Retention

Customer Retention Strategies

It’s a fact you have heard over and over. It is cheaper to convince existing customers to buy again than to find new customers. This is true for many businesses, particularly in the crowded ecommerce market where clicks and conversions seem to be increasing in price.

Have you ever looked into ways to re-engage customers and get them back? Let’s take a look at the steps to follow.

What is customer retention?

Before we present strategies, let’s define customer retention. Customer retention refers to the combination of activities that a business does to increase repeat customers and increase profitability for each customer.

Retention strategies allow you to provide more value to your customers and get more from them. It is important to retain the customers that you have worked so hard to win, to provide a great customer experience and to continue to benefit from your products.

Acquisition creates customers, while retention strategies are how you build customer relationships. How much time and how many resources should you allocate to your retention program. It all depends on the store.

When focus on Customer retention?

The stage of your business lifecycle will determine whether you should be focusing more on customer retention or acquisition. A business that opened yesterday will be very different from one that has been in operation for many years.

1. You are just starting: New customers should be your primary focus when you start your business. Your acquisition efforts should always be more important than retention. You should focus on strategies and tactics that can help you grow customer base.

2. Gaining traction: Now you have customers and are making sporadic sales. You can now introduce retention features to encourage customers to purchase more. You can start with retention emails that encourage a customer to buy from you again.

3. Consistentency: While you may not be an ecommerce juggernaut yet, your sales are increasing. You should now start to consider incorporating more retention elements into your acquisition efforts. It is possible to start a loyalty program or a referral program, as well as get more serious about marketing automation. Your retention strategy will determine how to maximize each customer’s profitability.

4. Establishment: Your business is now established. This is a common problem for small businesses, because it’s getting harder to grow. This stage is the best time to get  serious about your retention strategies.

5. Well-established: Your business is now well-established. You enjoy successes and mastered to automae many processes. This is the right time to concentrate on retention.

How retention can benefit your business

The product you sell will have a significant impact on the strategy you choose. If your business is selling expensive items like cars,  , your retention strategy will be very different from a selling clothing or books.

The highest customer lifetime value (CLV) will be achieved by businesses where customers frequently purchase high-value items. These businesses have the greatest potential to benefit from a solid retention strategy. If you sell lower priced items less frequently (e.g laptop cases), a strong retention focus is not of critical importance, but you shouldn’t ignore it. Finding the right balance for your business is key.

Customer retention metrics

Understanding the underlying metrics is key to increasing customer retention. How can you measure them and, more importantly, how can you improve them?

These questions will give you the information you need to create a customer retention strategy that has a lasting and significant impact on your store’s profitability. Let’s take a look at three key customer retention metrics to see why they are important.

1. Repeat customer rate
2. Purchase frequency
3. Average Order Value (AOV)

1. Repeat customer rate

Customer retention is based on repeat customers. This measures how many customers are willing to purchase again from you. It is a great way to evaluate how effective your retention strategy is. This metric will indicate how willing your customers are to return to your store if it is higher than the others.

How to calculate repeat customer rates

It’s easy for people to get lost in complex calculations when it comes to measuring retention metrics. It’s easy to calculate your repeat customer rate with just two pieces of information.

1. Number of customers with more than one purchase

This is the total number of customers who have purchased more than one product in a given time period. To see the whole picture, look at a longer period, say a year.

1. Number of unique customers

This number is the total number of customers who purchased products from your store within a specific time period. This is not the same as number of orders.

You can simply divide the number of customers who have made more than one purchase by unique customers:

# Customers Who Have Purchased More Than One Time / # Unique Customers

2. Purchase frequency

The purchase frequency is a measure of how many customers return to buy again. This is particularly important considering that repeat customers can often account for a large portion of the annual revenue of a business, depending on which product category.

How to calculate the purchase frequency

For calculating your business’ purchase frequency is your business’ total orders by the number unique customers using the same time frame as your repeat purchase rate:

# Orders Placed/# Unique Customers

3. Average Order Value

Once you have a good understanding of repeat purchases and purchase frequency, it is time to maximize the value of each purchase. This is average purchase value. It refers to how much a customer spends on each transaction in your store.

How to calculate the Average Order Value

Your average order value, just like your purchase frequency, should be calculated using exactly the same timeframe as your repeat purchase rate. Simply divide your annual revenue by the number orders you store has processed:

Total Revenue Earned/# Orders Placed

Customer value: The big picture for retention

You can strive to increase these KPIs individually or all at once, but the ultimate goal in retention marketing is to increase customer lifetime value.

To calculate it, you must have an idea of your average order value and purchase frequency. Multiplying these values together will give you a clear picture of the results of your work and help you understand the power retention marketing.

Customer Value = Average Order Value x Purchase Frequency

Strategies to increase customer retention

We have explored the reasons why a strategy to keep current customers happy can be as important as finding new ways to attract them. We also discussed what metrics we should use to keep our progress on track. Let’s now look at some concrete ideas that you can use to increase customer retention.

