It’s faster and cheaper to get your existing customers to make a repeat purchase than it is to find, attract, and convince new customers to make their first purchase.
To understand how to draw your existing customers back again and again, you need to understand the factors behind customer retention that can make or break your customer lifetime value (CLV).
If you’ve been neglecting your customer retention strategy in favor of wooing new audiences, then this article is for you.
We’ll take you through the drivers behind customer retention and how factors such as 2-day delivery, showing appreciation, and personalizing your communications can increase your marketing ROI and overall sales.
What is customer retention?
Customer retention is the ability to generate repeat purchases from existing customers, so they spend more money with you.
Customer retention strategies aim to increase the frequency your customers return to your store and the amount they spend on each visit. The goal is for customers to visit more often and purchase more items as time passes.
According to Alex McEachern, previous head of marketing at Smile.io, you should begin focusing on customer retention as soon as your store gains traction, and increase efforts alongside your store’s growth.
As soon as you have customers, you need to start working to keep them.
Why is customer retention so important?
Customer retention is important for ecommerce stores of all shapes and sizes, from D2C stores to marketplace merchants. Here’s why:
Grow your customer base
Retaining existing customers doubles your audience, enabling you to generate sales from both existing and new customers, increasing revenue by 25-95% from just a 5% increase in retention.
Boost your advertising ROI
The more an existing customer spends on your store, the more return you generate from your acquisition investment, including the ad spend that attracted customers in the first place.
Increase your profitability
Existing customers buy more often and spend more money than new customers, increasing overall business profitability.
Leverage the flywheel effect
The more sales you make, the more money you can invest in advertising and marketing. The more you invest in marketing and ads, the more prominence you’re given in marketplace search results. All of these working together generates compounding results, creating more business growth. This is also known as the flywheel effect of selling on online marketplaces.
Learn from customer feedback
Existing customers can give you insightful feedback on your products, branding, and services to help you improve. You can also access data on buying patterns, product trends, and purchase motivators that inform your product sourcing and pricing strategies.
For example, you can look at the last items a customer buys before going inactive. If you see the same item show up multiple times, you know to investigate the item quality or listing clarity.
Finally, your existing customers are your best salespeople. Happy customers leave more positive reviews and recommend your products to family, friends, and followers.
What are the key customer retention metrics?
There are a few crucial metrics for measuring, monitoring, and increasing customer retention.
Repeat customer rate
Your repeat customer rate is the percentage of people willing to make a second purchase from your store. The higher the number, the better your retention.
Your customer value is how much money repeat customers bring to your business. The higher the number, the more profitable your repeat customers are.
Customer lifetime value
This metric shows you how valuable a customer is throughout their journey with your brand. For example, if you extend your customer retention from 1 year to 3 years on average, you’ll have a higher customer lifetime value.
6 Factors that can make or break your customer retention
Now that we’ve gone through the basics of customer retention, let’s dive into the different factors that can make or break your CLV.
1. Your marketplace store and listings
In the same way that your store and listings are essential for driving initial purchases, they’re also fundamental to generating repeat purchases.
An easy-to-find and navigate store leaves a positive impression that customers want to return to (and makes it easy for them to find you again).
The key things to consider when optimizing your marketplace store and listings for retention are:
- Memorability: Brand your marketplace storefront with images, logos, and colors that make it easily identifiable, memorable, and enjoyable to navigate.
- Discoverability: Use categories, tags, and keywords in your listings that aid product discoverability and make it easy for customers to find you again.
- Ease of purchase: Join fast shipping programs like Walmart TwoDay and eBay Fast ‘N Free that make it convenient for customers to buy from you again.
- Item availability: Practice efficient inventory management to ensure your products are always in stock and available to purchase across all sales channels.
If you’re selling on an ecommerce platform alongside your marketplace store, you should also consider website design, guest checkouts, customer accounts, and product recommendations that make purchasing enjoyable the first time and easy to do a second time.
2. Product selections and variety
The products you sell have a considerable impact on customer retention levels, because your catalog should give customers a need or desire to come back.
For example, a store selling high-end furniture will naturally experience lower retention levels than a store selling affordable beauty products. Shoppers need a replacement bottle of shampoo much sooner than they need a replacement sofa.
The general rule of thumb is that the higher-value the product, the lower the repeat purchase rate. But it doesn’t have to be
By supplementing one-off products with a variety of everyday items, you can retain customers through a series of low-value purchases that put your brand at the top of the list when they need to make a high-value purchase.
For example, that high-end furniture store could sell a range of sofa cleaning products, maintenance care, and covers that generate smaller repeat purchases between larger furniture purchases.
3. The delivery experience
Delivery is a crucial factor for customer retention. More than a third of customers won’t return to your store following a poor delivery experience. Late, missing, and damaged deliveries create a terrible first impression that customers don’t want to repeat.
The good news is that an outstanding delivery experience can significantly boost customer retention by creating a memorable first impression that customers seek out again.
The keys to a seamless delivery are:
- Fast delivery speeds: 2-day and next-day delivery provides customers with convenience, confidence, and immediate gratification, enhancing the post-purchase experience.
- Free shipping: Free shipping adds value that makes shoppers more likely to buy. You can also offer free shipping as a minimum spend incentive to increase average order value.
- Tracking updates: Delivery updates keep customers informed and give them the confidence to make repeat purchases.
