A Guide on How to Improve Customer Retention

Kas Andz

October 26, 2021

Table of Contents

Profitability.

It’s the cup of plenty that any eCommerce store wants to drink from. Sadly, it’s also one of the biggest problems online retailers face.

But why?

Well, to market themselves, online stores need to advertise. But running ads regularly can be expensive and takes a cut of their available profit margins 

Unfortunately, there’s no real way of getting around this. In marketing, you pay to acquire a customer. 

This amount is referred to as the customer acquisition cost (CAC).

A Guide On How To Improve Customer Retention
Image Credit: CleverTap

However, no one made any rules about chipping away at this price… 

To do this, you simply need to build a strategy for customer retention, i.e. a) finding a way to keep your customers coming back to your brand, b) get them to continue using your products, and c) ensure they are not lost to your competitors. 

In fact, with just a 5% increase in customer retention, a retailer’s revenue can be boosted from anywhere between 25-95%!

It’s a challenge easily navigated through the perks of email marketing, an approach we here at KAMG are well acquainted with.

Want to learn how to improve your customer retention strategies and solidify a converting sales funnel? Then read on! 

Why is Customer Retention Important?

Let’s look at an example.

An average eCommerce makes $50 000 on sales, selling 5 000 items priced at $10 each.

If every item requires $5 to make, accumulating $25 000 in production costs, then that already cuts at 50% of the margin. Which is understandable.

But, to get that level of sales, they need to put in a certain amount of advertising. 

If we assume this retailer made a 5X return on ad spend, it will mean that for every sale that was made, $2 was spent to get the customer. That’s $10 000 in total.

Naturally, the costs on ad spend continue to climb with the amount of sales made. 

It means that 20% of the available margin is being taken up by ad spend

But the way we see it, 20% ($10 000) is available to convert to an added profit if customer retention strategies are applied!

A Guide On How To Improve Customer Retention
Image Credit: Retention Science

So why is it important to increase customer retention rates? Simple.

Once you already have someone’s email address on your mailing list, it doesn’t cost a lot to market them again—whether it be through FB ads or email marketing.

The customer has already been added to your system. That cuts significantly at your CAC, which is one of the benefits of customer loyalty.

There is no need to advertise multiple times nor to present these customers with different ads to promote the uniqueness of your product. They already know.

For this, eCommerce retailers are capable of scaling profitably, because they know what customer retention strategies to follow. 

Tips to Improve Customer Retention

Convincing someone who already knows your brand to make a purchase is easier than trying to acquire someone that is unfamiliar with your line of products altogether.

Customer Acquisition & Retention | Episode 2

They know your story, have explored the innovative characteristics of your brand, and they’ve gone through the purchase and consumer journey to stand as a reviewer to the promise of quality you had to offer.

Quality should always be your first entry point to win your customers back. 

Your product should be good enough to speak for itself, without you having to reiterate its worth at this point in your relationship.

You already touched base with the consumer, and for this reason, you should leverage the familiarity and trust a customer has in your brand if you want to convert them to a returning customer.

Here are 7 ways to get people to come back and buy repeatedly.

Use Loyalty Systems

A loyalty program is an effective marketing tool that reciprocates your customers for choosing to buy with you again and again.

There are diverse ways in which you can set this up. 

A tiering system motivates your customer to reach a certain level to gain access to wider benefits, thus operating based on a high-and low-end economy.

Customers with higher levels may be less inclined to sacrifice such benefits by switching to a competitor, motivating them to remain loyal to your brand. 

A Guide On How To Improve Customer Retention
Image Credit: Yopto

A points-based system is a measurable incentive and offers multiple channels by which loyalty points can be achieved. 

You may allow customers the option to win points through signups, reviews, charitable donations, or even referrals. 

Some retailers choose simpler reward systems, created on the basis of merely offering value. 

This could include branded merchandise or a simple discount on their favorite products. Each store is informed by its own target audience. 

Some brands, like Chipotle, use a simple combination of reward and point-based system to achieve their goal.

A Guide On How To Improve Customer Retention
Image credit: Really Good Emails

You could also consider using Yopto, a marketing platform that plugs in with Shopify.

Through its features, you can set up loyalty campaigns that are customized to win back existing customers or even attract new ones. 

It also integrates seamlessly with email marketing platforms like Klaviyo, where email recipients can be incentivized to share reviews and accumulate points. 

Upselling and Cross-selling

Upselling is a persuasive technique that eCommerce stores use in getting their customers to make a bigger purchase.

They accomplish this by recommending an upgrade of the original product purchase or suggesting add-ons to increase the value thereof.

Let’s look at the below example.

A Guide On How To Improve Customer Retention
Image credit: Really Good Emails

What makes the above offer persuasive?

