Customer Retention 101: 7 Powerful Ways to Generate Repeat Business
Customer retention is essential to your brand’s success.
As an ecommerce business owner, you’re probably focused on getting more customers — but what about the customers you already have? Are you working to retain them with great experiences?
If you’re yet to market to current customers, now’s a good time to learn about customer retention tactics that encourage customers to buy from you, again and again. In this guide, we’ll share 7 highly effective strategies to improve customer retention quickly.
But first, let’s take a closer look at customer retention and why it matters to your business.
What Is Customer Retention?
Customer retention is the process used by businesses to turn one-time buyers into repeat customers.
Depending on your industry, this might involve encouraging customers to renew their software subscription or make another purchase from your store.
There are plenty of customer retention strategies out, but loyalty programs are a classic example in ecommerce and traditional retail. For instance, the body care retail brand Blume offers a loyalty program where customers can earn points (or as they call it, Blume Bucks) by taking different actions:
Regardless of the industry, the idea behind customer retention is to offer an experience that keeps people coming back. In short, you want customers to enjoy using your products, make repeat purchases, and become brand advocates.
Why Is Customer Retention Important?
In short, it’s easier to sell to your existing customers than always having to find and convert new ones.
Think about it: your existing customers already know and trust your brand, which makes it easier to get them interested in other products you offer — and this translates into a shorter sales cycle and more profits.
But that’s just the tip of the iceberg — customer retention will help you with a lot more than just sales:
- Returning customers spend more:Recurring customers who already love your products tend to make more purchases over time. There’s a simple reason for this: brand preference. You can generate brand preference by consistently delivering great experiences.
Customer retention helps with marketing:Customers loyal to your business become free brand ambassadors, meaning you spend less on marketing and experience growth through word-of-mouth referrals. For example, the body care brand we mentioned earlier has a lot of advocates vouching for its products:
- Loyal customers are forgiving:When customers feel loyal to you, they’re more willing to forgive mistakes, meaning fewer of those angry rants on social media!
So, if customer retention is so beneficial to businesses, how do you measure it?
Customer Retention Rate: What It Is and How to Calculate It
Most businesses quantify and track customer retention performance with a metric called the ‘customer retention rate.’ This rate shows you the percentage of customers that stick around. You can calculate it by using this formula:
( [Number of customers per end of time frame – Number of customers gained during time frame] / Number of customers at the beginning of time period) X 100 = Customer Retention Rate
Let’s make this more tangible by plugging in some numbers. Say you want to calculate your customer retention rate in the first quarter of the year and you:
- Had 450 customers at the start of the quarter
- Gained 300 customers during the quarter
- Had 7,000 customers at the close of the quarter
Based on these numbers, your customer retention rate for the first quarter of the year will be:
( [7000 – 3000] / 4500 ) X 100 = 88%
This simple metric tells you how successful you are at retaining your customers.
So, what’s a good customer retention rate?
According to MixPanel’s benchmark report, ecommerce brands with a customer retention rate of 35 percent or higher are doing a great job at retaining customers.
How to Improve Customer Retention: 7 Strategies
So, how do you retain customers? There’s no single or right answer. And while there are several ways to carry out customer retention marketing, they all come down to delivering outstanding customer experiences.
To get you started, here are 7 powerful ways to retain customers and generate more repeat business.
1. Set Realistic Expectations
Setting realistic expectations upfront is the key to building trust with your customers. This involves being honest about your process, timeframes, returns, and so on.
For example, suppose you know that shipping could take a little while. To set realistic expectations with customers, you could share transparent shipping information on your website.
The online clothing store Neptune made it clear to customers that shipping times were slower due to the pandemic.
As a result, customers would know from the beginning that it could take a little while for products to arrive.
Setting realistic customer expectations also makes it easier to exceed them.
For instance, offering a simple way for customers to track their packages will position your brand as caring, helpful, and transparent. Plus, you can win major brownie points if customers can track their orders directly through your website.
Tools like AfterShip allow you to create branded tracking pages that let customers track their orders on your site instead of a carrier page — here’s an example:
2. Create a Loyalty Program
Nothing fuels customer retention quite like a loyalty program. A loyalty program rewards your customers by giving them incentives to perform certain actions.
So, once customers opt into your program, make them feel special by hooking them up with rewards. For example, you could create a loyalty program to give customers a discount for referring a friend to your business.
The best part is that your current customers already have an idea of your customer experience, so they’re likely to refer your brand to those seeking a similar experience.
