As you build your ecommerce brand, your initial focus must be customer acquisition. However, too many online retailers continue to spend most of their time and energy on attracting new shoppers and neglect customer retention as their businesses grow. But building a loyal customer base is essential to creating a successful ecommerce company. In addition to the savings in customer acquisition costs, repeat buyers will likely make larger purchases and act as unofficial brand ambassadors, recommending your company to others. While the research on customer retention still cited in the industry is from 1990 – long before the advent of online shopping – that study by researchers from Bain and Harvard found that a 5% increase in retention rate led to increased profits of 25% to 95%. If the pertinent metric for ecommerce is even half of that, customer retention is worth investing your time and money. Dozens of strategies, from minor tweaks to major initiatives, can improve your retention rate. Here are 12 that you can apply to improve customer retention in 2023.
6 Marketing Strategies For Customer Retention In 2023
Your marketing team can play a critical role in customer retention and acquisition. In fact, marketing targeted at past and current customers is one of the most effective things you can do to increase sales. These six (mostly) low-cost and high-impact strategies could lead to positive returns in 2023.
1. Leverage Data To Understand Your Customers And Tailor Your Marketing
An advantage of ecommerce over traditional retail is the wealth of data at your disposal. However, all that information does you no good unless you invest in the tools you need to analyze it. A customer relationship management (CRM) platform like Salesforce Commerce Cloud or Zoho Commerce offers tools to enhance customer retention. Leverage the data you have on your customers to deliver relevant messages that will drive repeat sales. That inside knowledge gives you a huge leg up on the competition, so make the most of that advantage.
2. Reward Customers For Referrals
A referral from a friend is an excellent way to attract new customers. If you’re doing everything right, your customers are talking up your business for free because they love your products or services, and want everyone to know about them. However, you can juice your referral pipeline with incentives or rewards for referrals that lead to new business. There are plenty of tools out there to help you do so, such as Referral Candy, Ambassador, and Referral Rock, to name a few. A referral coupon also gives you data points to better understand which customers give your business its most significant boost.
3. Offer Strategic Coupons
Time coupons and discount codes to optimize customer retention. For example, a coupon after a first purchase incentivizes a second purchase, making the customer a repeat buyer. Do some A/B testing to determine optimal discount amounts and timing for different customer profiles, then automate a program to deliver those to your customers.
4. Show You Care With Customer Service
Human, personal customer service is expensive, but it can pay big dividends. A positive resolution to a customer’s problem encourages customer retention while feeling ignored or (worse) mistreated can lead to angry posts or reviews.
5. Engage With Customers On All Channels
Engage with consumers on social media. Have staff available to provide personal responses to customer service inquiries and other questions and comments on social channels. Emotional connection and the feeling of being heard will increase customer retention.
6. Email, Email, Email
Email can seem very old school in this age of Slack, WhatsApp, TikTok, and ever-proliferating social channels, but here are the basic facts: There were more than 4.1 billion email users globally in 2021, more than half the world’s population. In the U.S., 91.8% of internet users had email. Most or all of your ecommerce customers have email accounts. They read or at least skim, their emails. Mailchimp data for 2022 showed an average 18.39% open rate for retail emails. Even if a customer doesn’t open an email, you’ve put your brand name and message in front of them, and they’ll remember you when they next need to make a purchase in your product niche. An email is a low-cost tool that’s great for high-frequency contact, particularly with your best customers. A/B test messaging and frequency to design effective email campaigns for different customer profiles, then automate with software such as Mailchimp, HubSpot, or Salesforce.
6 Customer Experiences That Improve Customer Retention
Customer experience is at the heart of customer retention, and your fulfillment operations play the most direct role in that experience for online retail. Work with your logistics team or your fulfillment company on these six fulfillment upgrades for 2023.
1. Provide Fast Delivery
When a customer places an order, they want it to go to the top of the list for picking and packing in the warehouse and ship quickly to arrive at their door in days (or even hours!). Of course, the reality is different; orders get queued for fulfillment and shipping in the order they were placed. Delivery time depends on the distance from the warehouse to the customer’s address and external factors contributing to delivery delays. Here’s what you (or the right third-party logistics provider) can do to get orders delivered quickly and enhance customer retention:
- Shorten the warehouse queue. If an order takes eight days to arrive, the customer doesn’t know (or care) how many of those days were waiting for picking in the fulfillment center and how many it was on a truck. When you ship orders the same day the customer places them (or the next day, at the latest), you shorten the delivery time and make your customers happy.
