Bringing new customers in the door is essential for every ecommerce business—we all know this. But what about keeping them around? How much effort do you honestly spend on your customer retention strategies and getting your customers to make a second, third or fourth purchase? If this question makes you a little uncomfortable, you’re not alone.
Regardless of your answer, the fact remains: Customer retention is essential to your long-term success. If your business has a healthy flow of new customers each month, then leveraging those customers with a solid retention strategy is one of the best things you can do to increase revenue and profitability.
Numbers Don’t Lie
We’ve all heard it before: Acquiring a new customer costs up to 7 times more than retaining an existing one. When compared to brand new ones, your current customers are much more likely to make another purchase, and when they do, they often spend more money than first-time buyers.
If you’ve got the customer acquisition piece down, but you’re not implementing any kind of customer retention strategies, then you’re probably leaving some serious money on the table.
With that said, here are 7 proven customer retention strategies you can use to improve customer retention and add some dollars to your bottom line.
Customer Retention Strategy #1: Win-Back Campaigns
You’ve likely heard of win-back campaigns, but if not, they involve contacting customers you haven’t heard from in a while in an attempt to win them back.
This is a brilliant retention strategy that old-school direct response marketers have been successfully using for years, but to do it effectively, there are a few things to consider.
Timing is Crucial
Start trying to win customers back too early, and you’ll end up offering perks and discounts to people who would have bought anyway. Start too late, and well, it will be too late.
To get the timing right, you need to figure out how frequently your customers order. If, on average they order every 3 months, then you might implement a win-back campaign around the 90-day mark.
Use the “Godfather Approach”
What’s that? Easy—make them an offer they can’t refuse! Entice your customers with things you know they value. Consider offering gift certificates, bonus items, and free shipping. If your lifetime customer value allows for it, you can kick things up a notch and offer a win-back package that includes multiple bribes (true Godfather style).
Don’t Stop There…
Depending on your business, getting a response could take three or more follow-ups, so don’t quit after your first attempt. Consider sending a sequence of emails with a clear expiration date, as you would with any other offer.
Keep in mind that spamming the daylights out of your customers won’t help you win them back. Work on finding a balance. Follow up enough to be effective, but not annoying.
Customer Retention Strategy #2: Loyalty Programs
We’ve all seen them before, and some of us have a special place in our wallet for them. If you haven’t guessed already, I’m talking about “Buy X Get 1 Free” loyalty cards. The idea here is simple: reward your customers for frequent purchases.
Loyalty points are likely the most common form of loyalty program out there. They’re easy to implement and pretty darn effective. Granted, one free coffee might not be a good enough reason to buy 10, but it is a good enough reason to stick with one coffee shop on your way to work each morning.
The same goes for your ecommerce store. Implementing a loyalty program might not have customers throwing their wallets at you, but combined with a competitive product and great customer service, it can definitely increase sales and improve customer retention.
In most cases, your loyalty program should reward your customers based on the frequency and/or monetary value of their purchases. “Buy X Get One Free” might work well for coffee shops, but depending on your business, you might want to consider a different reward.
Anything your customers can use towards a purchase is typically a good idea for a reward. Store credit and free shipping are two good examples. These types of rewards work well because they encourage future purchases and lead customers back to your shop.
When considering a loyalty program, keep this essential question in mind: Does the reward encourage continued purchases?
With that said, points systems like those offered by Shopify apps LoyaltyLion and Smile.io are great for a couple of reasons: Firstly, they add a gamification element (more on this later) to your loyalty program, and secondly, they allow you to get creative with how your customers can earn/redeem their points.
If loyalty points are something you are currently using, or are considering using, here are a few creative ideas that work well—especially if you offer points that can be redeemed toward a purchase.
Welcome & Wow
New customers might not fall into the loyalty category—not yet, anyway. However, offering some surprise loyalty points with every first purchase can be a good strategy. This is a nice gesture that gives you the opportunity to introduce new customers to your loyalty program and let them know what it’s all about.
