Retention of Customers. How to Improve Your Business?
Customer retention is a crucial aspect of growing a successful ecommerce business. By encouraging customers to make repeat purchases, you can reduce your marketing expenses while increasing sales. In this article, we will explore effective strategies to improve customer retention in your ecommerce business.
What is Customer Retention?
Customer retention refers to the rate at which customers return to your business and make repeat purchases within a specific timeframe. It is also known as brand loyalty or repeat business. High customer retention rates indicate a loyal customer base and higher customer satisfaction. By retaining customers, you can forecast your finances more accurately and make better business decisions.
Customer retention is particularly important for online retailers due to the highly competitive nature of ecommerce. With numerous options available to shoppers, it is essential to establish a strong customer base and differentiate your brand from competitors. Customer retention rate should not be confused with customer lifetime value (CLV), which measures the total income you can expect from a typical customer as long as they remain a client.
How to Measure Customer Retention Rate in Ecommerce
To calculate the customer retention rate, you need three variables: the total number of customers at the start of a designated time period (S), the total number of customers at the end (E), and the number of new customers acquired during that time (N).
To measure the customer retention rate, subtract the number of new customers acquired from the number of customers at the end date. Divide the result by the number of customers you started with and multiply by 100. Here’s the formula:
[(E – N) / S] * 100 = customer retention rate
For example, if you start the quarter with 10,000 customers, gain 2,000 new customers, and end the quarter with 10,200 customers, the formula for the quarterly retention rate would be:
(10,000 – 2,000) / 10,200 = 0.7843 * 100 = 78.43%
In this example, your retention rate is approximately 78%, indicating that around four out of five customers made repeat purchases within the quarter.
5 Strategies to Improve Ecommerce Customer Retention
To improve customer retention in your ecommerce business, consider implementing the following strategies:
1. Launch a Customer Referral Program
A customer referral program incentivizes existing customers to bring in new customers. By turning your existing customers into brand ambassadors, you can tap into their networks and achieve sustainable growth with minimal effort. Design a referral program with attractive rewards for both the referrer and the new customer, encouraging referrals and repeat business.
2. Take Advantage of Email Marketing
Leverage your customer email addresses to increase purchase frequency. Use email marketing to send personalized messages, discount codes, and promotional offers. Stand out among the numerous emails customers receive by delivering relevant and valuable content. Email marketing can be an effective tool for customer retention when approached intentionally and tailored to your target audience.
3. Start a Customer Loyalty Program
Implementing a customer loyalty program is a cost-effective strategy to retain customers. Reward returning customers based on their engagement and purchase frequency. The more customers buy or engage with your brand, the more rewards they earn. Loyalty programs foster a sense of connection and exclusivity, offering perks such as discounts, redeemable reward points, and access to special events.
4. Create an SMS Marketing Campaign
Utilize text messaging to communicate with your customers. SMS marketing campaigns, especially those with opt-in options, can be highly effective in delivering coupons, discount codes, and other promotional offers. Text messaging is a familiar and personal communication channel, akin to how friends and family communicate. Capitalize on this by using SMS marketing to engage and retain customers effectively.
5. Iterate on Your Marketing Strategy
Continuously iterate and improve your marketing strategy to stay relevant to your customers. This may involve adjusting your social media plans, rebranding your visual identity, or adopting new marketing channels. By signaling to your existing and prospective customers that you are still relevant, you can enhance customer retention and attract new customers.
Improving customer retention is essential for ecommerce businesses. By implementing strategies such as launching a customer referral program, utilizing email marketing, starting a customer loyalty program, creating an SMS marketing campaign, and iterating on your marketing strategy, you can enhance customer retention and drive sustainable growth. Focus on building strong relationships with your customers, providing a seamless shopping experience, and offering valuable incentives to encourage repeat purchases. By prioritizing customer retention, you can increase customer satisfaction, reduce marketing expenses, and achieve long-term success in the competitive ecommerce landscape.
