The percentage of consumers who place multiple orders from your online store is known as the customer retention rate. While accounting for only 21% of a brand’s client base, these people are your loyal followers, earning 44% of total revenue and 46% of purchases.
Customers who remain loyal are clearly more profitable. They are already familiar with, like, and trust your DTC brand. The actual challenge is, how do you convert more first-time purchasers into repeat customers? Handling retention may be difficult, especially if you’re a DTC operator wanting to provide tailored retention marketing to existing clients at scale.
Today, eCommerce businesses must prioritize client satisfaction and retention. If you can’t keep clients, you’ll never be able to break free from excessive marketing costs and expand your brand in a sustainable manner. Furthermore, if you can’t provide a customer experience that inspires brand loyalty, negative word of mouth will erode your company’s reputation and make it difficult to attract new customers at all.
Fortunately, there are more tools and resources available than ever before to assist you in developing a good customer retention strategy by increasing on-site experience, customer service, and all other aspects of a great customer experience.
What is a Good Retention Rate for eCommerce?
Customer retention rate is the percentage of existing customers who continue to buy from your brand over time.
If your company has a high number of repeat customers and, if applicable, keeps customers subscribed, you’ll have a high customer retention rate. If, on the other hand, your organization rarely does business with a customer after the initial order, you have an opportunity to enhance your retention rate. The flipside of the customer turnover rate is the customer retention rate.
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If you sell to 10,000 customers each month and 2,500 of them return to make another purchase within the next year, your customer retention rate is 25%. Additional KPIs to consider when measuring your eCommerce customer retention include:
Customer lifetime value (CLV): Your CLV would be $120 if the average consumer made three transactions of $40 each. Use this to assess the success of your retention plan. An increase in CLV indicates that, even if the quantity of purchases made does not improve, the strategy is working—customers are spending more money with your brand.
Customer or revenue churn: The proportion of clients who quit a business over a specific time period. Consumer electronics companies have the greatest average turnover rate, at 82%, but the lesser the better.
Customer loyalty rate: The proportion of existing consumers who participate in your loyalty program. Individuals who join the program express a desire to buy again, even if they have not yet made a second purchase.
“It’s all about income when it comes to retention.” Yes, you may include acquisition while considering revenue. ‘How do we bring in additional clients to compensate for the ones we’re losing?’ That is, indeed, an element of the puzzle. But if you solely think about obtaining new clients and ignore the ones you already have, you’re missing a huge piece of the puzzle. More DTC brands should benefit from focusing on retention as much as they do on new customer acquisition.” —Val Geisler, Klaviyo’s customer advocacy lead
According to Omniconvert, the widely regarded customer retention percentage for the ecommerce industry is 31%. Some businesses may have a significantly greater customer retention rate depending on how well they manage their customer base and how hard they work to establish customer loyalty. Individuals who focus solely on recruiting and selling first-time consumers may have a lower retention rate.
Of course, regardless of your brand’s current client retention stats, the most important thing is continual progress. Client retention is a continual process that can always be improved, benefiting both your customer service ROI and your bottom line.
According to data, online shops have a 28.2% recurring customer percentage. This, however, varies by industry:
- Cosmetics: 25.9%
- Apparel: 26%
- Supplements: 29.1%
- Coffee 29.6%
- Pet products: 31.5%
“Average eCommerce retention rates vary based on industry, size, and business model, but they typically sit between 15% and 30%,” says Moran Khoubian, Senior Director, Ecosystem & Community at Yotpo.
“Since that is such a broad range, we recommend that organizations assess retention through more precise measures such as customer lifetime value, repeat buy rate, average order value, average purchase value of loyalty redeemers versus non-redeemers, and time to second purchase.”
“Shifting attention toward retention leads to improvement across various KPIs, resulting in improved overall retention rates,” Moran adds.
Your client retention rate is an important metric that provides crucial information into your capacity to maintain customer connections (and turn them into repeat business). Keeping a customer is easier and less expensive than finding new ones. According to Hubspot, a 5% increase in client retention can boost a company’s revenue by 25%-95%.
Repeat consumers make up only 21% of the average brand’s client base yet create 44% of that brand’s income because they shop more frequently and submit higher-value orders, according to Gorgias research.
You’re missing out if your strategy is overly focused on acquiring new clients. You will overspend on poor-return client connections, reducing your ROI, due to high customer acquisition costs and low returns from first-time customers. Of course, obtaining clients is crucial, but their true value is recognized only if you can maintain them.
Your client retention rate can be calculated using a simple formula. It consists of three parts:
- Number of customers at the beginning of a time period
- Number of customers at the end of the same time period
- New customers acquired during the given period
Customer retention rate = [(Number of customers at the end of time period – Number of customers acquired during time period) / Number of customers at the beginning of time period] x 100
Business A had 100 customers at the start of the year and 80 customers at the end. They gained 45 new clients during the year. Business A’s customer retention rate would be calculated as follows:
Customer retention rate = [(80 – 45) / 100] x 100
Customer retention rate = 35%
How to Improve eCommerce Customer Retention Rate?
eCommerce businesses should monitor their eCommerce retention and churn rates, as well as their customer lifetime value (CLV) and average order value. These are measures that help monitor a company’s health and discover possibilities to improve the bottom line. You can take steps to keep current consumers with you rather than your competitors.
