Ecommerce Retention

Ecommerce Retention Marketing

Ecommerce is booming, getting new customers is getting harder and pricier.AARRR Framework Retention

How do you grow in cut-throat competition? You work with what you already have – and paid for!

You do retention marketing to make more sales to your existing customers. Here’s how.

What is customer retention marketing?

It is working to keep customers as such for longer, buying often and buying more. It is the active effort to get repeat orders and return customers.

It is the exact opposite of relying on one-time buyers where you have to go out and acquire new customers all the time, letting them go after just one sale.

Retention Marketing definition

In ecommerce, retention marketing is the activities that make customers return to your store and buy again. These activities stimulate loyalty and ongoing repeat buying.

Benefits of retention marketing

In short, with customer retention, you:

  • cut down cost per sale
  • don’t rely only on acquisition to make sales
  • increase ROI
  • shorten the buying cycle
  • make customers happier, resulting in loyalty and word-of-mouth
  • strengthen your brand

We’ll expand on these in a bit.

When do I need to start working on customer retention?

Naturally, at an early business stage, you have to get some traffic and traction first to be able to do any retention efforts.

But, we’d say, as soon as you have 100 customers in your database, it’s time to do some retention work.

The best thing about it is that the more you work for retention, the more money you’ll be able to put back in the acquisition of new customers. A win-win on both fronts!

Note: Unfortunately, retention is tied to your products. It’s applicable to most but not all products. If you sell things like wedding items or boats, we suggest you work on a referral strategy instead to make sure people spread a word-of-mouth on your behalf even if they’re not likely to buy from you again (for obvious reasons).

Why retention marketing has a better ROI (than acquisition marketing)

New customers cost 5 times what keeping an old customer would cost.

The chance of converting a new customer is 5-20% while the chance of converting an old one is 60-70%.

Retention is done through many channels, most of them owned, where you have the information, control, and can be proactive.

Retention marketing effect compounds over time, bringing costs down and boosting profits every time a customer returns.

Key metrics to evaluate your level of customer retention

How can you know your customer retention efforts are working, you ask. Just like you monitor your traffic, conversions and other essential ecommerce metrics, you can check the health of your retention, too.

Retention rate

This is basically the ratio of one-time buyers to returning customers. It shows whether you manage to retain most of your customers or let them slip away after 1 order.

Of course, it depends on your products. If you sell clothes or food, you can get pretty high retention rate like 75%. That’d be a retention rate of about 3:1.

Order frequency

That’s the average time between orders. It can be days, weeks, months…even years.

While it’s connected to product usage, it can be stimulated and increased.

Orders per customer

The more orders each customer places, the better your bottom line feels.

Sometimes, you lose money on the first order of a customer, but the orders that follow make up for it and turn you profitable.

Customer lifetime value (LTV)

That’s the all-time amount spent by a customer in your store.

The average LTV is a good predictor of your future sales and is the main benchmark to use when setting your marketing budget. If that’s less than the acquisition cost, you should not even be doing it.

More about LTV in ecommerce

Customer satisfaction

Customer satisfaction is at the core of customer loyalty.

If customers are unhappy, though, your retention rate will be low. Ratings of the shopping experience and direct feedback will explain why you lose customers or why they love you.

Don’t know how happy customers are with your site? You should start gathering feedback automatically.

Rate of return

In ecommerce, this is a critical metric. It measures how often your customers return items. You can use the following formula:

Rate of return = Number of units returned / Number of units sold

For the best inventory management, it’s crucial to look at the reasons for return. This way, you’ll identify issues, take action to resolve them and avoid customer frustration.

 

Cohort behavior over time

Cohorts are groups of customers united by a common trait like the first product they ordered or the coupon they used.

Monitoring their behavior over time gives you grounds to predict future sales and to plan your marketing for the best time.

For example, do you know which product inspires the highest loyalty in your customers? Or when holiday shoppers come back to buy again?

More on cohort analysis in ecommerce

Customer Lifecycle

Looking at all these ecommerce retention metrics, you should be able to map your customer lifecycle stages: how often people buy and for how much, when do they become profitable customers, how much you can spend on their acquisition, why are you losing customers, and more.

