Customer loyalty and customer retention are often the most overlooked aspects of a digital marketing strategy. Not only are loyal customers more valuable than new customers, but they are also cheaper to market to.
That’s right. New customer acquisition can cost five times more than re-engaging with an existing customer.
It’s convenient to use a gardening metaphor when talking about customer retention. When planting flowers, you often choose from perennials and annuals.
Annuals grow fully during a season, budding and blooming to present beautiful flowers to the world. Then they die.
Perennials have roots that survive, even when the plant above appears to die off. Then, the following season, the flowers that grow and bloom in that same place aren’t from seeds and new plants. They’re from that same plant you tended the season before.
When it comes to lifecycle marketing, you want to grow perennials. You want satisfied customers that keep coming back—a loyal base—while also dropping seeds to help bring in new “plants” via word-of-mouth marketing and brand ambassadorship.
So far, we’ve talked about getting potential customers to your website, encouraging them to sign up for future communications, nurturing them, and conversion rate optimization.
Today, we will talk about the importance of loyal customers and provide five ecommerce retention strategies to help turn first-time purchasers into repeat customers.
Down the Full Lifecycle Marketing Ebook
What is Customer Retention?
Customer retention for an ecommerce store is the process of encouraging customers to make regular purchases. Instead of focusing on new customer engagement, customer retention aims to reduce churn rate with current customers and increase repeat purchases.
The best ways to improve customer retention is to focus on customer satisfaction and to implement retention-focused marketing campaigns.
How to Measure Customer Retention Rate
The most simplified way to measure your customer retention is to calculate how many orders the average customer makes. For example, if your online store has fulfilled 100 orders and has 50 different customers, then your store averages two purchases per customer (which is very good!).
But you can do better.
The best metric for measuring customer retention is customer lifetime value (CLV, CLTV, or LTV). Measuring customer lifetime value is better than just looking at the number of orders because you can actually measure the monetary value behind each customer.
Customer lifetime value is the average revenue from a single customer throughout their entire relationship with a business. You can calculate this by multiplying your average number of purchases by your average order value.
The best 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.
5 Strategies to Improve Customer Retention
Read on to learn more about brand loyalty and ambassadorship and other ways to create (and benefit from) loyal customers.
Support a Great Customer Experience
The first step in creating loyal customers is to show that you care about them. That means offering exceptional customer support at every step of the customer journey.
Customer experience is essential to the success of any business and critical for an online store. Consumers have endless retailers to choose from, so a poor experience will drive them away from your store and into the arms of a competitor. More than half of consumers will leave a brand after a poor experience, and a third will talk about that negative experience with others in person or on the phone. Others say they will leave a negative review online or post on social media about the experience.
So, what makes customers feel valued and ensures they have a good experience?
First, make sure your website works well and is easy to use. That helps you convert the window shopper into a customer in the first place. Then, once the person enters the first-time buyer or repeat-customer part of the lifecycle marketing process, take actions to continue to make them feel valued.
MarketingCharts published data from Ometria in 2019 that indicated some of the best actions for making customers feel valued.
Here’s a look at the actions customers ranked in the top five:
- Promos and perks for loyal customers (i.e., things that aren’t offered to the general public).
- Ensuring emails and promos are relevant to the consumer (i.e., segmenting your audience so you’re not sending the same general communication to everyone).
- Follow-up emails after purchases that contain content related to
- Asking for customer feedback after interactions with your company, including customer service calls and purchases.
- Product recommendations that line up with the customer’s individual preferences and purchase activity.
Use Email & SMS to Forge a Personalized Connection
Email and SMS are among the best ways to directly communicate with customers. This direct line of communication should be held in high regard and used intelligently. Don’t batch and blast. Instead, work towards building a personalized connection with highly segmented and targeted retention campaigns.
Post-purchase follow-ups are the first touchpoints after a purchase and a core tenet of email marketing. This is the best time to guide a customer towards their next purchase. In most cases, you can create an automated post-purchase sequence as part of your retention efforts.
Here’s a look at a standard post-purchase email campaign. Don’t forget, use automation to lighten your workload:
- Order Confirmation – Should include basic information like shipping address, billing information, and ordered products.
- Shipping Confirmation – Should include tracking information and expected arrival date.
- Thank You For Your Purchase – After a product arrives, thank the customer for their order and invite them to connect if there is an issue.
- Product Education – If a product requires advanced instructions, send a quick guide or video showing a user how to get the most out of a product.
- Review Request – Several days or weeks after delivery, ask a purchase to share their experience with the rest of your customer base.
- Cross-Sell/Upsell – If you have related products, let your customers know how well the product they purchased works with your other products.
