When should you concentrate on customer retention?
The stage of your store’s lifecycle heavily influences whether you should prioritise customer acquisition or retention. A store that opened yesterday is vastly different from one that has been in operation for many years.
Examine the timeline below for general guidance on potential investment levels for your store.
1. Just getting started: When you first open your store, you should concentrate on one thing, getting customers. At this point, your acquisition efforts should completely outweigh your retention efforts. Concentrate on strategies and tactics that will assist you in expanding your customer base.
2. Gaining traction: You now have customers and occasional sales. At this point, you can start introducing retention elements to encourage each customer to purchase more. My advice is to start with a loyalty email campaign that focuses on encouraging previous customers to buy from you again.
3. Consistent: You aren’t quite an eCommerce behemoth, but your sales are increasing. This is the point where you should consider incorporating more retention into your acquisition efforts. Consider launching a referral and/or loyalty program, and take marketing automation seriously. Each customer’s profitability is maximised by your retention strategy.
4. You are now a well-established eCommerce store. Finding new ways to grow is a common issue for retailers of this size. The acquisition may result in a large number of one-time purchases, but a retention strategy can encourage customers to buy more frequently, increasing their lifetime value. At this point, your retention efforts should be serious and deliberate.
5. Well-established: At this point, your store has passed the first hurdle. You’ve had a lot of early successes and a lot of processes and automation in place. Now is the time to prioritise retention.
What role does retention play in your company?
Which strategy you should concentrate on depends a lot on what you sell. A store that sells high-end leather furniture will be very different from one that sells tea and coffee.
Customer lifetime value (CLV) is highest in a store whose consumers repeatedly purchase high-value items. These are the stores that stand to benefit the most from a successful retention plan.
In general, as you progress to the right of this matrix, you should begin to place a greater significance on retention. But keep in mind that you should not ever choose one above the other. It’s all about striking a balance that works best for your company.
The most important client retention metrics
Understanding the underlying data is crucial to increasing client retention. But what exactly are these figures? What method do you use to assess them? What’s more, how do you make them better?
Answering these questions will provide you with the resources you need to develop a customer retention plan that will have a major and long-term influence on the profitability of your store. Let’s take a look at three of the most essential client retention indicators and see why they’re crucial.
Customer retention rate
The percentage of customers who return is used to calculate customer retention. It calculates the percentage of clients that are willing to buy from you again. Measuring your repeat purchase rate is an excellent way to determine how effective your retention strategy is. Customers are more likely to return to your store if this indicator is high.
How to work out what percentage of customers come back?
It’s easy to get lost in a sea of sophisticated mathematics when it comes to calculating retention measures. Fortunately, measuring your repeat client rate is simple and takes just two pieces of information.
A. Customers who have made multiple purchases
The number of clients that have made many purchases in a given time period is referred to as this. To get a sense of the big picture, I recommend looking at a year’s worth of data.
B. The number of distinct customers
This is the total number of different clients who bought something from your store in a specific time period. This is distinct from the number of orders.
If you want to do it manually, simply divide the number of consumers who have made several purchases by the number of unique customers.
This equation looks like this when written out:
(number #) of customers that purchased more than Once / # Unique Customers
Purchase frequency
Purchase frequency indicates how frequently customers return to your store to make purchases. This is especially crucial when you consider that, depending on the product category, repeat customers can account for a large portion of a store’s annual revenue.
How to Determine Purchase Frequency
Calculating the purchase frequency of your store is akin to determining the repeat buy rate. Divide the total number of orders in your store by the total number of unique customers over the same time period as your repeat buy rate for example a single month.
This equation looks like this when written out:
( Number #) of orders placed / # Unique Customers
Order Value on Average
Once you’ve figured out your recurring buy rate and frequency, it’s important to optimise the value of each of those purchases. The average order value is a number that measures how much money a customer spends in your store on each transaction.
How do you calculate your average order value?
Your average order amount, like your purchase frequency, should be determined using the same time frame as your repeat purchase rate. After that, simply divide your annual revenue by the number of orders your store processed.
This equation looks like this when written out:
Total Earned Revenue / # Orders Placed
The Big Picture of Retention: Customer Value
The ultimate goal of retention marketing is to improve customer value, whether you want to increase these metrics one at a time or all at once. The third element of the puzzle is client value, which indicates how much each customer is worth.
You must already know your purchase frequency and average order value to calculate it. You can truly see the fruits of your labor and understand the power of retention marketing by multiplying these two values together.
Customer Appreciation = Frequency of Purchase x Order Value on Average
Now is the time to develop a customer retention strategy to see how improving each of these metrics can help your company grow.
Retention strategies for customers
We’ve looked at why figuring out how to keep our present clients is equally as important as figuring out how to get new ones. We’ve also considered what we should track to keep on target. Now, let’s look at some concrete suggestions for increasing customer retention.
Customer accounts should be used
Accounts with customers can be a double-edged sword. On the other hand, accounts make shopping easier by giving customers quick access to past orders and pre-populated shipping information. Customer accounts, on the other hand, are typically seen by new customers as requiring too much commitment.
As a result, when given the option, many people choose to check out as a guest. So, how can you quickly deploy and encourage customer accounts without jeopardising first-time client conversions? The trick is to provide them with the option of creating an account once they’ve placed their first order.
