Discover the leading brands we work with and explore how they're building customer loyalty with LoyaltyLion. Read more about our customers and their loyalty journeys >
78%
increase in order count
68%
higher customer spend
Building up your ecommerce store is both stressful and exciting, but there’s nothing more rewarding than seeing something you’ve built begin to succeed—especially when you make it past the launch phase and move through the next stages of business growth .
To grow your business, you’ll need to retain the customers you’ve started to attract—but this is no easy feat. A new 2023 survey from Wunderman Thompson suggests seven in ten (71%) ecommerce executives have been asked to match or improve last year’s customer experience (CX) output on a smaller budget.
We’d all like to be able to do more with less, but sometimes it doesn’t work out that way—one method to combat this impasse is to focus on loyalty strategies that drive better return on investment (ROI) for business growth.
Having great customer retention means your business can keep existing customers and continue to generate revenue from them. The reason customer retention is important is that it sustains your business’s profitability in the long term.
A business that only focuses on constantly trying to find new customers will spend a lot of time and money just to find themselves chasing a carrot on a stick.
Way back in 2001, Bain & Company suggested that just a 5% increase in customer retention produced more than a 25% increase in profit. Today, thanks to the all-powerful internet generating even more ways for businesses to engage with their customers, increasing your customer retention rate by 5% boosts your profits by as much as 95%!
Measuring and tracking your retention rates is pretty straightforward with the right formula. To calculate it, punch your numbers into a calculator like this:
(Total customers at the end of the period – new customer acquired) / (Customers at beginning of the period) * 100
Here’s an example:
Let’s imagine you had 4000 customers at the beginning of the quarter and you gained 200 new customers, but you ended the period with 3800 customers. Your customer retention rate would be:
(3800 – 200) / 4000 * 100 = 90
This means you’ll have kept 90% of your customers during the quarter. The remaining 10% is your customer churn rate (another helpful measurement to know).
To track these measurements over time, you can use a good old-fashioned spreadsheet, but this method can be tedious to keep up with as your business grows. Another method you can use is a loyalty analytics tool , preferably one that integrates with your store so you can see these measurements in real-time.
Now you know why customer retention is important and how to measure and track it, let’s focus on how you can improve customer retention for your ecommerce store. You can use these seven tips and strategies (from expert experience and case studies) to move the needle in a positive direction.
These days, our mobile phones are practically an extension of our arms. People use them for just about anything and everything, including online shopping and checking emails. Research from Klarna suggests a preference for online shopping via mobile is on the rise, and in the U.S., the majority of shoppers prefer mobile to computers for shopping. Another 2022 survey from Statista’s Consumer Market Insights team also found that emailing is the second most popular activity (65%) on mobile devices in the U.S. (N = 59,934).
With this information in mind, it makes sense to build your ecommerce store email campaigns with mobile at the core of the designs.
“ E-mail is fast, convenient, cheap and effective. For me, you can’t beat it. But the world is moving to mobile-only, and fewer people accessing e-mail on big screens so tailor your message and content accordingly.”
—Paige Arnof-Fenn, Founder & CEO of Mavens & Moguls
Another strategy you can use to try improving your customer retention rates is to create a tiered loyalty program, which you can easily do with loyalty program software .
“Avoid creating a one-size-fits-all loyalty program by offering tiered benefits to increase your ROI. This way, customers can unlock higher levels of benefits or exclusive perks based on their loyalty and spending. This tiered approach encourages people to continue engaging to access elevated rewards. The result is a sense of achievement and exclusivity that promotes customer retention.”
— Jas Banwait Gill, Growth Manager at SwagMagic
Creating tiered loyalty rewards was the approach folks at REN Clean Skincare took when they were looking to improve their long-term customer relationships. Using LoyaltyLion’s software, REN saw a 68% increase in customer spending from loyalty program members, and REN now generates 38% of its total revenue from loyal customers.
“Make it personal” might seem like a pretty generic tip, but there’s so much you can do with personalized marketing to increase customer retention—and personalization is often critical to customers’ experience.
