However, studies have shown that it should sit between 20% and 35%. Subscription-based services or luxury brands may also have higher retention rates. Some factors that impact customer retention rate are the size of the company, the quality of products and services offered, the effectiveness of the marketing and retention strategies, and the level of competition in the industry. 

The Top 8 Ecommerce Customer Retention Strategies

There are many effective ecommerce customer retention strategies that businesses can use to keep their customers engaged and returning to their online stores. Here are the 8 most effective ones:

1. Create a Customer Retention Plan to continuously monitor and improve KPIs

According to a study by Adobe, returning customers make up to just 8% of website visitors on average, but they account for 40% of the site’s revenue. Developing a customer retention plan that monitors and improves key performance indicators is crucial to maintaining a strong customer base and maximizing profits.   

To create such a plan, you need to first identify and define the main customer retention KPIs like the ones mentioned above. After that, it is highly recommended to identify retention drivers – product quality, customer service, pricing, marketing efforts, etc. – and develop the strategy based on them. Finally, you need to regularly track and analyze these KPIs, take action and monitor the impact of those actions.

Some ideas to improve performance are:

  • Identify they key customer retention KPIs for your ecommerce – each business is unique
  • Set measurable goals
  • Establish a data analytics platform to track KPIs
  • Constantly optimize your results and methods

2. Leverage zero-party and first-party data to better understand your customers and tailor your marketing 

Zero-party data is data collected directly from your users, while first-party data is obtained from users via their behavior on your site or mobile app. According to a study by Salesforce, 63% of consumers expect companies to use their data, and 73% are willing to share their data if it leads to personalized experiences. Customers expect you to track their purchase history, their cart abandonment information and ask them for feedback, but also are open to provide you with their favourite products, channels of communication or preferred rewards. 

Leveraging this data will help you better understand your customer base, their interests and needs, and give you the opportunity to tailor your offers and marketing activities based on customer preference. Customers will increase their engagement with your brand and, ultimately, you will experience revenue growth. 

Some ideas to better understand your customers are:

3. Improve your customer retention rate with Conversion Rate Optimization (CRO)

Conversion Rate Optimization is the practice of improving the conversion rate of a website by analyzing customer behavior and feedback, and using that information to optimize customer experience. The process involves analyzing website data to identify areas where visitors are dropping off or failing to convert.

CRO consists of creating or modifying elements and content such as landing page design, copy, ads, call to actions, etc. The goal is to increase the percentage of visitors who convert from your website or mobile app. Some of the benefits of using CRO include lowering marketing and customer acquisition costs, improving SEO efforts, better understanding of your customers, boosting customer lifetime value, and enhancing user experience.

Some ideas to leverage Customer Rate Optimization are:

  • Use A/B or user testing
  • Simplify the navigation and utilize a heat map to see user activity
  • Encourage certain actions like purchases or signing up for a newsletter
  • Improve website speed

4. Provide seamless and personalized omnichannel communication

One of the most important goals of customer retention is making your customers feel special and valued. In order to achieve that, your customer retention strategy must provide personalized content: personal recommendations, tailored discounts, emails and offers. In fact, 62% of consumers expect companies to send personalized offers or discounts based on their purchase history. 

Businesses that don’t provide customized communication will struggle to retain customers in the long term. Even more if they don’t reach their customer is all the channels they are in. Managing the data and customer preferences in the right way will allow you to create a unique shopping experience that will be translated into a higher spending by your customers. Building this closer relationship based on personalization is one of the most powerful ways to increase customer retention. 

Some ideas to improve personalization are:

  • Consider data from all touchpoints – email, mobile app, website, social media, etc.
  • Use Send Time Optimization to communicate with your customers at the right time
  • Create a seamless experience building a perfect customer journey
  • Test your communication and measure the impact

5. Utilize cross-selling and upselling strategies to increase the value of each customer’s purchase

A report by McKinsey states that cross-selling techniques can increase revenue by up to 30%, while Forbes states that upselling can increase revenue per customer by up to 10-30%. It is obvious that these two techniques have a great impact on revenue and including them in your customer retention strategy can be extremely positive. 

Both encourage customers to buy either complementary items to their purchase or higher-end products. It is ideal to promote new arrivals as well as incentivize customers acquiring least sellers by offering special discounts and promotions. Offering the right product to the right clients can increase customer satisfaction and loyalty, as they will be having an improved overall experience with your brand.

Some ideas to help increase each customer’s purchase are:

  • Incentivize first & early purchases
  • Reward repeats purchases
  • Offer exclusive discounts for existing loyal customers
  • Show your customers you understand their needs and preferences with the right offerings

6. Create customer loyalty program and pack it with superior benefits

Building a loyalty program is the most effective strategy to increase customer retention. Coming back to making a customer feel special, with a loyalty program, your brand can reward every time a purchase is made and incentivize customers to keep buying with special benefits. 

Loyalty programs are the best way to build trust and long-term relationships, as well as keep customers choosing your products and services over your competitors. In ecommerce, over the multiple ways to increase customer engagement, gamification plays a very relevant role that every loyalty program strategy should consider. Games, challenges and leader boards can make the experience with your brand a lot more entertaining, competitive and fun. And who doesn’t like to have some fun?

Some ideas to enhance your ecommerce loyalty program performance are:

7. Marketing and remarketing: regularly communicate with customers

Customers need to see that you are there. Staying in touch on a regular basis will keep your brand on their minds and aware of any news. But not every customer wants to be communicated in the same way. Using email marketing, SMS and push notifications, as well as social media and ads depending on their communication preferences is an excellent way to keep customers informed of new products, promotions and discounts. 

It is also outstanding to run targeted remarketing campaigns to remind customers of items they have viewed before in your website. They already showed interest, but abandoned the cart and never finished the checkout process. By showing these reminders, you can encourage them to come back and resume or repeat a purchase.

Some ideas to support your marketing and remarketing campaigns are:

  • Set up control groups to avoid under or overcommunication
  • Tailor the messages to each customer’s specific needs
  • Offer exclusive deals to reward loyalty
  • Use a Marketing Automation tool to ease your campaign management

8. Survey customers to understand their choices & behaviour and identify areas for improvement

If you want customers to pay attention to what you have to say, you should also be able to listen to them. Customers need to have a way to communicate with you. Receiving customer feedback is the best way to understand their needs, requests and behaviors. This practice should be conducted frequently given that excellent customer service and support build customer loyalty. 

One way to collect customer feedback is through surveys. The comments gathered allow your business to improve products and services and get to know your audience better.  You can ask the questions and be open to new requests. Encouraging customers to share their experiences with you will allow you to address the issues or concerns reported as soon as possible, and be on top of any problem.

Some ideas for collecting customers feedback are:

  • Reward your customers for answering surveys
  • Use social media channels
  • Create a community to share experiences
  • Make sure your team is responsive and goes above and beyond to solve problems

How Comarch Can Help 

Improving customer retention in ecommerce can be a challenging process to get off the ground. There are a lot of strategies that can help, but not every one of them will fit your unique business or lead you to immediate success. Following the right steps can become a strenuous task, but with the right help you can reach your customer retention goals. 

If you are looking to build a customer retention strategy and/or loyalty program for your business, contact our loyalty experts now!

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