Enhance your client service.
Support systems allow you to effectively communicate with your customers and provide them with the appropriate level of assistance. A support system can help you both before and after the sale by allowing you or a customer service agent to communicate with the customer clearly and concisely.
Having a live chat or help desk tool on hand may turn a customer inquiry into a sale or a customer complaint into a resolution, regardless of whether the customer visits in person, by email, or via social media.
A skillfully addressed complaint or problem can frequently convert a dissatisfied customer into a loyal, repeat customer. Not to mention the value of customer feedback, which can help you improve your products and your whole shopping experience.
While joy has its place, data reveals that customers regard rapid, polite, and consistent customer service as the gold standard. You’ll be doing both of you a favour if you help clients avoid difficulties and get the most out of your items.
Sending a modest present to your top customers can be a wonderful way to remind them to return while also providing an element of surprise and excitement, which can enhance customer happiness, depending on your niche, product mix, and margins. Giving an unexpected present also adheres to the law of reciprocity, which states that we are compelled to reciprocate positive actions with positive actions of our own.
There’s a time and a place for delight. Customers, on the other hand, consider rapid, friendly, and consistent service to be the gold standard. People, for example, sometimes just desire a change of pace in a world where everything is instantaneous and done over the internet.
A hand-crafted gesture is an awesome way to show your customers you care about them, and possibly get them to come back and buy from you again. When you write something by hand, it demonstrates that you care about your consumer and have taken the time to address them individually.
This attention to detail will set you apart from the sea of automated receipts and generic order confirmation emails. These considerations go a long way and have the potential to turn a one-time customer into a lifelong customer.
A client loyalty program can be started
Loyalty programs, also known as customer loyalty programs, are an effective technique to boost buy frequency by encouraging customers to shop more frequently in exchange for attractive benefits.
This is a win-win situation for you and your consumers; they get greater value with each transaction, and you benefit from their loyalty.
Customers may be tempted to continue investing in the program if they are given welcome points when they register for an account. They’ll want to come back to your store to do it again after they see how simple it is to get a gift.
It’s as simple as rewarding clients after their second purchase or after a particular amount of money has been spent to start a loyalty program. Based on the financial value of their orders and the overall number of orders they’ve placed, your store reports make it simple to see who your best customers are. You can also utilise automatic loyalty programs to reward customers for certain actions they take in your store.
Emails to customers should be interesting
Email marketing is the heart of the customer engagement and retention toolset if customer retention is based on the frequency of purchase.
Both before and after they make their initial purchase, you can engage with your customers via email. Every message you send should help your customers have a better experience. You’re in danger of losing them if it doesn’t.
Email had the highest conversion rate of 4.29 percent, according to a Shopify figure from Black Friday and Cyber Monday, followed by a search in second place. Email is unquestionably a conversion-oriented channel.
Following up with emails is a great way to get started. Send an email a week after a customer makes their first transaction thanking them for their business. Customers will feel more confident in their decision to buy from you if they receive such recognition, and it will make your brand more approachable.
By suggesting products that compliment their first purchase, you may maximise the effect of this initial email.
Finally, you can start incorporating customer input. These recommendations will increase the perceived value of each recommended product, as well as the customer’s desire to buy it.
Make sure to send personalised messages regularly once you’ve sent your initial follow-up. Beard King excels at this, sending out personalised emails every two to three weeks with new products or special offers. Continue the conversation with first-time buyers by offering more product recommendations and inviting them to upcoming new product offers and promotions.
Knowing your product’s lifespan and sending well-timed emails can be the right strategy for reactivating inactive customers. This method can be incredibly effective because you’ll be conveying the right message to the right person at the right time.
Luxy Hair, for example, states in their FAQ section that their hair extensions would last three to six months on average, or up to a year depending on wear.
Knowing this, Luxy might put up a series of automated emails every three months, six months, and a year to discuss the benefits of a new set of hair extensions.
This type of communication would educate first-time consumers, remind them of Luxy, and urge them to make future purchases, all while offering a positive customer experience.
Remember to remind clients why they bought from you in the first place in all of your post-sale marketing interactions. Your ability to encourage customers to return is contingent on your ability to show them why making an additional purchase is worthwhile.
Provide a discount or credit for returns
In general, one would avoid discounting. When you discount your products, you’re engaging in a never-ending race to the bottom that teaches buyers to expect lower pricing, resulting in a loss of income for your business. Discounting becomes considerably more dangerous when margins are narrow.
With a first-time order, sending a discount code for their next purchase is a terrific approach to encourage them to return. As a result, pricing can be an efficient strategy to re-engage clients who haven’t bought in a while.
You can increase that encouragement by providing them with a discount greater than the typical 10%. It sounds a lot more reasonable when you think of that 20% discount as an investment in increasing your recurring client rate.
You might also want to try offering store credits example: $10 toward any purchase rather than a percentage discount example: 10 percent off any purchase.
Keep your customers if you want to expand your business
Your current customer base is your most valuable asset. Your brand, products, and service are already well-known to your customers. Instead of always chasing new consumers, focusing your time and energy on improving the experience for this group can be a strong method to increase income for your shop.
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