Why Your eCommerce Brand Should Be Focused on Customer Retention (and How to Create a Winning Customer Retention Strategy)

Think about the phrase “eCommerce marketing” for a second. What comes to your mind? 

Chances are, you’re thinking about acquiring new customers. Am I right? 

And you see, that’s the problem with eCommerce marketing. Only 18% of companies focus their marketing efforts on reconverting customers, compared to those focused on acquiring new ones. 

But here’s the thing: It’s much easier to get those who have bought from you in the past to buy from you again. 

And that’s where this article comes in. In it, you’ll learn the what, why and the how of eCommerce retention marketing

You’ll also learn:

  • The benefits of customer retention (hint: there are a lot!) 
  • Examples of customer retention done well
  • How to get a customer to come back to you 

So, let’s get straight into it…

Benefits of retention-based marketing

Simply put, you’ll make more and spend less by marketing to your previous customers than by trying to find new ones.  A 5% increase in retention can improve profitability by as much as 55%.

That’s because as humans, we thrive on repetition and familiarity. Once your customer has received their product and they’re satisfied with it, that fear of the unknown is gone. They know your brand, your product quality and the buying process. And so they’re more likely to purchase from you again. 

Retention-based marketing can also provide you with insights that will help you to grow your business. I asked William Harris, Customer Acquisitions Expert at Sellbrite, to provide his thoughts on retention marketing and this is what he had to say:

From a growth perspective, focusing on customer retention will allow you to grow faster by giving you more budget to spend acquiring customers and allow you to see the true value of each customer.

When done correctly, retention-based marketing can do the following:

Increase average order value

As mentioned earlier, marketing is often incorrectly described as acquiring new customers. Similarly, growth is often incorrectly described as “more sales.” But more exponential growth can be had by simply increasing the average order value of your customers. 

When customers buy from you a second time, they’re more likely to spend more, thereby increasing your average order value—67% more than first-time buyers, to be exact.  

Increase LTV of customers

Lifetime value (LTV) is a prediction of the net profit of your relationship with a customer over the course of a (you guessed it) lifetime. 

Retention-based marketing can help you to not only increase the average order value of your repeat customers, but also the frequency at which they buy from you (and thereby their lifetime value). 

Need proof? Research has found that past customers are 27% more likely to buy from you again

Diversify marketing channels

When you start spending less on acquiring new customers, that frees up money for you to spend elsewhere. Plus, with the extra income from a greater order value and an increase in LTV, you’ll be able to afford that brand redesign or new software tool that you’ve always wanted. 

But before you start working on getting customers to come back to you, ask yourself this:

Why aren’t my customers naturally coming back to me?

A quality product offered by a quality brand will keep a customer coming back time and time again. 

Happiness breeds repetition.

If your customers aren’t buying from you again, ask yourself this: Why aren’t they coming back to me?

It might just be because the product you’re selling has a low purchase frequency. This would be the case if you sell power banks, drones, and other electronic devices, for example. 

Here’s an image from Shopify that can help you figure out why your customer might not be coming back. 

Image Source

If your product does fall into the retention side of the above image but you’re not getting repeat customers, it might be because of your buying process. 

Are you providing them with a top-notch customer experience? For example, when your customer opens their delivery, do they get what they expect or are they blown away?

Adding value in the form of custom branded packaging, a personal follow-up email, thank-you card, or a little extra something that makes them feel special helps you do just that. 

Making your customer feel like they got more than they bargain for keeps your brand in their mind. And this goes a long way in making customers come back to you organically. 

Once you know you’re blowing the mind of your customer when they first get their hands on your product, it’s time to look at different ways you can re-engage your customer. 

How to make a customer come back

So you know why returning customers are great…now let’s take a look at a few different ways to get more of them. 

The subscription model

Customer retention is the basis of the subscription business model

If your product is consumable and bought on a regular basis, consider offering a subscription service. 

Below, you can see British subscription box brand, Scent by Mail

Scent by Mail customers pay a flat fee every month and receive a handful of scented candles, wax melts and other accessories delivered to their door. 

Subscription services like this add value to the customer in the form of convenience. 

Reactivation

Many past customers may have stopped buying from you simply because they forgot you existed. But guess what: You have their email address. 

Reactivation campaigns are a series of emails sent to past customers who aren’t engaging with you anymore. 

Below, you can see how Amazon rival, Jet, reengages dormant and expired trials with a financial incentive:

Schedule automatic emails a few weeks or months after the first purchase to show customers products that complement their initial purchase. 

Experiment with the following:

  • Number of emails in a campaign
  • Number of days the campaign lasts
  • The incentives for a customer to buy from you again

A simple poke may be all that’s needed to get a large percentage of your customer base reactivated!

Discounts

To that end, offering exclusive discounts can be a great way to re-engage your old customers. You’ll need to experiment to see whether dollar- or percentage-based discounts work best for you. 