- On-time deliveries: Delivering when you say you will enhances customer trust and makes them feel confident buying from you again, especially on a time crunch.
- Accurate and quality orders: Sending the correct items, undamaged and in good shape allows customers to enjoy their products immediately, and eliminates some of the most common reasons for complaints and returns.
Tip: Use our fulfillment cost calculator to see how much 2-day delivery would be for your SKUs. We use nationwide flat-rate, transparent pricing. That means your delivery fee is the same whether your buyers are in California or Connecticut.
4. Your customer support
Proactive customer support has the most significant impact on customer loyalty, followed closely by consistently good service and fast, friendly interaction.
This means you must reach out to customers before they reach out to you, which you can do using:
- Post-purchase emails: Send a series of post-purchase emails that thank them for their purchase, confirm the delivery details, ask how they found the product and experience, and recommend relevant next purchases.
- Delivery updates: Immediately inform customers about potential delivery delays, and quickly rectify and compensate for late deliveries.
- Product support: Send customers information on how to use and get the best out of their products, including information on equipment needed, set-up guides, and access to your customer community.
- Multiple channels: Invite customers to contact you via email, telephone, live chat, and social media, and integrate these channels so your support team can stay on top of multiple streams of questions.
In all your proactive customer support, if you’re selling on a marketplace be sure that you abide by that marketplace’s rules for communication with customers.
5. Where you advertise your products
Advertising isn’t just for attracting new customers. It can be a powerful retention tool as well.
Building customer loyalty on Amazon and Walmart is challenging, because customers become loyal to the marketplace before becoming loyal to you. This means they head straight to the search bar to repeat their purchase, opening them up to your competition.
Using ads across marketplaces, Google, and social media, you can secure prime positioning in the search results to reintroduce your brand to customers before your competitors can say hello. Once they recognize your store, they can bypass the initial stages of the purchasing process, allowing them to proceed more quickly to checkout.
Tip: Use Deliverr to make your Facebook, Instagram, and Google ads stand out using dynamic, fast shipping tags. These badges display 2-day or next day delivery speeds depending on the customer’s location and proximity to inventory.
6. How you treat existing customers
If you run a D2C ecommerce website alongside your Amazon or Walmart Marketplace store, the way you treat existing customers can determine whether they return to your website or a marketplace.
You must give customers a reason to re-engage with your brand. This involves:
- Loyalty programs: Provide customers with a tangible incentive for remaining loyal to your brand, such as tiered discounts, free shipping, or gifts.
- Engaging emails: Keep in touch with customers and send them product updates and recommendations tailored to their previous purchases.
- Reminders: Remind customers to re-order as their products are about to run out — for example, coffee beans or haircare.
- Subscriptions: Give customers an easy way to remain loyal by offering convenient and cost-effective subscriptions.
Customer retention best practices
Before you head off into the sunset with your existing customers, there are a couple of best practices to consider first.
Customer retention is a metric you should constantly be analyzing and improving.
Use the calculations at the beginning of this guide to benchmark your current repeat customer rate and value, and then track them every month to determine success. You can also use methods such as A/B testing to compare the effects of different tactics and strategies.
Ask for feedback
One of the quickest ways to improve customer retention is asking your existing customers about their experience with your brand and what would convince them to purchase again.
You can do this through NPS surveys, feedback forms, social media engagement, or a quick telephone call, covering topics including product selection, website navigation, customer experience, delivery, and support.
You’re not alone when it comes to retaining customers. In fact, by involving third-party support and services you can better serve existing customers while giving yourself more time to attract new ones.
Different ways to outsource and boost customer retention include:
Outsourced fulfillment partner
Using an outsourced fulfillment service to access 2-day and next-day delivery speeds and ensure orders are delivered on time, every time.
Benefits of outsourcing fulfillment include:
- Strategic inventory distribution across a network of warehouses
- Scalable support to suit your order volumes throughout the year
- All-inclusive pricing so you can incorporate the cost of free and fast shipping in your pricing strategies
International customer support
Outsourcing customer service means you can hire across time zones to provide existing customers with 24/7 support. This will enable you to resolve issues and proactively assist customers quickly.
You can start small by outsourcing out-of-hours support, or go large by outsourcing everything.
Advertising tools like Teikametrics help you to supercharge your ads with AI-power, allowing you to target buyers and optimize your success.
Customer retention is one of the most powerful ways to increase your business profitability while generating positive reviews, customer feedback, and higher returns on your ad spend.
While there isn’t a magic formula you can use to boost customer retention, there are many ways to encourage it. Optimizing your listings, providing fast delivery, ensuring proactive customer service, and staying in stock encourages your customers to keep coming back.
You don’t have to tackle customer retention alone. You can work with fulfillment services, advertising partners, and outsourced customer service teams to boost retention while you continue growing your store.
About the Author
This is a guest post from Rachel Go, senior content marketing manager at Deliverr. Deliverr provides fast and affordable fulfillment for your Shopify, Walmart, Amazon, eBay, Wish, and BigCommerce stores, helping to boost sales through programs like 2-day delivery for Shopify, Walmart 2-day delivery, eBay Fast ‘N Free, and Wish 2-day.
Deliverr’s FBA-like multi-channel fulfillment comes with clear pricing, easy onboarding and a hassle free experience so you can focus on growing your eCommerce business.