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Customer Retention Strategies for E-Commerce



Customer Retention Strategies for E-Commerce

Gone are the days of Henry Ford when he said, “You can have any color so long as it’s black”. Retaining customers is an important aspect of e-commerce strategy as customer acquisition costs increase with new e-retailers crowding the market and vying for the attention of online customers. According to Smallbusinessgenius.net65% of a company’s business comes from existing customers, and increasing customer retention by just 5% boosts profits by 25% to 95%. 82% of companies surveyed agree that retention is cheaper than acquisition.


Customer retention strategy, of course, depends on the lifecycle of the brand or online retailer’s platform. At the early and growth stage in a lifecycle, businesses are likely to focus on customer acquisition as the brand or reputation needs to be built among consumers. But a foundation for customer retention strategy needs to be developed in order to maintain consistency with the target audience over a long period of time.


The three key tactics in customer retention strategy are:


Personalization: Every consumer is unique in their tastes and preferences. Whether it is offline or online, consumers today like to personalize the products they are going to buy, from floor tiles to jewelry. For e-commerce resellers, they need to differentiate from each other by providing a seamless and intuitive online buying experience. 58% of companies pursue personalization strategies for customer retention. Thanks to rapid advances in e-commerce technologies, e-commerce businesses can leverage data analytics to offer recommendations to a consumer returning to the site, by either populating and displaying products similar to previous online purchases made or through chatbots guiding the consumer in their current shopping episode. If a customer has paused midway through their online purchase, online retailers can retain the customer’s shopping carts through their dedicated personal accounts. Custom emails can be sent to the customer to gently remind them or offer incentives to complete their purchase


Customer loyalty rewards: 75% of consumers say they favor companies that offer rewards. Offering rewards through gifts and discounts is a way to make customers feel appreciated. Giving them a surprise, bumping them up to a VIP list, or offering a loyalty program are some ways to show to customers that they are being valued for their repeat purchases and loyalty. It is more likely that a customer will remain loyal when a loyalty program and customer service are more customized because of the personal touch. If possible, offering incentivized subscriptions to products or services retain customers and therefore locks in recurring revenues for the online retailer. Many online retailers have benefited from offering products on a subscription basis.


Tribe: Brand recognition and sustainability are not only built by social media campaigns. Consumer referrals and testimonials are crucial for retaining customers for an e-commerce business. “56% of customers stay loyal to brands which “get them.”” Loyalty is built around the customer’s voice and stories that connect them to the brand. Online retailers need to respond to and act on the feedback, whether positive or critical, from consumers to improve their products and/or the online buying experience. Using social media effectively, the effect of their proactiveness, prompt responses, and/or actions would lead to a compounding positive impact on retaining customers. The base of customers who are loyal becomes a tribe or community and lends more trust and credibility to the brand, attracting new customers and thereby reducing customer acquisition costs for the online retailer. Another way to build the tribe is to take up causes that resonate with the sensibilities of the target demographics. Care needs to be taken that the causes are not taken for the sake of customer retention but rather because they align with the brand values.


Customer retention strategy can be measured by
three metrics:

  1. Repeat customer rate is calculated by the number of repeat customers divided by the number of unique customers 

  2. Purchase frequency is the number of orders divided by the number of unique customers.

  3. Average Order Value (AOV) which is the total revenue divided by the number of orders placed.

An increase in any of the metrics means that customer retention is working and customer value is being increased. It is possible to track and evaluate what tactic is working or not working and reshape customer retention strategy. 

Repeat customers are not only an asset for an e-commerce business but necessary for survival in current times as online competition is fierce! 








 


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