A good rule of thumb is that, if you’re selling items over $100, then a dollar discount will be most effective (as it sounds higher). For items under $100, percentage-based discounts tend to work better. 

Have a look at the example below from Tanner Goods:

What do you notice first? 20% off for Cyber Monday

But look closer at the top of the email: Free domestic shipping with the code FREESHIP

In one fell swoop, Tanner Goods offers 20% off storewide and free domestic shipping. A powerful way to re-engage email subscribers who haven’t bought from them in a while!

Just one word of caution: Be careful with using discounts, as they can end up actually hurting your sales in the long run if not used correctly. 

Advocacy

Just as it sounds, advocacy marketing is a type of marketing focused on getting your current and former customers to spread the word about your brand (word-of-mouth marketing). Normally, you’ll need to provide some sort of incentive to make this happen. 

Many eCommerce brands leverage advocacy by offering a financial incentive to refer a friend. For example, Refer 5 friends and earn $50 by Ibotta:

For the brand, this lands them a new customer, but it also keeps the name fresh in the mind of the original customer. 

Influencer marketing, a phrase we’ve all heard of before, is the modern take on advocacy marketing. 

Exclusivity

We all want to feel like we’ve got something that no one else has. That exclusivity elevates our social status, even if it’s just having something before everyone else. Offering early or exclusive access to products that your non-customers won’t get can re-engage your old customers and earn their repeat patronage. 

Exclusivity works wonders at higher price levels. If your item isn’t bought by an individual on a regular basis, consider launching a pre-sale list. 

Ask customers to sign up and pre-order your product, giving them access to your product after it launches, but well before the general public. Limiting the number of pre-sale possibilities adds to the exclusiveness.

Foster a personal interaction

If you want to create a customer for life, you’ve got to build a real, human connection. 

Personal follow-up emails and feedback requests are a great way to do this if they’re not done at a massive scale. 

You could also get your happy customers to create user-generated content (UGC), which is when customers create content (like photos and videos) that feature your brand name and products. 

A simple email asking for content from your customers engaging with your products is a double-edged sword:

  • It’s social proof that your brand is being used and appreciated by the public
  • It’s free content for your brand that you don’t have to worry about creating

GoPro is a brand that takes full advantage of user-generated content on their social media: 

This naturally creates engagement and fosters that personal investment in your brand from your customers. 

Create a memorable unboxing experience

Picture this: There are two hotels on opposite sides of the street. The buildings, rooms, prices and service are all the same, except one hotel has a doorman, while the other one has an automatic door. 

Which one do you think makes guests feel more welcome when they have the first physical interaction with the hotel?

The hotel with a doorman, right? 

And in the world of eCommerce, a memorable unboxing experience is the same as having a doorman. 

Upon the first physical interaction with your product, you want your customers to be blown away—to feel like they got more than they bargained for. 

You can create a memorable unboxing experience by delivering your products in custom printed boxes that echo the branding on your website.

 

Wrap up your product in custom printed tissue paper that has your branding and extends that feeling of excitement and anticipation for your customer. 

An unboxing experience is a stage that presents your product to the world. And it’s a minuscule investment for the positive first impression that it leaves on your customer. 

Reward genuine loyalty

Genuine loyalty is hard to come across in a day and age where nearly every market is flooded. 

Below, you can see a nice concept from the online tea brand, DavidsTea:

After a handful of purchases, the customer is sent nothing more than a brief summary of their past purchases: where they first bought from, how much tea they’ve bought, and a few other odds and ends. 

While this all may be computer-generated, it’s still gives the reader a sense of achievement in their loyalty with the brand. 

You could also create a loyalty program, where you reward your customers with free products or experiences based on how much they spend. 

Measure, test and assess

What isn’t measured doesn’t grow. 

For that reason, whatever retention marketing strategies you implement, you must measure their effectiveness. 

Before implementing your strategies, start by measuring your customer retention rate. Not sure how to do that? This infographic from Salesforce sums it up pretty well: 

Image Source

The next step is to implement your strategies, and let them run for a certain period of time. At the end of that period, check your customer retention rate again. If it’s improved, keep doing what you’re doing. And continue to tweak to see what you can do to improve your retention rate even more. If things haven’t changed at all, then you’ll probably want to try a different approach.

Key takeaways

As you’ve seen, selling to your past customers is actually a lot easier than may be expected:  

  1. Establish whether your product and/or business model can benefit from retention marketing
  2. If it can, create a brand experience that makes your customers naturally come back
  3. Don’t give up on inactive buyers—re-engage them! But remember that re-engaging customers is easy, but difficult to do well. So give serious thought as to how you’ll re-engage your customers. 
  4. Measure, test and assess the effectiveness of your retention marketing. 

Now, armed with the above information, go out and begin squeezing sales from your past customers, rather than putting so much effort into getting new ones!

Phil Forbes

Phil Forbes is an Aussie, living in Warsaw, Poland, helping take the Packhelp name to the world. When he’s not doing that, he can be found faffing in the garden or pretending to be a Storm Trooper.