BMW, Mercedes, and their likes have ZERO customer acquisition costs, yet those big dogs easily turn one customer into ten. Their secret lies in customer retention.
Customer retention is one of the building blocks in building a successful business, especially an e-commerce empire. According to a report, nearly 82% of businesses find retention five times more economical than acquiring new customers.
And if the idea of customer retention is daunting for you, you must read this on-point guide to embark on a journey of e-commerce success.
Reasons Why You Should Focus on Customer Retention
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The Cost of Retention vs Acquisition
Ideally, your acquisition cost should be zero but it’s not the case for a vast majority of businesses.
Why?
Because the cost of acquiring a customer goes up every day and ads are getting more and more expensive. Even big businesses are spending anywhere between $100 – $500 to get only one customer.
Say, for example, you get 100 buyers a day at $300 each, which means you’re spending $30,000 a month on ads alone. You can continue to allocate that amount to ads if you’re making $80,000 – $100,000.
However, the problem with this model is that the ads will continue to get more expensive. Not to mention other costs, such as manufacturing, sourcing, operations, and keeping a team to run day-to-day business.
This means that your margins will also shrink over time. Plus, given the enormous competition, incentivizing new users to make that first purchase is also recommended, which only further reduces your profitability.
Therefore, it only makes sense to do what other business giants have been doing to overcome this. Where they get a customer once and then maintain a lasting relationship with them to sell them other products over and over again.
Because once someone buys something from you and they get value out of it, they’ll most likely come back for future purchases. That’s how you get a “repeat buyer.”
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Increased Lifetime Value of a Buyer
CLTV or customer’s lifetime value is the maximum money you can get out of a buyer over the course of your relationship. It’s the key metric in the success of ecommerce businesses as retaining a customer is directly proportional to CLTV.
The longer a buyer sticks with you, the more they feel emotionally connected to you, and the more purchases they make, which results in an overall increase in lifetime value.
“Companies that create an emotional connection with their customers have a 306% higher lifetime value.” – Harvard Business Review
5. Improved Profit Margins
Since repeat buyers trust your brand, they’re 60-70% more likely to buy your high-ticket products knowing that they’ll get exceptional services. This behavior is proportional to improving profit margins.
Moreover, you don’t have to heavily discount your products in order for them to buy, which also contributes to sustained profitability.
Strategies for Customer Retention in 2024 and Beyond
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Brand Advocacy and Loyalty
Data shows that about 50.5% of millennials show loyalty to their favorite brand.
So, once you get a loyal customer base, they’ll happily choose you over your competitors. That’s why you see people sticking to one brand for years even if another one is more economical. Their loyalty prevents them from switching over. This explains why most Apple users are far less likely to be swayed by android.
This type of loyalty is the result of a great product coupled with an excellent user experience. The more satisfied your customers are, the more likely they are to become your brand ambassadors and the more people they refer to your business.
This means that the more customers you get, the more reputation you build, and the more testimonials you get resulting in a bigger customer base.
Then you start attracting top talent and more big influencers invite you to their podcasts.
Consequently, your brand gets bigger and so do your launches, which translates into you printing big bucks without increasing your marketing spend.
Plus, your raving fans tend to be more forgiving in the event of subpar service than the first time buyers, which is a great upside of retention model.
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Loyalty Programs
About 70% of consumers would choose a retailer that offers a loyalty program. These programs incentivize them to spend more to solidify their commitment to your business.
The more they buy, the more points they get, which they can use to get different gift card amounts or freebies. According to a survey, around 42% of people buy more only to upgrade their tier in order to get exclusive discounts.
Points, tiers, and exclusive benefits are excellent ways to engage with your clients and get more money out of them.
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Gamification
It’s a popular trend that uses game like elements to increase user interaction with a business. It plays off of our inner desire to compete and win to feel good. A good example of this is Nike Run Club.
It motivates its consumers to set a goal, track their run, and compete with their friends. When they finish a milestone, Nike unlocks a reward (discounts, points, badges, etc) to keep them hooked and coming back to play more.
Some ecommerce tycoons also do “spin the wheel” where you get exclusive offers once a wheel stops. Others may also require you to log in to their app to collect daily coins, which you can use later to avail a discount.
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Personalized Shopping Experiences
As companies race to compete in the booming ecommerce industry, it’s more important than ever to give your prospects personalized shopping experience. According to a report, 77% of buyers are ready to pay more to a brand that offers personalized shopping, which is a testament to its importance in this day and age.
The prime example of this would be Amazon. With over 310 million customers across the globe, it offers every user products catering to their specific needs. Be it the ads they run or product recommendations, everything is tailored keeping in mind a shopper’s personal preferences.
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Implementing User Feedback
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. If you don’t listen to your customers, someone else will.” – Sam Walton – An American Business Tycoon
Customer feedback is the most effective way to learn what may or may not bring a customer back. Therefore, you must pay attention to customer reviews and watch out for any areas you need to improve.
For example, was the buying experience seamless for them? How was the customer service? Are they satisfied with the product? Did it meet their expectations or not?
Reach out to your prospects who have had a bad experience and reimburse them immediately to win them over again. Offering them something complimentary would be a cherry on top. This will create a soft corner for your brand and they’ll most likely want to buy from you again.
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Leverage Email Marketing
Nobody has time to read 100 promotional emails every day. So, if you’re using email marketing, you only stand a chance of getting seen in their cluttered inbox by personalizing your emails. It’s like writing them a letter – just like good old days.
Share your stories, struggles, life lessons that people can relate to. If your emails are all about flaunting your wealth or how you achieved XYZ, a majority of your subscribers won’t relate to that.
The reason being, your success is yours but your struggles are somewhat common. People tend to find solutions in your struggles, so, personalizing is the key to success here.
4. Use “Surprise and Delight” Campaigns
We think we’re completely different from the person next doors, but we are not. From a biological perspective, we all have a similar set of characteristics and a certain way of thinking and feeling an emotion. And factually speaking, humans like getting surprise gifts and rewards.
So, when a buyer feels like you’re giving them something extra along with their purchase, it makes them feel really good. So, saying that this is the best customer retention tactic would be a massive understatement.
You can offer them freebies with their purchase, a token of appreciation for sticking to you, an exclusive, invite-only early access to your soon-to-be-launched product line. This will make them feel special and they’ll most likely reciprocate by buying more from you and also referring you to others.
Another way to pull this off is offering birthday discounts. Who doesn’t love a surprise birthdsay present? I’m sure we all do. So one of the best possible ways to build a real, lasting connection is to greet them on their birthdays with an exclusive discounts.
Sephora does a phenomenal job at customer retention through its Beauty Insiders program. Every loyalty member gets a box of 3,4 goodies as a birthday present, which they can redeem for free. And that’s not all, it also gives 2 – 3 options to choose a birthday gift from.
What more would a buyer want?
5. Create a Customer Community
Humans are tribal in nature and we’re always on the lookout to satisfy our innate desire to “belong somewhere”. That’s why multi-million dollar brands have a tag line “join the exclusive community of thousands others…”
It makes us feel like we’re a part of a special club, which makes us feel good and we tend to associate ourselves with that brand. Overtime, that brand becomes a part of our identity and we keep spending more with that particular brand.
In a Nutshell
Customer retention is all about creating a loyal customer base. This is done by offering excellent customer support, delivering high qulaity products, and constantly improving your services by taking their feedback. You have to understand their pain points and desires first and speak to them on an emotional level for them to show loyalty to you.
Once you take that first step and do this right, it’s only a matter of time before you start printing money.
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