Framer does the following:

  • They draw a comparison between their customer’s current plan and the recommended plan,
  • they incentivize by listing the benefits of the Pro Plan,
  • and they even offer a link to learn more about why the recommended upgrade might be worth it.

eCommerce stores could also opt for cross selling their products. 

In cross-selling, instead of an upgrade, alternative item purchases are recommended that may compliment the item originally purchased.

Want to learn how to upsell and cross-sell to your customer base? Watch the video below.

How to Upsell and Cross-Sell to E-commerce Customers

Repeat Sales for Consumables 

Consumables are an easy product to lean on to guarantee repeat sales. 

They get used up. And if they’re good, people want more.

This is one reason products like fitness supplements do well, because customers can buy them again and again. 

Using email marketing with this can be important, because you can send timed reminders (e.g., every 21 days) that their supplement will run out.

In addition, you have an option to upsell or cross-sell some of your other products. 

They could for instance upgrade their supplement bundle to a bigger batch to last longer (upsell), or they could add a pre-workout mix that might make them see results sooner (cross-sell).

And since there is no marketing cost, there is far more profit to be made from the sale.

Calibrating Sales from Your Request for Reviews

A Guide On How To Improve Customer Retention
Image Credit: Really Good Emails

User-generated content (UGC) is an important organic aid to generate more traffic or help your conversion funnel to lead to more sales.

People trust reviews left by objective third party consumers that do not represent the brand itself. 

Such reviews are based on the quality of your product and service alone and leveraging such feedback from your satisfied customers could help others return to your brand as well.

BOF: Retargeting to Remain Top of Mind

Bottom of Funnel (BOF) customers are those people who are already within your conversion funnel but need the extra push to buy your product.

Accumulating people here leaves you with the simpler task of timing your approach right to convert them to the purchase moment. 

Thus, you retarget customers with email-marketing and FB ads to build rapport and remind them of your value and the offers you have lined up. 

Take a look at how Huckberry retargets their customer.

A Guide On How To Improve Customer Retention
Image credit: Really Good Email

In the above example, they:

  • Remind the customer that they have a waiting list, and therefore an account, all based on a product they were interested in.
  • List the exact item that is back in stock.
  • Reassure the customer that stocks will last, building a connection with the client without pressurizing them.
  • Display new trending items that the customer may be persuaded to add to their order.

Reward Your Customer Base

We’ve mentioned reward systems through loyalty programs above, but there are other ways to build a connection with your customers.

They simply need to feel your brand recognizes them in some way.

Using email marketing here is important, and there are many automation flows that can be created when customers fall in a certain category.

Klaviyo, for example, offers the option to create a VIP flow based on the category a customer falls in. 

In this case, customers can be segmented into those who spend big as opposed to those who purchase frequently from your store.

In addition, other unique email automation flows can be created that simply make the customer feel special, such as Birthday Flows or Purchase Anniversary Automations.

A Guide On How To Improve Customer Retention
Image credit: Really Good Emails

The above example illustrates several good practices:

  • They don’t have to rely on exclusive offers to form a connection.
  • Their email is personalized by the detail and customer insight it displays.
  • They use humor or an endearing remark.
  • They remind the customer of their perks (shipping and bonuses).

It’s important to not rely on discounts as a suitable reward, especially early, as such offers can often hurt profitability by tightening the margin even more.

It’s all about sending valuable content that solves a certain problem and builds a relationship.

The Unboxing Experience

Unboxing
Image Credit: Burst.Shopify

Though this is an unrelated practice to your email marketing campaign, a good unboxing moment does add to the emotional connection with your brand. 

When you freeride on the adrenaline of the customer’s buildup of excitement, prior to delivery, you’re helping to build a memorable interaction between them and yourself. 

When you’ve paid attention to this, you’re achieving several wins:

  • Increasing perceived product value
  • Marketing an experience with a product
  • Boosting customer loyalty
  • Making great first impressions 

FAQs

What is a customer retention rate?

Your customer retention rate is a figure that illustrates how many customers remain loyal after a certain period of time. From this percentage, online retailers can gain customer insights to improve their service, so customers come back to buy.

Are there different types of customer retention?

Some experts believe that customer retention strategies are informed by certain bindings that are a) situational, b) technical, c) legal, d) emotional, or e) economic in nature. For a full overview, why not check out this article.

Are there any good examples of customer retention?

Curious to know what customer retention strategies are followed by top brands like Starbucks or Amazon? Check out these 12 examples from giant brands who’ve experienced the benefits of customer loyalty firsthand.

Make Customers Continually Profitable

Still not sure how to approach customer retention for repeated sales?

Contact us at KAMG now, and we’ll put you in touch with our email marketing experts.  With our help, you’re guaranteed to maintain your relationship with a loyal customer base and boost your profit margins without any additional ad spend!

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