Customer Retention Best Practices for eCommerce

For most etailers, the primary focus of online marketing efforts is to attract and convert customers. They do this through careful management of paid advertising and time-intensive search engine optimization strategies. Many times, on-site promotions are geared toward first time buyers only, how many times have you been presented a pop-up with messaging along the lines of “15% off Your First Purchase”? Driving new traffic and converting new visitors is always going to be an important part of selling online, but etailers must not forget to balance their efforts with capturing repeat business.

The Importance of the Return Shopper

The first step in determining customer retention strategies is to discover the value of a return customer vs a new customer. In Leading on the Edge of Chaos, Emmett C. Murphy and Mark A. Murphy make the following observations:

  • Acquiring new customers can cost five times more than satisfying and retaining current customers.
  • The average company loses 10 percent of its customers each year.
  • The customer profitability rate tends to increase over the life of a retained customer.
  • A 2 percent increase in customer retention has the same effect on profits as cutting costs by 10 percent.

It is a well-known fact that not only is it cheaper to retain an old customer than to acquire a new one it is also more profitable in the long run. You can see for yourself what a new customer vs. a returning customer’s value is in your business by checking out the New vs Returning report in Google Analytics. Toggle the attributes to see what the average value per customer is and how much revenue can be attributed to each group. Use this data to make forecasts that show how much you can expect sales to increase as you increase the percentage of return shoppers.

How to Increase Customer Retention On Site

There are two main ways to increase customer retention. The first way is to increase retention involves creating a “sticky” experience on the site by presenting options that either increase the opportunity cost of using a competitor or provide some value that they cant get from a competitor’s site. Brand awareness and customer loyalty initially drive customers to an ecommerce site, retaining them there through a compelling reason is what really pays. Once visitors hit a site, stickiness is the key. It is more cost-effective and efficient if you can retain a higher percentage of visitors as customers, and prior customers as repeat customers. How can you increase the “stickiness” of your ecommerce website?

Registration/Login

Requiring a login is a double-edged sword. On one side, having an account saved on a site will automatically make it easier for return purchasing, which will increase retention. The other side is that people generally want instant results, they perceive that creating an account will be too time intensive – so they immediately click the “check out as a guest” option. Requiring people to register is detrimental to conversion. The trick here is to alleviate concerns of a lengthy registration process as soon as you can. You could also provide an option at the end of an order to “save my information”, then ask them for a user name and password. They have now actually created an account without feeling like they have wasted any time. Better yet, you will be offering a great value by saving them time on their next purchase through saving their account. Your site is now a bit more attractive than a competitors site who will require them to re-enter all their information.

Customer Retention Best Practices for eCommerce

ModCloth uses a pop up to drive more registrations. Labeling it as "joining the community" and making it separate from the checkout is a unique spin on customer logins.

Personalization

Once someone has purchased from your site or registered for an account, you should be using every opportunity to connect personally across the site. Simple things, like dropping their first name into email communications or onto the header with a welcome message can go a long way in making a customer feel like they are getting special treatment – putting another vote for your site over a competitors.

Performance

Site performance is an important piece to the retention puzzle. If customers are bouncing at a high rate due to slow page load times – they will never become loyal customers. A fast, up to date, and well-designed site will help increase a customers experience on the site and make them more apt to revisit.

Content development

Keeping site content fresh is another way to make sure people have a reason to return to the site. Your goal should be to make your site addictive to people. Do you have a blog, style guide, or buyers guide that you update regularly? These types of efforts, when maintained, can keep your target audience coming back for more.

Club/Rewards Program

Developing a club or membership to your website is another way to increase retention. This could be as simple as offering members special values or communication like early access to new products or promotions to the more in depth process of creating a formal rewards points program. When thinking about a rewards program, it is vital to put together a full strategy behind it. You’ll need to think about how you will allocate points, will 1 dollar = 10 reward points, or 50 reward points? Can they receive more points by interacting with the site, like signing up for the email newsletter or leaving a review? Really dive into the value behind the awards points, make sure that earning points will be enticing enough to keep customers coming back. We recommend a Magento Enterprise extension by SweetTooth to help configure and manage rewards/loyalty points programs.
I have heard of ecommerce stickiness being referred to as a “secret handshake”. The basis of this analogy is that making a customer feel special, part of an exclusive club, will improve the odds of repeat purchasing. Does your online store offer a secret handshake experience to customers?

Customer Retention Best Practices for eCommerce

Sephora uses a Very Important Beauty Insider program and allocates points for your purchases toward a special gift. They also learn your skin/eye color and recommend personalized products.

 

How to Increase Customer Retention Through Reengagement

The second way to increase retention is through driving people who have purchased from you back to the site and enticing them to purchase again (and again).

Email

Email marketing is a great way to increase return shopping. It is the perfect medium for staying in touch with customers and reminding them to come back to your site. With a retention focused email marketing strategy, you can target people who have just purchased for the first time and offer them specials on their next purchase. An important note to keep in mind is to make sure you are using a warm and friendly tone in all of your emails. Rethink any automatic or marketing emails that read as though a computer wrote them. Include personalization like the name of the product the customer bought and even include the person’s name. Making someone feel like there is a human on the other end of the communication can help customers feel like they are a friend, not just another sale.

Promotions

Try running promotions that are geared more to repeat customers. Maybe try a “Customer Appreciation” day where you offer % off certain products or free shipping for all your loyal customers. This promotion should feel more like a thank you and less like an “everything must go” type discount, so make sure you are clearly getting the appreciation point across. If your ecommerce platform allows, you should utilize dynamic banners to make sure that “New Customer Only” discounts are only presented to first time visitors and people who haven’t purchased yet. Showing these discounts to all shoppers across the board may alienate your repeat purchasers and sour the relationship.

Social Engagement

Social Media is an ideal way to increase customer retention for two reasons. One, it allows you to interact with customers on a weekly and daily basis. You can stay in front of customers and keep your brand top of mind. Two, people who have chosen to ‘like’ or ‘follow’ your company are your most loyal customers. They have chosen to connect in a personal way with your brand and are probably your biggest brand ambassadors. Make sure you are driving these people back to your site as often as you can.

All in all, dramatically increasing the amount of return shopping is not an easy process. It takes cooperation from all the different divisions of the company, marketing, designers, and developers to shift the balance from acquiring new sales to retaining existing customers but it is worth it. Thinking outside the box to bring your customers an experience that they can’t find on your competitions sites will create re-engagement and stickiness that will improve your bottom line.

Think you need to increase customer retention and return shopping? Ask us about our free 30 minute site consultations to get expert advice.

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Robyn Keegan

Robyn began at Groove in 2010 as an intern and has since risen through the ranks as Business Development Coordinator to Sales & Marketing Coordinator then to Digital Sales Executive. In this role, she proactively targets and engages potential clients and leads them through Groove's consultative sales process. Robyn earned her B.A. in Business Management from Towson University.

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