Secondly, if you offer points that can be used towards a purchase, you will get the added benefit of being able to remind your new customers that they still have “X” number of points sitting around from their first order.
Offer Points as a Bonus
Introducing a loyalty points program allows you to use the points as bonuses alongside other offers. For example, if you’re running a promo for 20% off, consider offering double the points when your customers redeem the offer.
Double The Value
If your loyalty points represent redeemable store credit, then consider sending a promo to customers with a surplus of points that offers them double the regular value of any points redeemed in the next 48 hrs. For example, “Shop before X day, and we’ll double the value of any rewards points used toward your purchase.”
Customer Retention Strategy #3: Subscription-Based Business Models
Many ecommerce retailers resist subscription-based business models and, in some cases, that resistance is not unfounded. But before you dismiss the idea, consider this: if a person has been buying the same supplement every month for five years, why not give them the opportunity to save some time and money by subscribing to regular deliveries?
Pull this off, and you get the delightful benefit of recurring monthly revenue. Together with excellent customer service, monthly subscriptions almost guarantee a boost in retention. In addition, your customer gets a discount for their commitment and doesn’t have to think about ordering again.
Subscriptions work well for most consumable or disposable products, but what if you sell something with a low repeat purchase rate? In this case, ask yourself what complementary product you can offer that would lend itself to a subscription model.
For example, let’s say you sell high-end espresso machines to a consumer market. Why not offer high-end coffee as a subscription? Adding a subscription element will allow you to stay in the minds and hands of your customers long after that first purchase. Keep those customers happy, and you’ve got a sure shot of getting the sale when it comes time to buy a new espresso machine.
Customer Retention Strategy #4: Welcome Campaigns
Want to know the best way to predict your customer’s buying behavior? Simple: take a look at their past behavior. Of course, there are some exceptions, but generally, the more a customer buys from you, the more likely they are to buy from you in the future.
According to some statistics published in a great article titled “Repeat Customers are Profitable and We Can Prove It!”, written by Alex McEachern over at Smile.io, the likelihood of another purchase goes up by as much as 27% by a customer’s third order. Check out this infographic for specifics:
If you’re experienced with customer acquisition, then the hardest part of leveraging these numbers is getting your one-time buyers to make a second purchase. Welcome campaigns are a simple and effective way to do this.
The quick and dirty way to implement a welcome campaign is with email. Your customers will be most engaged during and immediately following their purchase. Use this hyper engagement to your advantage.
Instead of sending a run-of-the-mill thank you email, why not actually show your customers that you appreciate their business by sending an email that thanks them for their order and offers them a time-sensitive discount toward their next purchase?
Quick and dirty won’t cut it for you?
For those of you on Shopify looking for something a little more elegant, Touchcard offers a hands-off solution for sending highly effective welcome campaigns that will make your new customers feel extra special while encouraging a second purchase.
At Touchcard, we send automated, physical postcards that thank your new customers for buying and give them an incentive to come back with automatically generated, expiring discount codes.
Whether quick and dirty is your thing, or you’re looking for something more classy, welcome campaigns are a great way to boost retention and turn your first-time buyers into repeat customers.
Better still, welcome campaigns are simple to set up. You can get one up and running in a day or less.
Customer Retention Strategy #5: Paid VIP Memberships
Ask yourself this: do you have a handful of customers who buy frequently enough to benefit from things like unlimited free shipping and exclusive discounts? If so, offering a paid membership that includes such perks can make the difference between satisfied customers and customers who buy almost exclusively from you.
A great example of this is Amazon’s Prime Membership Program. Their prime members pay $10.99 a month for exclusive perks, such as free 2-day shipping, advance promotions, and year-round discounts.
Amazon’s paid membership program has been so successful that, in July 2016, they launched Prime Day—a day similar to Black Friday or Cyber Monday, but only for Amazon Prime members. Not only did people sign up for the Amazon Prime free trial just to take part, but Prime Day 2017 also produced record sales that made it the biggest day in Amazon’s history.