Luxy Hair offers customers $10 in-store credit when they refer a friend — plus, the new customer will get $10 off their first purchase.
You can use Automizely Loyalty to initiate your referral program. This app lets you offer discounts to both referrers and brand advocates.
3. Increase Post-Purchase Engagement
The work doesn’t stop after a customer places an order on your website. If anything, that’s when the real work begins.
Getting customers to engage with your brand beyond their purchase can positively impact your business’s ability to retain them.
One way to do this is to provide exclusive access to helpful resources. Create awesome tutorials, hacks, and other content — but keep them reserved for customers only. It will be a pleasant surprise for your customers and allow them to make the most out of their investment.
Another idea is to do random acts of kindness — this is a great way to delight your customers and tap into their innate sense of reciprocity. For example, beauty brand Aesop offered complimentary shipping on all orders around Mother’s Day:
Offering benefits to customers when they don’t expect anything is a potent way to improve customer retention.
4. Nurture Customer Relationships Via Emails
It’s important to stay in touch with customers if you want to keep your brand top-of-mind. Emails can help.
Email marketing allows you to nurture customers before and after their initial purchase. You can remind them of the products they liked, offer a special birthday discount, and offer a sneak peek of your new product range: Here’s an example from Everlane:
This type of engagement helps customers feel good about their decision to shop from you. And when customers feel good, they stick around and refer their friends: customer retention achieved.
Plus, it’s easy to set up automated email marketing campaigns to drive customer retention with Automizely Marketing, an app designed to help new businesses engage, retain, and convert customers.
5. Take Customer Complaints Seriously
Sometimes, they’re a result of something you can’t control, like slow shipping or an unexpected fault with a product — but that doesn’t mean you can brush them under the carpet.
Ignoring negative messages from customers or responding defensively to them can damage your brand reputation. Alternatively, showing your customers that you’re willing to go above and beyond to fix any issues they have can turn unhappy clients into brand advocates.
So, how can you handle complaints effectively? Well, start by making it easy for customers to submit their opinions. For example, Adidas has a dedicated page on its website informing customers how to submit a complaint:
Then, address complaints in the following ways:
- Let the customer win: Make them feel like they’re in the right (even when you think otherwise).
- Solve the problem: Do everything in your power to fix the issue and follow up to check your customer is happy.
- Make it easy to find solutions: Having an FAQ section on the complaints page (like Adidas) can stop complaints in their tracks by allowing users to solve their issues.
6. Support a Cause
High customer retention rates often hinge on your customers feeling good about your brand. And there are more ways to make them feel good than great products and a wonderful experience.
For example, you could support a cause that’s important to your customers.
Being socially, ethically, and environmentally responsible shows customers that your company is about more than just making money. It also ensures that you can build a community united by a common goal.
TOMS is a great example of a company using social good to its advantage. Not only does the company invest a third of its profits into grassroots efforts, but TOMS also regularly releases reports, so customers can track how their purchases are making a difference:
You can use an app like Give & Grow Donations to let your customers donate seamlessly. It comes with an option to display social impact, so you can show customers the impact your business is having in real-time.
7. Listen and Empathize with Your Customers
Everyone has an opinion they want to share. That’s why the internet is full of reviews and social media posts mentioning brands. For businesses, this is an excellent opportunity to develop rapport.
Listening to your audience, wherever they might be, can give you an insight into how they feel about your business. For example, if customers are dissatisfied with a specific aspect of your business, emphasize and tell them you’ll do your best to resolve the issue.
For example, the fashion brand PrettyLittleThing responds to negative reviews about customer service as quickly as possible to show users they’re taking issues seriously:
In the example above, the company lets the customer know they’ve forwarded the customer’s feedback to the relevant management to be addressed.
To summarize, track brand mentions on social media and pay attention to comments people leave around the web. This is a great way to identify potential gaps in your customer experience, which you can then fill to satisfy and retain customers.
Summary: Never Underestimate the Value of Customer Retention
Attracting customers to your business is just the first step of building a successful brand. Once you’ve acquired a new customer, keeping them around for the long haul is the key to long-term success.
To finish up, here’s a recap of 7 strategies you can use to improve your customer retention:
1. Set realistic expectations
2. Create a loyalty program
3. Increase post-purchase engagement
4. Engage customers via email
5. Take customer complaints seriously
6. Support a cause
7. Listen and empathize with your customers
Which customer retention strategy are you going to apply first?