The Importance of Customer Retention for Shopify Stores

The Importance of Customer Retention for Shopify Stores

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Too many ecommerce stores focus their precious time, money and energy chasing new customers instead of capitalizing on their existing customers. Experienced marketers know that spending too much time chasing after new customers is a fool’s errand.

The real marketing gold mine is in customer retention.

It makes sense: Why go after new customers when your best customers are right in front of you?

In fact, statistics show that over 65% of business comes from existing clients. So, instead of focusing on customers who only make a single purchase, most e-commerce stores can benefit from maximizing their customer lifetime value through customer retention strategies.

Read on to learn what customer retention is, why it should be a priority for your Shopify store, and retention strategies that are vital to every business today.

What Is Customer Retention?

Customer retention is the process of maintaining a loyal customer base. This stage in lifecycle marketing aims to increase the number of repeat customers and enhance profitability.

When done successfully, customer retention ensures that your customers remain loyal, enjoy an excellent customer experience, and continue getting value from your brand.

While there are several important customer retention metrics to monitor, the one that summarizes success the best is customer lifetime value. Customer lifetime value (LTV or CLTV) is the average revenue from a single customer throughout their entire relationship with a business.

As you can probably guess, the easiest way to increase your customer lifetime value is to increase purchase frequency. That means turning single purchasers into repeat customers and repeat customers into loyal customers.

Why Is Customer Retention Important For Shopify Stores?

Customer retention is what sets a successful lifecycle marketing strategy apart from the traditional sales funnel. Not only does customer retention improve your customer LTV (and therefore your bottom line), customer retention also enables you to understand and quantify your overall customer satisfaction.

Here are some additional benefits of customer retention for ecommerce stores.

Retention Leads To Word-Of-Mouth Referrals

When you build a clientele base and focus on retaining it, you establish credibility with your market. Your happy customers (aka repeat customers), will share their positive experiences with their friends and family. According to research, 60% of consumers talk about brands with their friends and family and hence become your brand ambassadors. Word-of-mouth is one of the most valuable forms of advertising since ninety-two percent of people trust the recommendations from family and friends over conventional marketing approaches.

Boost Customer Lifetime Value (LTV)

As we mentioned earlier, customer lifetime value is a metric for how much a client is worth to your company for the entire time you do business with them. Unfortunately, relying on new clients who make single purchases and never return will bring down your overall LTV and profitability. Therefore, you need to focus on retaining existing customers and ensure that they enjoy your products and respond well to your business. One study found that people who form an emotional connection with a brand have a 305% higher LTV than those without. Besides, loyal customers tend to buy from a business for a longer period (over 5.1 years).

Retention Stabilizes Your Revenue

Relying on attracting new clients may cause your profits to fluctuate significantly. This can cause difficulty with forecasting, hiring, paying bills, etc. But, when you have a healthy customer LTV, you have a more stable source of income. Loyal customers offer a company a sense of security. If you have a large returning clientele base, you’ll have a clearer idea of how much money the business will bring in by the end of the month.

Loyal Customers Boost Sales

An effective customer retention program has a higher ROI than many other marketing strategies. According to Harvard Business Review, a company that boosts retention rates by five percent will experience profit growth between 25 and 95 percent. Other studies show that loyal customers are 23% more likely to spend with a brand than the average customer.

It’s Easier To Sell To Returning Clients

It’s noticeably easier to convince current customers to buy your products. Marketing metrics show that chances of selling to a new client are between 5-20%, while that of existing ones is between 60 and 7 percent. Besides, 32% of customers purchase from a company for a second time within a year, and once the client returns for another purchase, the chances of attracting them back in the future increases exponentially (half of repeat customers make purchases within 16 days of second purchase).

Save On Marketing Costs

On average it costs over five times more to acquire a new client than retain a current one. Additionally, 82 percent of companies state that customer retention is cheaper than customer acquisition. That’s because the customers already know your products and services and therefore it will cost you less in advertising as you don’t have to out and find new ones. You can use the existing customers’ information to retarget your retention marketing programs.

In other words, it’s a lot cheaper to send an email to a current customer than to target new customers with social media ads.

Returning Customers Spend More

Existing clients tend to spend more money and are more willing to buy new products. That’s because you’ve already established credibility with them and they are comfortable with your product or services. According to Inc., returning customers spend over 67 percent more than first-time shoppers.

Top Strategies to Boost Customer Retention

Now that we’ve outlined why customer retention is important, let’s look at how to do it. Here are some of the top strategies to reduce your customer churn rate and increase customer retention rates.