1. Create customer accounts
2. Improve your customer service
3. Create a customer loyalty program
4. Mobile App marketing
5. Get a credit or a discount to return

1. Use customer accounts

Customer accounts can be both, a bonus and a problem at the same time. Accounts can be a boon for repurchasing by giving customers immediate access to past orders and pre-filled shipping information. Customers accounts can be seen as too much of a commitment by new customers.

Many people will choose to check in as guests if they are offered the choice. How can you encourage customers to open accounts? The answer is simlpe: after placing the first order, you should offer the possibility to create an account. For example, you can send an invitation to activate their accounts after they have made a purchase.

2. Improve your customer support

Support systems allow you to communicate effectively with customers and offer the right level support. Support systems can be helpful pre- and after-sales by allowing you or a customer representative to communicate clearly with the customer.

A live chat tool or help desk can be used to convert a customer’s question into a sale, or resolve a customer complaint. This is true regardless of whether the customer contacts us via email, on-site, or through social media. A well-resolved complaint or problem can often turn a dissatisfied customer into a loyal customer. Customer feedback is invaluable and can make your products and shopping experience better.

According to data, while delight is a good thing, customers regard consistent, friendly, and prompt customer service as the highest standard. You’ll do both of your customers a favor if you can help them avoid problems and get the best out of their products.

Depending on your niche and product mix, sending small gifts to your customers can be a great way for them to remember to return. It can also add an element of surprise and delight which can help increase customer satisfaction. The law of reciprocity states that we are more likely to give unexpected gifts to customers than to take positive actions.

In a world that is constantly connected, people sometimes just need a break from the fast pace. Handwritten thank you notes are a thoughtful way of showing customers that you care. They can be encouraged to return to you and buy again. You will stand out among the flood of automated receipts and order confirmation emails that are generic. These small details can make a lasting impression and could lead to a loyal customer for the rest of their lives.

3. Customer loyalty program

Loyalty programs are sometimes called a customer retention program. They motivate customers to buy more often to earn valuable rewards.

This is a win-win situation for both you as well as your customers. They get more value every time they shop and you profit from their repeat business.

Customers can be encouraged to invest in the program by offering them welcome points upon registering. Customers will be more inclined to return to your store when they see the ease of earning rewards.

A loyalty program can be as easy as rewarding customers for their second purchase or after they have spent a certain amount of money. You can easily see which customers are your most loyal by comparing their value and the number of orders they have placed.

4. Mobile App Marketing

Mobile app marketing is the backbone for customer retention if purchase frequency is important. It is also the backbone to customer engagement.

A mobile app allows you to build a relationship with customers even after they have made their purchase. Each message that you send must add value to the customer’s experience. You risk losing your customers if it does not.

Follow-up messages are a great way to get things started. Send a thank you message to customers one week after their first purchase. This acknowledgement makes customers feel confident about buying from you and helps to make your brand more approachable.

In the app, you can start suggesting products that compliment their initial purchase. You can also include customer reviews. These endorsements will boost both the product’s value and customer desire to purchase.

Once you have sent the initial follow-up, it is important to continue sending personalized messages. Depending on your business, you can for example send personalized emails every two to three weeks with new sales or products. It’s a great way to keep the conversation going with new buyers by sending them invitations for sales or promotions and product recommendations.

Knowing your product lifespan is also an important factor for message frequency. For example, if you are bookstore and know that your customer reads a new book every three weeks, you could create a series of messages that would be sent after three, six weeks after a purchase.

This tactic is particularly effective as you will be communicating the right message at the right moment to the right person.

Remember to remind your customers why they purchased from you in all your post-sale communications. Your ability to convince them that a second purchase is worthwhile will be the key to getting them back.

5. Offer a discount or credit for your return

Discounting is a two-edged sword. Discounting your products creates a constant race to the bottom, which causes customers to expect lower prices. This ultimately leads to a loss in revenue for your store and you must be careful when when margins are tight.

However, it’s a great thing to receive discounts for first-time buyers. A discount code to be used on their next order with a first-time order is a great way of encouraging them to return. Discounting is also a great way to get customers back who haven’t bought in a while.

This can help you to give them more than the 10% standard discount. It sounds much more reasonable when you consider 20% discount as an investment in increasing repeat customers.

Also, you might consider offering credit to your store. You might also consider offering credits to your store (e.g. $10 off any purchase). Or a percentage discount (e.g. 10% off any purchase).

Keep your customers to grow

Your existing customers are the most valuable asset your business has. Your customers already know your brand and your products. They also appreciate your customer service.

So, It is possible to increase your sales by focusing your energy and time on this group, rather than trying to attract new customers. Contact us to and talk to our experts if you want to know how your business can benefit from a retention strategy and how to implement it.

What is Customer Lifetime Value?

Key Elements of User Experience Strategy

How good are PWAs for your Business?

Lessons from AmEx’s Member-Get-Member Program

Sources:
https://blog.hubspot.com/service/customer-retention-strategies
https://www.shopify.com/blog/customer-retention-strategies
https://www.revechat.com/blog/customer-retention-strategies/

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