Forbes EQ BrandVoice: Ecommerce Customer Retention Strategies

Brahm Buck

Ask professionals in any industry, and they’ll all agree: Your best customer is the one you already have. Your customer retention strategy is an integral part of increasing your ecommerce sales. But what is customer retention, why is it important, and how do you go about it? Let’s get into […]

Ask professionals in any industry, and they’ll all agree: Your best customer is the one you already have. Your customer retention strategy is an integral part of increasing your ecommerce sales. But what is customer retention, why is it important, and how do you go about it? Let’s get into it.

What Is Customer Retention?

Customer retention is the ability of a company to retain its customers over a specified period. If a company has high customer retention, that means its customers continue to rebuy the same products, to resubscribe to the same services or, in some other way, continue buying from that company.

Customer retention is vital for two reasons: First, even if you are adding new business, you can’t grow your company if you are simultaneously losing business. The second reason is incredibly black and white: It’s always more expensive to acquire a new customer than it is to keep your current customers and sell more to them.

Repeat business costs less to maintain. A fact is a fact. Even though the value of brand loyalty is almost impossible to quantify, marquee brands like Coca-Cola, Disney and American Airlines understand it’s easier and less expensive to foster repeat customers through retention marketing than it is to convince a new customer to make their first purchase with your company. Your existing customer base already recognizes your brand and has decided to trust it. New leads cost more to acquire their contact information and nurture them through the entire sales funnel because they haven’t yet bought into (both figuratively and literally) your product.

Need more proof? Calculating your Customer Lifetime Value (CLV) and comparing it to the cost of customer acquisition (CAC) will show you how long it takes to recoup a lost customer’s value. To calculate CLV, calculate the average purchase value, then multiply that average by the average purchase frequency rate. This number will be your customer value. Then calculate your average customer lifespan and multiply it by the customer value to find the CLV.

Choosing Your North Star Metric

There are several metrics a business can calculate and monitor to understand its health. However, for small companies that do not have dedicated data analysis teams, choosing a singular North Star Metric may be a good idea. A North Star Metric is a singular number a company can monitor as an indicator of its growth. For Spotify, that metric might be the time users spend listening.

Proponents of the North Star Metric believe if your company brings more value to your customers, then the growth of your company must increase as well. The assumption is that if your customers receive significant value, they will stay longer, buy more of your product and refer more friends to your company. So how do you bring value to your customers?

Building Good Customer Experiences

Delighting your customers through better customer experience leads to higher user engagement and overall higher customer satisfaction and growth.

Deliver what you promise. Most customers are understanding and empathetic as long as you are upfront about your limitations. For example, communicating to customers that there are shipping delays to their country related to Covid-19 sets the proper expectations.

Building strong customer relationships is also critical, especially in B2B industries, where purchases often require a higher degree of consideration and more interactions between team members. Tactics like buying your customers lunch or offering incentives or a thank-you gift following a meeting are known to strengthen customer relationships over time. For ecommerce stores, going the extra mile by including a handwritten note or including free shipping with the order can elevate the user experience and create a fleet of loyal customers.

Like setting customer expectations, delivering valuable content to your customer and prospect base keeps your brand top of mind. Email marketing is the backbone of customer engagement. Setting up regular nurture streams that communicate consistently to your customer keeps leads engaged until they are ready to make their next purchase.

The Importance of Excellent Customer Service

Excellent customer service at every communication point is also critical to establishing customer loyalty. A single poor customer service experience can sour even a long-term customer relationship and overshadow all previous great experiences. Remember, trust is hard to gain but easy to lose, especially when shoppers have many retail options online. Mistakes will happen. No system is fool-proof. Having an efficient and friendly customer service experience ensures your customer experience never tarnishes.

Offering flawless customer service is essential at all times, but especially when rectifying a mistake or solving a customer problem. How your customer support team handles this customer problem will determine how that customer feels about your company, possibly forever. Studies show that improving customer service KPIs, like response time, can significantly improve customer satisfaction. Tools like offering live chat on your website can streamline your buyer’s experience and make them more likely to purchase.

Customer Retention Programs

Building a customer loyalty program such as a rewards program or a referral program may be a good option for some D2C retail-focused businesses. They can reward your most loyal customers for making a repeat purchase and increase your word-of-mouth referrals, which are often some of your best-qualified leads.

Loyalty programs

Most loyalty programs award purchase points, which can be redeemed for discount coupons or other products. Brands like Sephora have demonstrated that loyalty programs can dramatically promote customer retention. Loyalty programs cultivate repeat business and customer referrals. There’s no sales tool more effective than the social proof of a personal recommendation.

Shipment tracking

Did you know customers check their shipment tracking an average of 4.6 times for each online purchase, illustrating the significant opportunity to drive more sales during the post-purchase stage? With the advent of new ecommerce applications, it can be easy to create custom tracking page experiences that drive more sales.

Lessons Learned

Customer retention and customer retention marketing comprise a critical element that needs to be considered when growing your business. Retaining customers is always easier and more cost-effective than acquiring new prospects. While recent customer acquisition is vital for lead generation and any business’s health, for companies with smaller marketing budgets that need to triage their priorities, focusing on customer retention can provide greater bang for your buck.

While there are many metrics you can use to measure and monitor customer retention, it’s most important to find a North Star Metric that accurately represents growth for your specific company. Using a North Star Metric can simplify your growth metrics when you don’t have enough resources for more in-depth data monitoring.

Finally, the key to good customer retention isn’t rocket science. Building beautiful customer experiences that are easy and pleasant is the number one thing you can do to get customers to return and continue to do so over time. By concentrating on good customer service, excellent customer support, fast and consistent communication cadences, and selecting the right tools to help you automate these processes are all key to building a viable customer retention strategy.

This is a content marketing post from Malomo, a Forbes EQ participant. Forbes brand contributors’ opinions are their own.

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