Research from Twilio last year showed that nearly half (49%) of customers say they will likely become repeat buyers after a personalized shopping experience, and 62% said a brand will lose their loyalty if they delivered an un-personalized experience.
“[Our best tip] for us—it’s excellent customer service and personalized interactions. As manufacturers of sentimental products, we know that we should always make our customers feel that their needs are our top priority.
We also go above and beyond to ensure they receive personalized interactions with our staff members. This can be as simple as using a customer’s name in communications or as complex as tailoring product recommendations based on previous purchases.”
— Nicky Dutta, CEO of Lorel Diamonds
In one of LoyaltyLion’s own customer retention case studies , Primal Kitchen was able to create personalized and seamless loyalty experiences that resulted in a 71% increase in loyalty purchase revenue. By making the most of LoyaltyLion’s powerful technology integrations, they set up new communication strategies that resulted in an increase in purchasing from loyalty program members by 240% in 16 months.
Referring back to the Primal Kitchen case study, one of the reasons the brand saw such great results in a short time was the ability to make data-driven decisions to positively impact their program.
Making use of your zero-party data is critical for ecommerce brands moving forward, with the (eventual) death of the third-party cookie. Loyalty program analytics can help you generate measurable/trackable zero-party data, but you can also dive into more traditional research methods like interviews and focus groups.
“We gather qualitative data throughout the customer journey via focus groups, interviews, and questionnaires. Doing so enables us to capture highly detailed customer feedback that reveals how satisfied our customers are with our service and what contributes to or takes away from their experience.
This way, we can identify ways to ensure desired outcomes for our clients, as well as how to optimize the relationships we share with them.”
—Daniel Kroytor, Founder and Director of TailoredPay
Oftentimes just a little bit of extra effort goes a long way. One strategy you can use to go the extra mile for your customers is by including a video in your thank you emails or creating a video thank you page linked from your email.
“Add personalized thank you page videos. They’re like post-purchase emails—but far more personal and in essence they have a 100% ‘open rate’. Plus, data from our app shows that customers come back 2.2x on average to check for shipping updates. And when you add triggers you can completely tailor the post-purchase experience.”
—Fintan Meagher, former ecommerce retailer (three years), currently a content marketer with ReConvert
The best part about video thank yous? You only have to record it once, and the ROI of your time in doing so will pay long-term dividends.
Most (if not all) customer retention strategies come after an initial purchase, so it makes sense that one of the most important areas for any ecommerce store owner to think about is post-purchase feedback.
“Adopting an approach that emphasizes post-purchase engagement has been our golden ticket to cultivating customer loyalty and fostering repeat business. When we interact with customers following a purchase, it opens a window for us to gauge their shopping experience and identify any problems they might have faced.
This timely interaction empowers us to swiftly address their concerns, transforming potential negative encounters into uplifting experiences. The result? Contented customers more likely to return for more and spread the word about our brand.”
—Zach Dannett, Co-Founder of Tumble
One of the easiest ways to implement a post-purchase feedback strategy is to create a customer feedback survey . Sending a feedback survey (as part of an automated post-purchase email sequence) won’t get a 100% response rate, but it should help gather some useful CX information directly from the customers themselves.
The final tip we’d suggest for increasing customer retention rates is to introduce “low effort” rewards in your loyalty program. What’s a “low effort” reward? It’s a small token of appreciation for your customer engaging with you in an equally small manner.
For example, Ana Luisa customers get loyalty points for “low effort” engagements such as following the brand on social media accounts, subscribing to SMS marketing, birthdays, and writing reviews.
Used in combination with the tiered loyalty program strategy, these “low effort” engagement rewards are a great tool to help nudge customers towards more active loyalty program engagement in the future.
Growing your business is easiest to do when you take good care of your customers with a well-developed customer retention strategy. Some tips to help you build a great CR strategy include:
While it is possible to implement a lot of these strategies manually, using separate tools, you’d find it very difficult to make these strategies work together consistently and reliably.
Using dedicated loyalty software such as LoyaltyLion helps drive brand loyalty across the customer lifecycle for your ecommerce store.
To learn how LoyaltyLion can help your ecommerce brand with customer retention, book a demo with us today .