- Pick your warehouse locations carefully. A warehouse in Long Beach or Miami might be convenient to the port of entry for your goods or your company headquarters, but orders to the other side of the U.S. will take several days to ship. Choose central warehouse locations that offer ground delivery in two days or less to a broad region. With suitable locations, you can provide fast delivery to most of the continental U.S. with just two or three fulfillment warehouses.
- Diversify your delivery. FedEx, UPS, and USPS are the major U.S. carriers, but they have had delays at peak times in recent years due to capacity limitations. Don’t lock into a single carrier, so you have options if your preferred delivery company runs out of space during the holidays. Take DHL, which been boosting its domestic delivery capabilities in the U.S., and the other local delivery firms.
2. Focus On Order Accuracy
Ecommerce thrives on reliability, so your orders must be picked and packed flawlessly nearly 100% of the time. Mistakes will happen, and your customers will forgive you for them (see customer service above), but they should be extremely rare. Create a report card for your fulfillment operations and if your error rate is above 0.5%, level up in 2023.
3. Provide A Delightful Unboxing Experience
Find ways to make unboxing memorable. That could be anything from appealing, branded packaging to inserts with graphics and text that convey the personality of your brand to coupons offering discounts on future purchases or other special perks. Plus, consumer-made unboxing videos are a great way to increase awareness of your ecommerce company.
4. Go Green With Your Fulfillment
Consumers want to feel good about what they’re buying, and, in 2023, that means helping them feel better about the carbon footprint of their purchase. Whether your brand has sustainability as a core value or not, green packaging will make an impact. If a shipment leads to a big pile of garbage (i.e., plastic bags, Styrofoam inserts, or infill), that’s the opposite of a delightful unboxing experience. Use recyclable or compostable packaging and infill wherever possible, highlighting your brand’s green initiatives in your marketing and packaging.
5. Inventory, Inventory, Inventory
It’s hard to overemphasize inventory management’s importance for reasons far beyond customer retention. But managing your inventory well affects consumer experience, as well as your supply chain and profitability. For example, if you don’t reorder a popular item in time and run out of stock, shoppers may get the same or a similar item from one of your competitors. If they like the competitor’s product, you just lost a customer. You might be able to keep customers in the fold with backorders, but if you do, often communicate while your customer waits so they know their order is coming. Even the best-run supply chains sometimes have glitches in today’s world. Still, intelligent, data-driven inventory management can protect your stock from shocks and help preserve your loyal customer base.
6. Build Loyalty With Seamless Returns
Returns are a critical element of your logistics that can make or break your relationship with a customer. Use your reverse logistics to increase customer retention with these best practices:
- Pay for return shipping. That gives online shoppers the confidence to make a purchase, and they won’t resent you if they need to return it.
- Make the returns process easy. Offer an online return portal to print a label or include a return shipping label in the box. Include clear language and graphics to outline the process for your customers, and make that information easy to find on your website.
- Give your customers multiple options for returns. Allow in-store returns of online purchases (if you have a brick-and-mortar location) or provide a convenient drop-off location.
How To Calculate Customer Lifetime Value
Customer acquisition metrics are more exciting and easier to digest than customer retention numbers. Conversions, customers acquired and lost, and average sale are all valuable data points. But churn slows your company’s growth, and customer retention accelerates it. You can do a simple calculation of a customer’s lifetime value (CLV) with this formula:
Customer Lifetime Value = Average Gross Order Amount x Average Orders Per Year x Average Years Retention (companywide)
These values will change over time as you add more data, particularly the average length of customer retention for your brand. You can refine the calculation to account for profitability by replacing the average gross order amount with the average profit margin on each order. That allows you to separate repeat bargain hunters from the premium customers willing to pay full price.
While customer acquisition should always be a focal point for your business, remember not to forget about customer retention. By ensuring you’re providing a delightful experience to your existing customers, you are laying the foundation for a loyal customer base that will keep coming back – and will spread the news of your brand through word-of-mouth, too. Whether you pursue these or other strategies, elevate your customer retention practices in 2023 to grow your revenue and profits.