Let’s look at six tried-and-true customer retention tactics you may employ to boost the customer retention rate of your eCommerce firm.
Provide a fantastic customer experience
We can’t emphasize how important a positive and pleasant user experience is. According to a 2019 study conducted by Oracle and Jeanne Bliss, 43% of customers will discontinue doing business with a brand due to a single negative encounter. Furthermore, 59% of them will inform their friends and relatives about their bad experience.
Assess your customer service program using measures like as resolution time, net promoter score, and customer happiness, and work on enhancing key customer experience factors such as:
- Hiring and training high-quality, well-trained talent understands your customer and delivers top-tier support every time
- Self-service resources to help customers find instant answers when they run into problems
- Automation to help your customer success team perform their jobs faster and more efficiently
- Mobile optimization: According to Statista, smartphone orders generated 46% of revenue for retail ecommerce websites
- Omnichannel support so customers can get ahold of you wherever they are, like social media, text messaging, or live chat
Introduce a clear post-purchase experience
The period immediately following a customer’s first purchase is one of the most critical in their life cycle. Consider the post-purchase email campaign to be your recurring customer onboarding flow. Customers will be less inclined to return to your store if you don’t create clear, proactive expectations with them.
Following are some instances of the ramifications of poor post-purchase experiences:
- If a customer places an order and doesn’t get a follow-up email, they start to doubt whether their order went through
- If a customer doesn’t get an order tracking number after a purchase, they may stress about the shipping time frame
- If a customer doesn’t get set-up instructions, they may think the product doesn’t work and ask for a return
Pay close attention to the messages a consumer receives following their initial purchase. A lack of communication is fatal, and the appropriate combination of confirmations and email marketing can swiftly pique the interest of clients in purchasing additional products. If you nail it, you provide the customer with a clear, straightforward path to long-term customer loyalty.
Build a rewarding customer loyalty program
Loyal clients return to your brand on a regular basis, making them a beneficial addition to your business. According to a Yotpo 2020 survey, 68% of customers will participate in a loyalty program if one is provided. With a customer incentives marketing plan, you may turn your consumers into raving fans and improve their purchase frequency.
Consider using tools like as LoyaltyLion to develop a successful rewards program. They assist you in determining the rewards that will be given to recurring customers for critical customer engagement activities such as mentioning you on social media (excellent for word-of-mouth marketing), purchasing a new product, or generating referrals. Consider giving out freebies, huge discounts, and first access to future product releases.
Offer customers discounts and deals
Everyone wants to feel unique. Provide exclusive incentives to your present customer base to score major points with them. Allowing loyalty program members to order new products before the general public, offering member-only discounts, offering free delivery, and sending a free gift with their purchase are all examples of this. These small touches will boost client happiness and loyalty to your brand.
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Amazon is an excellent example of a corporation that uses promotions and discounts to entice customers to shop on their website. When you sign up for Amazon Prime, you get free shipping, a large library of original movies and TV shows, and a slew of other benefits to keep you shopping at Amazon.
Of course, this technique is impractical for small businesses using Shopify, BigCommerce, or other eCommerce platforms. Consider repeating the concept with a Subscribe and Save option if it makes sense for your items. Customers can save money by signing up for automatic repeat purchases. Customers benefit from this since they save money and don’t have to remember to replenish. It’s also beneficial to your business because you keep more existing clients, which increases income.
Conduct surveys and learn from customer data
Don’t just guess what your customers want; ask them! Customer retention necessitates ongoing communication since their interests and preferences change over time. It is vital to poll them on a regular basis to ensure that your retention initiatives are effective. Collect and analyze client feedback to identify trends that can be used to improve your buyer’s experience.
These questionnaires do not have to be lengthy or time-consuming. A simple inquiry or two after checkout, or a marketing email requesting two minutes of their time, will provide you with vital information.
Utilize cross-selling and upselling strategies
Upselling and cross-selling are the most effective tactics for increasing repeat customers’ lifetime values by driving higher order values. While you should never be pushy, you may use retention marketing methods to offer new, exciting products to existing consumers in order to entice them to return to your store and spend more money.
Check out our eCommerce upselling methods guide for:
- A list of tools to support your upselling efforts
- Tips to turn customer support interactions into upsell opportunities
- Tips to proactively reach out to customers as an upsell strategy (which has been shown to lift revenue)
- Tips to reduce returns and get more exchanges instead, which reduces lost revenue and still gives you a chance to wow customers
You may boost your eCommerce company’s retention rate and benefit from your existing client base by focusing on offering a good customer experience at every touchpoint, developing customer loyalty, and cross-selling at the correct times.