- Replenishment Reminders – When it is time to reorder, let people know!
Ask for birthdays wherever it makes sense. For example, it might be an optional field in your shopping cart process or a required field for your loyalty program. You don’t need the year for this purpose unless you need to qualify adult recipients for specific products or offers. Otherwise, you can typically go with month and day.
Send birthday emails a few days before the person’s birthday. Don’t wait until their actual birthday—you want to give them time to use their unique birthday promo code.
Reward your best customers by giving them early access to sales or special pricing on new products. Incentives like these help make your customers feel special.
Create and Manage Loyalty Programs That Work for Your Customers
As we mentioned with VIP offers, consumers like to feel special and enjoy getting a first look at products or offers that are slightly exclusive. One of the ways you can do this is by creating and managing a customer loyalty program.
Statistically, you have a 60 to 70% higher chance of selling to an existing customer than a new one.
That doesn’t mean you shouldn’t chase window shoppers and first-time purchasers—you need a constant influx of new customers to grow. But it does mean you should invest in your current customers too.
In fact, if you go by the Pareto Principle, a small section of your existing customers—the loyal customers—will account for a large percentage of your overall sales. The Pareto Principle is a statistical analysis tool that says 80% of the outcomes in a process are dependent on 20% of the inputs. That’s some fancy math jargon, but in this case, what it means is that around 80% of your sales will come from 20% of your customers. That makes it obvious you need to invest in those loyal customers.
Related: Great Loyalty Program Email Examples
Here’s a quick step-by-step guide to creating a loyalty or rewards program that invests in customer satisfaction and repeat business.
Understand what your loyal customers want.
A program that doesn’t serve their needs is useless to everyone. Do they want the first look at new products, discounts for referring people to you, or just a few promo codes exclusive to your list?
Name your program.
A fun, exclusive-sounding name helps remind people that you value them and entice others to want to join in on the program.
Let people know what the program is about.
It’s not about persuading people to buy more—that’s just an enjoyable perk you benefit from. Instead, your program should be about rewarding loyal customers, demonstrating your appreciation, and building customer relationships.
Create rewards structures.
Use a variety of rewards. You want to walk a balance between what customers want and need and what your business needs. For example, you might want more reach on social media; you could incentivize your loyal customers to engage with and share your content. Examples of rewards can include exclusive promos, referral content they can share online, or savings based on the number of orders or products they’ve purchased.
Add some non-monetary perks.
Build customer loyalty by pulling these repeat customers into the community with you by offering them a chance at more personal engagement. For example, give them the first look at new products, ask them to participate in exclusive feedback or focus-group polls, or offer a Facebook group or other forum where they can chat with you and each other.
Invite people to join.
You might do this in shopping cart processes or follow-up emails.
Don’t leave your customers hanging.
You can design whatever loyalty program you want, but make sure it’s one you can manage. You may need to keep it simple, especially at first, but it’s better to have less but have it consistently than to do more one time and forget about the entire thing within a few weeks.
Regularly Run Re-Engagement Campaigns for Existing Customers
Not every customer makes that loyalty list or signs up for the program. However, the goal of lifecycle marketing is to retain as many customers as possible. You do that by constantly shepherding and re-engaging with existing customers.
Segment your list so you know who is already in the loyalty program and who isn’t. Then, design email campaigns specifically for those you want to re-engage with or herd into your loyal audience.
How you do this depends on your brand and target audience, but here are a few ideas to get you started:
Use some of the emails from our article on turning window shoppers into customers, including promotional emails.
Send a check-in email to let customers know you noticed they hadn’t been around in a while and that you miss them. Consider sending a promo code or other offer to entice them back.
Use news about new product lines or changes to your shop as a reason to connect with people. Send out an email announcing the news—it’s authentic and valuable while also reminding people to return to your shop (without having to say they seem to have left you).
Encourage Brand Ambassadors
You might consider creating a top-tier rewards structure for the most loyal customers. These people buy with you consistently, share your social posts, and are always happy to tout your brand online or off.
Brand ambassadorships can work similarly to a referral program. Those most-loyal customers get perks for sending you more customers and talking about you online. The perks can range from free products to monetary commissions on referrals that make purchases. How you choose to run such a program depends on how much work and other resources you put into it.
But just having this type of program gives loyal customers something to work toward, increases customer engagement, and helps them partner with you to plant more seeds in your metaphorical garden. It’s a great example of how lifecycle marketing really is a cycle.
Unfortunately, loyal customers are on a coin with a less positive flip side. Turn that coin over and you have the lost customers—the ones who have gone on to purchase elsewhere or nowhere at all.
Let’s look at how you can winback lost customers so you have a chance at making them loyal, perennial customers in the following chapter.