Need to measure your store’s retention metrics? Metrilo’s retention dashboard will help.

Retention Marketing strategies

After you’ve audited your current state of retention, here is how to improve your customer retention.

Listen to feedback

When you know the good and the bad, use both to improve.

  • Fix issues with the shopping experience.
  • Solve individual problems and follow up to make sure it’s all good.
  • Use the positive feedback as testimonials (don’t forget to ask for permission).
  • Highlight the things people love on your site.
  • Give people what they say they want in terms of options, products, service, etc.

Reactivation campaigns

When you know how long people take between orders, you can be proactive and push them a few days earlier to speed up the process.

It’s good marketing because they’ll be in buying mode and more receptive. Your message will be welcome instead of marked as spam.

Reorder alerts

When idle customers go past the time for a new order, be creative and remind them that their coffee should have finished by now or that they’re running out of deodorant.

No matter how long the buying cycle of your products is, don’t let them slip away between your fingers.

Reward loyal customers

Seeing some customer are already loyal, thank them with surprises, bonuses, exclusive offers.

There should be an incentive, a thrill for them to keep coming. They might be enjoying everything about your store, but sometimes people just change habits, find new brands – you should keep the positive relationship going.

Personalized experience

Thanks to customer analytics, you can track everything that people do on your site plus learn from their order histories.

Thus, you know what products they prefer, what campaigns work on them, what kinds of offers, if they read your content, how often the browse your site…

Use this information to segment your customers and tailor the marketing flow to their taste.

A few examples:

  1. Send weekly newsletters with content to the ones that read it and browse your site often.
  2. Customize the offers – coupons for coupon users, exclusive products for high-value customers, big discounts for hesitant shoppers, UGC games for social followers, new collection preview for big spenders and so on.
  3. Cross-sell according to their taste – carefully choose similar products to what they’ve bought before.

Use your superstar products

You probably will notice that some products stimulate more repeat orders and customer retention than others.

One of the best tricks in retention marketing is to make those products more visible, feature them on your homepage and in your ads to get more people to buy them. You’re hoping to multiply loyalty thanks to those products’ record.

More about the Superstar Technique here.

Post-purchase engagement

One mistake ecommerce businesses make and put the breaks in their own retention marketing is that they give up too early.

Soon after the first sale is made, they let go of the customer and stop engaging them.

However, for buyers, the first order is a test-drive – they’re checking you out and if things are ok, they might become regulars. Chances are high that you have more than 1 thing they like, but you have to proactively engage them.

Enhancing the post-purchase experience with tips on usage and maintenance, inspiration, and other relevant content and value for free via email is a no-brainer way to keep a customer close, yet so many online stores don’t do such email nurturing.

Another easy way is to ask for social follow to keep up to date with the brand. Just keep your options open!

Social community

One step further is creating an online community around your brand. It’s a place for discussion, value, and genuine connection with your audience, not a sales channel.

How does it help retention marketing?

It should be a source of inspiration, information and even support. Your customers will have a friendly space to connect with like-minded people, ask questions, get ideas how to use your products and so on. If you can drive this kind of engagement, you can drive the need for your products too.

Bonus: UGC with your products

People nowadays quite like sharing own photos using a cool product (maybe in exchange for a small discount). It’s a great confidence booster for them (getting those likes) – they feel like influencers among their friends and will most probably buy from you again.

For more ideas like this, see how to develop a customer retention program.

Start doing retention marketing today
Try Metrilo for free

 

About the author

Dimira is the Words Pixie of Metrilo. A daydreamer and a coffee junkie. Can’t live when a comma is misplaced. A dog lover with a geeky sense of humor.

Become a data-powered marketing hero

Learn to use the power of data and turn it into sales. If you want to grow your ecommerce business with data-driven decisions, subscribe for our email newsletter and you’ll be the first to get our content + exclusive examples you can’t read anywhere else.

Oops! Invalid email.

We promise, no spam.

Awesome!

Thank you for subscribing!
See you soon :-)

New blog posts