In today's fiercely competitive market, retaining customers is more important than ever. In fact, studies show that acquiring a new customer can cost five times more than retaining an existing one. That's why it's crucial for businesses to have effective customer retention strategies in place. In this article, we'll explore some of the most effective strategies for boosting customer loyalty and increasing purchase rates.
Why customer retention is important
- Repeat customers on average contribute to about 40% of a store’s revenue.
- About 40% of that overall revenue is generated from just 8% to 10% of your customers.
- Acquiring new customers can be 5 to 25 times more expensive than retaining the existing one (depending on which industry you are in).
- The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is only 5-20%
If you’re not convinced that retaining customers is so valuable, you can read more about this research by Frederick Reichheld of Bain & Company who did a research on customer loyalty with Chick-fil-A. Their research shows increase in customer retention by 5% increases profits by 25% to 95%.
In addition, repeat customers often make larger purchases, provide valuable feedback and recommendations, and are more understanding of any mistakes. They are also more loyal and less price-sensitive overall. And hence customer retention is a vital element of ecommerce marketing, yet it tends to get less attention than acquisition, even in established companies.
How to measure customer loyalty
Measuring customer loyalty in ecommerce can help businesses understand how well they are meeting their customers' needs and expectations. Here are a few ways to measure customer loyalty in ecommerce:
- Repeat Purchase Rate: One of the most straightforward ways to measure customer loyalty in ecommerce is to track the number of repeat purchases made by a customer over a specific period. If you have a high repeat purchase rate, then you are doing great because customers are very satisfied shopping with you and hence they are coming back.
- Net Promoter Score (NPS): This metric measures the likelihood that a customer will recommend your ecommerce store to others. Customers are asked to rate their likelihood to recommend your store to others. And, a recommendation from someone is of much more value compared to any ad.
- Customer Lifetime Value (CLV): This metric estimates the total value a customer will bring to your business over their lifetime. This helps you understand who are your VIP customers. And, then you can figure out strategies on how to invest on these customers so that you continue to retain them.
By tracking and analyzing these metrics, you can gain insights into customer loyalty and take actions to improve it.
How to increase repeat purchase rate
So far, we saw why customer retention is important. We also saw how we can measure customer loyalty using different aspects. Now, let’s try and understand how we can increase our retention rate. To increase this, one thing is for sure - the service to the customer is crucial.
- Ensure the best customer experience: The most effective customer retention strategy is to create the ultimate customer experience from beginning to end.
- Create a Loyalty Program: A loyalty program is an effective way to reward your customers for repeat purchases. Offering exclusive discounts, early access to new products, or special promotions can encourage customers to return to your store.
- Send Targeted Emails: In the era of AI and Big data, it’s important that we send marketing emails that makes sense to the customer. In other words, they should be targeted in a way that it feels as if the email was indented for the customer.
- Provide an Easy and Convenient Shopping Experience: Providing a seamless shopping experience can reduce barriers to repeat purchases.
- Ask for Feedback: Encourage customers to leave reviews and provide feedback on their shopping experience. Use this feedback to improve your products and services and show customers that you value their opinions.
By implementing these strategies, ecommerce businesses can increase their repeat purchase rate, build customer loyalty, and generate more revenue.
In conclusion, repeat customers are critical for the success of any ecommerce business. They represent a reliable source of revenue, provide a steady stream of sales, and are more likely to refer your business to others. By increasing the repeat purchase rate, businesses can build customer loyalty, increase customer lifetime value, and establish a competitive advantage in the marketplace. Strategies such as providing excellent customer service, offering incentives and rewards, focusing on product quality, sending targeted emails, providing a seamless shopping experience, and asking for feedback can all help to increase the likelihood of repeat purchases. Overall, prioritizing repeat customers can have a significant impact on the success and sustainability of an ecommerce business.