While Amazon has done a great job making this look (sort of) easy, this strategy is not for everyone. Executing a successful VIP membership program requires serious thought and planning. Plus, you need a handful of loyal customers to begin with. Consider this one more of a retention multiplier for those looking to take customer loyalty to the next level.
Done right, paid memberships will reward your loyal customers and increase their level of commitment to your business. Plus, paying the small fee will give them yet another reason to continue buying from you.
Customer Retention Strategy #6: Gamify Your Business
Gamification improves customer retention by making your business more fun to interact with. The idea is to take the psychological elements that make video games enjoyable and incorporate them into your business.
Some of these psychological elements include:
- Competition
- Completing goals
- Receiving rewards
- Achieving social status
There are many ways to implement gamification in your business. A few strategies that tend to work well for ecommerce stores include contests, scavenger hunts, referral programs, and points systems.
A great example of a gamification strategy was the “Wayfair Summer Scavenger Hunt.”
Wayfair, a home goods ecommerce store, asked their Pinterest followers to find items on the Wayfair website (things that fit descriptions like “something for gardening” or “something for cooling off”), create a board on their Pinterest account with the title “Wayfair Summer Scavenger Hunt” and pin the items to it.
The first 25 participants to send an email with a link to their Pinterest board received a $50 gift card. This clever scavenger hunt was a great way for Wayfair to get followers engaged with their website while creating social content from the Wayfair summer product line.
Granted, you might not have the budget, product line, or social media following to successfully replicate a scavenger hunt exactly like the one above. Fortunately for you, there’s a simpler version of the contest that will get your email subscribers engaging with your store and promoting your products on social media for as little as $100. To implement it, just follow the steps below:
- Send an email to your subscribers offering them a chance to win a $100 gift certificate to your store.
- To enter, ask them to visit your website, choose the item(s) they would purchase if they had $100 to spend, post the item(s) to their favorite social media platform with an interesting caption and email you the link. Be sure to include a deadline!
- Select a winner based on the most creative caption or whatever measure you think fits your business best. Send a second email revealing and congratulating the contest winner.
You can also begin by incorporating just one or two gamification elements into your business. Start simple and make additions as you see results.
For example, points systems and referral programs can produce measurable ROI while rewarding participants for achieving goals. You could start with a referral program, then gamify even further by running a referral contest with a public leaderboard. This will introduce competition and status elements to your gamification mix.
Customer Retention Strategy #7: Surprise & Delight
In the age of email and automation, it seems like heartfelt gestures and highly personal business-to-consumer relationships are things of the past. Sad as this may be, it’s also a tremendous opportunity for you to build more personal relationships that differentiate your ecommerce business and improve customer retention.
Go the extra mile. Take the top 20% of your customers each month and send them something personal, like a thank you card, gift or handwritten note. Too busy to send these yourself? Touchcard and many other apps out there make this super easy, so you don’t have to worry about it.
Personal gestures are highly memorable, even remarkable. Furthermore, surprising your customers in this way lays the foundation for lasting relationships. In the crowded online marketplace, sending something tangible and personalized differentiates your business, makes your customers feel special and keeps your brand top of mind when it comes time for that next purchase.
What’s Next?
Well, that’s up to you.
At the very least, we hope this article has communicated the importance of customer retention and given you a variety of ideas that you can implement in your business.
At best, we hope we’ve given you enough ideas and inspiration to go and implement at least one of them right now!
If you’ve got a bit of experience under your belt and already have some retention strategies working for you, why not kick it up a notch? Why not try to build the kind of customer base that buys exclusively (or almost exclusively) from you? Wouldn’t that be nice?
If you have a steady flow of new customers and would like to see them stick around a little longer, then it’s just a matter of getting started. Why not challenge yourself to implement one of these strategies every quarter until you find something that works for your business?
Regardless of where you are, improving customer retention will require the same process it took to master customer acquisition. Choose a strategy and implement it until you can decide whether or not it works for your business. If it works, great. If not, move on to something else until you find a winner. When you find something that produces results, you’ll be glad you did.
