Everything you need to know about ecommerce customer retention
Customer retention in ecommerce is crucial especially when it comes to customer satisfaction and maintaining loyal customers. This is important especially with the growing number of customers relying on ecommerce businesses now more than before. While gaining new customers is important for the growth of your company, ensuring that your loyal customers continue to promote and remain with your company’s new launches and expansions can be cost-effective and more profitable in the long run.
Focusing on ecommerce customer retention ensures three things: loyal customers, an increase in profits, and time efficiency.
What is customer retention in ecommerce?
Customer retention is the process of existing customers returning to your ecommerce store to increase your company’s profits and improves the success rate of your business.
Ecommerce customer retention strategies
There are a variety of actional ways for your company to keep loyal customers and increase the rate of customer loyalty and “beat out” competitors. Here are 5 key ecommerce customer retention strategies:
Well-produced email newsletters are a great way to keep your customers engaged, informed, and eager for upcoming releases. Having weekly or monthly newsletters allows current customers to read the information (embedded with links) directing users to your company’s website. Having a positive user experience is meaningful for both your loyal customer base and one-time buyers. Concise but informative newsletters show consistency and provide a voice for your company providing your customers with something to look forward to.
Newsletters can include photos and links to your company’s social media accounts which is another way to connect users to your other communication channels. This ecommerce customer retention strategy enhances all aspects of your marketing and communication strategies. By having direct links to your social media accounts and website, it encourages users to take action right away.
Loyalty and rewards programs
Loyalty programs are a great way to engage customers and reward them for their continued support of your brand. Having a loyalty point system attracts customers - both new and returning ones - to discounts, exclusive promotions, and provides an incentive to return to your business.
One of the most successful customer loyalty programs is Inkbox. They’ve created an inclusive points system that rewards their members with exclusive access to new products. The incentive to stay with Inbox's customer loyalty program is high since it’s simple to sign up through their website, social media, or through referrals. A loyalty program allows customers to receive rewards while easily promoting the brand.
With the rise of online shopping and higher rates of screen time, users can easily access your company through SMS campaigns. SMS campaigns create user engagement through the use of direct text messages sent to your customers. SMS campaigns provide information on exclusive promotions, updates on new products, and benefit other marketing and communication channels like your email or social media platforms. The texts encourage your customers to read your company’s emails for detailed information on new products, exclusive offers, and customer rewards to collect.
SMS campaigns are easy for users to read since they are through text messages. Without having to scroll far, texts are advantageous compared to long emails which can deter your customers from opening them. Texts with a strong CTA can include links and eye-catching detail for users to quickly. For your company, it is convenient to send scheduled mass text messages. SMS campaigns can also let your audience easily check their transactions and current or previous purchases.
A subscription service allows your customers to anticipate new products or an updated service each month. Having your loyal customers cherish a unique and personalized experience adds customer satisfaction each month. With a memorable yet consistent subscription service, customers are unlikely to unsubscribe from your company mailing list.
Most subscription services are personalized to the customer, creating a curated experience for each customer. From HelloFresh to FabFitFun to Dollar Shave Club, these weekly and monthly subscription boxes have been widely popular and successful with strong customer retention. Usually, when the subscription service or product has arrived in the mail, happy customers frequently post on social media in anticipation of the service or product which also spreads brand awareness. This marketing effort has customers eager to receive a new gift in the mail over and over again.
Engaging with customers on your company’s social media platforms brings added value to your company compared to your competitors. It shows that you care about your customers and want to maintain that trust. Your brand's social media platforms also serves as a customer support service for your customers.Social media campaigns use different social media platforms to engage users about your brand, specifically on a new product or offer.
With the use of social media, there’s strong brand awareness that can attract both new and loyal customers. Customers are eager to receive mentions, notifications, and personal messages from brands that they personally shop from.
Being engaged in social media boosts customer satisfaction which leads to repeat buyers and a higher rate of customer retention. Interaction with users on your online store's different social media platforms customers from having their questions answered or directing them to your website shows consistency. Having a quick response time reminds return customers of their value to your company.
How to calculate customer retention rate in ecommerce
The customer retention rate is one of the most important metrics to growing your ecommerce business. Here's how to calculate the customer retention rate:
Customer Retention Rate formula
Customer retention is integral to your company, so how do you calculate the customer retention rate? Here’s the customer retention formula:
Customer retention = ((EP - CP) / SP) x 100
- EP is the number of customers at the end of the period. CP is the number of customers earned during the period. SP is the number of customers at the start of the period. This is then multiplied by 100.