Loyalty Programs

Loyalty programs are a cost-effective way of increasing purchase frequency as they motivate or incentivize customers to spend more in order to hit valuable rewards and milestones. This win-win situation enables your customers to get more value every time they shop and you benefit from their repetitive business. Here are some loyal program tactics to consider

  • Offer a head start. The biggest hurdles for any customer loyalty program is the sign up hump. In order words, it’s often difficult to get people to sign up in the first place. One great way to overcome this hurdle is to offer a bonus right off the bat. Many credit cards use this tactic – get 50,000 bonus points when you apply (for example).
  • Create Positive Labels for Programs. Studies show that people are more likely to participate in a program if they’re labeled with a positive trait (such as “awesome” members or “awesome plan”). This can also include a tier program where the clients who spend more get into higher tiers that come with better rewards.
  • Start a Referral Program. Recognize your repeat customers who refer others to you with a gift card or reward points.
  • Make High Spenders VIPs. People love being in gold or VIP members to get exclusive products, pre-sales, discounts, and other benefits. Use data to segment your top customers and show them the VIP treatment.
  • Use a Points Program. Here, clients earn points for a set dollar figure and they can eventually cash in for products.

Replenishment Reminders

If your company sells products that need regular re-orders such as consumable goods, you should create replenishment reminder emails. The strategy is crucial as they notify the customers that they might be running low on a product and entice them to make a purchase. Besides, replenishment reminders have one of the highest open rates and outstanding click-through rates. Replenishment reminders work great for things like cosmetics, since you can easily estimate when a customer will run out of a product.

Subscription Programs

Take your replenishment reminders to the next level and offer a subscription program instead. By offer a subscription for your product, you’re essentially guaranteeing future profit for your business. At the same time, you are making it easier for your most loyal customers to create new orders.

Leverage Personalization

Customer retention depends on your ability to offer a unique and personalized customer journey. One of the simplest ways to add a sense of personalization is by recommending products that complement their first purchase. For instance, a personalized email follow-up after a camera purchase should recommend accessories such as bags, memory cards, or batteries.

Besides marketing highly targeted and relevant products, personalization also enables you to collect more information about the clients. Studies show that 79% of clients will share relevant information about themselves in contextualized interactions in which they are known and understood.

Follow Up A Purchase With An Exclusive Discount

You can retain a customer by sending an email with an exclusive discount code for the second purchase. While you can send the email at any point, it’s more efficient to include the code in the “thank you” email for the initial purchase. You can strengthen this nudge by offering the clients with more than the standard 10% off (try a 20% off).

Build Your Community

The internet has revolutionized people’s sense of self. Today, customers are looking for brands that they can identify with. From social media to shopping, everything is an expression of identity as consumers look for brands that promote the values they hold. Cognizant of that fact, you can capitalize on the overlap between consumption and identity by building and nurturing a strong community around your store. This can be done by sharing customers’ stories, engaging in the comment sections on social media, and embracing social causes that are close to your clients’ hearts.

Incorporate User-Generated Content Into Your Marketing

User-generated content is a content marketer’s dream come true. Seriously, what could be better than your customers doing your job for you? Customer reviews are one of the most basic forms of user-generated content, but thanks to social media, your options are limitless. Besides, consumers love it when their content is shared on a brand’s channel, which helps strengthen your customer relationships. Some of the ways to engage with customers include:

  • Create hashtags centered on your product that makes it easier to find and share your products on social media.
  • Run competitions that inspire customers to create content, which highlights how they put your products to use.
  • Offer customers a note with their purchase and ask them to share a photo of themselves with the product in exchange for a discount on their next purchase.

Optimize the Delivery and Return Process

People expect fast (and often free) delivery. By making the customer experience as seamless as possible, you’re reducing any friction that might impede repeat customers.

Don’t Just Sell—Educate

It can be frustrating for customers to fend for themselves after they’ve bought an item from you (they’ll probably never buy from you again). Thus, it’s vital to offer resources that make it easy for them to learn how to use your product. That can be done by:

  • Offering in-product onboarding tutorials and tips created to help new clients get started.
  • Providing one-on-one sessions with customer support and sales or the brand specialist.
  • Building a community of brand experts that new and existing customers can turn to whenever they have questions.

Collect Feedback

You can use the post-purchase marketing cycle to strengthen your relationship while gaining crucial customer feedback. Asking customers to leave feedback can encourage them to articulate what they appreciated about their shopping experience and help you better understand customer behavior. This will also help you diagnose pain points so you can continue to improve your products and services.

Furthermore, customers appreciate being asked for their opinion. It means your brand cares and that you’re ready to go the extra mile to retain them.

Strive for 100% Customer Satisfaction

If you treat customers well, they will come back. An American Express study shows that 69% of customers spend more with brands that have excellent service, while 41% of clients will switch to another provider due to poor customer service.

If your customers aren’t happy, you need to address their concerns and do what it takes to make things right. Therefore, you should ensure that you have a well-trained, dedicated, and responsive support team.

Keep Your Customers And Grow Your Business

Your existing client base is your store’s best asset. The customers already know your product and brand and they appreciate your services. Focusing your time, money and energy on improving the experience for this target is a powerful way to supercharge your customer lifetime value, diminish marketing costs, and extract additional revenue for your store. So, don’t allow customers slip through the net – employ these retention strategies and watch your profits soar.



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