- For example, your company released an app and there were 1000 users on your app in the beginning. At the end of the month, there were 300 new users, but 100 users stopped returning to your app. At the end of the month (or whatever time frame you choose), you had 1200 users.
- ((1200-300) / 1000) x 100 = 90
- So your customer retention rate would be 90% for that month.
The customer retention rate is important to your company because it reveals how satisfied your current and past customers are with your services, products, and marketing tactics. By focusing on your company’s retention rate, it can ultimately be a cost-effective and more effective strategy to maintain a consistent customer base because they will buy more, promote on social media, and refer your brand to others.
In ecommerce, the churn rate is the rate at which customers end their service or subscription with your company. Churn rates reveal the growth of your company and which customers may be returning or leaving. By analyzing your company’s churn rate, you can discover potential areas that need to be improved such as email marketing tactics or shipping products.The churn rate can be calculated as such:
Churn rate = (NLC / TAC) x 100
- NOC is the number of lost customers. TAC is the total number of customers.
- For example, (10 customers lost / 100 total amount of customers) x 100 = 10% churn rate
Product Return Rate
This metric is for companies that sell products and is a useful tool to calculate why a certain product is returned more frequently than other products. It’s good to keep in mind that your company wants the product return rate to be as low as possible. A high product return rate raises red flags to possible issues in the manufacture, shipping, or production.
The formula is:
PRR = NPSR / TNPS
- NPSR is the number of products sold and returned. TNPS is the total number of products sold.
- For example, (8,000 products returned / 15, 000 products sold) = 35% product return rate.
Repeat Purchase Ratio
To measure customer loyalty, the repeat purchase ratio is the perfect way to measure how often your repeat customers purchase another product from your company again. This calculation can be used to calculate products and subscriptions.
By focusing on repeat customers, in particular, you can evaluate the results closely, which reveals what kind of customers are making repeat purchases and why. This data is useful when focusing on different kinds of customers and what your company produces.
The repeat purchase ratio can be calculated for different time lengths from daily, weekly, monthly, quarterly, and yearly.
The formula is:
RPR = NRC/NTC
- NRC is the total number of returning customers. NTC is the number of total customers. For example, 3k users subscribe to your service at the start of the month and only 2k customers return to use your service by the end of the month.
- (2,000/3,000) = 66.7% is your repeat purchase ratio.
Improve Customer Retention Rates with Automation
Improving your customer retention rate becomes easier with automation. At Alloy, we work with leading ecommerce businesses to grow their business through automation. Here's how we do it:
Built for ecommerce
Alloy was created to integrate with ecommerce websites. Your company can quickly and easily use automated workflows in 5 minutes.
Integrates your favorite ecommerce apps
We have integrated with leading ecommerce apps Klaviyo, ReCharge, Gorgias, Postscript, Smile.io, Shippo, and more. New integrations are available every week. Want to see a specific integration? Contact us and we'll let you know when we can build the integration!
Pre-built workflow templates
We've created a collection of 100+ workflow templates that you and your team can easily use and customize for your ecommerce company. The greatest aspects are that the workflow templates are just a click of a button, they’re free and won't cost you any extra fees.
Customer retention FAQs
What does retention mean?
Retention in ecommerce means how frequently your customers perform a certain action. For example, how often do your customers place an order or return to your ecommerce business?
What strategies can be used to reduce the rate of customer defection?
Strategies to reduce the rate of customer defection or lower rates of customers leaving your online store to competitors is important. A couple of effective ways are listed below:
- Analyze your competitor and pinpoint how why customers may prefer your competitor. From there, pinpoint your company’s strengths, weaknesses, and why your company is better than your competitors.
- Create new incentives for your customers to return to your business
How is ecommerce helpful in customer retention?
Ecommerce in customer retention is key. Sending new campaigns through email strategies or SMS campaigns are integral ways to maintain consistent communication and maintain brand value. Including personalized details for great customer experience is useful for customer retention.
While trying to expand your brand and gain new customers, it is important to show appreciation to your loyal customers. Customer satisfaction leads to repeat customers with higher rates of profit while being cost-effective. Using a variety of different customer retention strategies can improve your company’s brand image and relationships with your loyal customers. To calculate your company’s customer retention rate, there are different ways to analyze and calculate this.
With Alloy, you can easily automate your ecommerce store to send emails and manage orders, freeing up time for you and your team. Alloy has over 100 workflows so you can choose which one to use to improve customer retention and ensure a greater customer experience overall.
Click the button below to request a demo of the Alloy platform.