Customer retention is fundamental to success in ecommerce.
While customer acquisition is the primary way in which you grow your customer base, customer retention is how you will sustainably grow your revenue.
In fact, effective retention is necessary just to make a profit in many ecommerce markets due to the ever-rising costs of customer acquisition.
For one women's fashion brand, repeat customers have spent more than 4 times as much as one-time shoppers, on average.
But repeat customers aren't just more profitable in the long-term: they're often more profitable right now. For the same retailer, repeat customers have an average order value over 14% greater than those who only bought once.
But not all customers go on to make multiple purchases. In reality, it's common that most customers only ever make the first purchase.
This graph illustrates the percentage of total shoppers for this brand who have reached any given number of purchases.
Inherently, 100% of shoppers have made 1 purchase. But 34% have made at least 2 purchases, and only 18% have made 3 or more purchases.
Across retailers, we see that the greatest drop-off in customer retention occurs between the first purchase and the second purchase.
Unlocking customer lifetime value starts with maximizing repeat customer rate.
We met with Karen DiClemente, the Senior Strategy Director at Listrak, to discover how ecommerce merchants can retain more first-time customers.
Due to the proliferation of ecommerce platforms like Shopify and BigCommerce, there has never been more competition among D2C brands.
And social media platforms have made it easier than ever to get in front of potential shoppers.
Together, the two phenomena produce one major result - noise.
Consumers' inboxes, social media feeds, and other screen space is consistently being bombarded by a variety of brands who want to gain their attention - either to convert them to a customer or drive a repeat purchase.
As a result, it can be difficult to capture a shopper's attention long enough for her to make a purchase. So when you do, you need to make it count.
Customer churn is often likely the result of indifference, not aversion.
Above, we see the subsequent percentage of shoppers to make an additional purchase, by the number of days since their preceding purchase for a women's athletic apparel brand.
Essentially, it indicates that over 27% of those who made a purchase later made another purchase. However, only 12% purchased again 30 days or later following their preceding transaction.
Recency is absolutely central to retention - customers are most likely to repurchase soon after a purchase.
It's pivotal to keep this in mind when developing your customer retention playbook. Recency is the key.
Unfortunately, it's not enough to recognize that customer retention is important. You need a retention playbook, a formulated and mechanized plan of touch points to drive future activity from first-time buyers.
The first message after a purchase is a post-purchase thank you message. This touch point confirms the order, sets expectations for shipment or delivery, and should point shoppers to learn more about your brand.
Karen DiClemente also recommends providing product instructions, either in the post-purchase thank you, or as a separate message. This could include tips on how to use or care for the product. Think less of a product catalog and more of a recipe book.
Once the customer has received her purchase, prompt her for a rating or review of the product. Emphasize that you are interested in her feedback, and want to use it as input for future products and not just as a selling tool.
At this point, we move past the post-purchase phase and onto the future customer relationship. This is when you should nurture shoppers by providing loyalty opportunities and product suggestions, perhaps pointing to related products or new product launches.
At a certain point, you should transition more toward a win-back focus. Recency is key: a customer who purchased yesterday is far more likely to repurchase than a customer who most recently purchased a month ago.
Karen DiClemente highlights specifically timed incentive offers or a replenishment message in the case of consumable products. This stage is centered around driving engagement and preventing customer churn.
Now that we've walked through some of the core intervals and touch points of a customer retention playbook, let's cover some best practices.
Recency is crucial when it comes to retaining customers. You should engage with shoppers while they're engaged with you.
It all begins with the typical post-purchase messaging. But once the shopper has received her purchase, you should transition to a nurturing series and eventually a win-back campaign.
Keep the customer engaged with your brand, and strive to lay the groundwork and ease the path from one purchase to another.
Shoppers like to feel as though you're talking to them - and the truth is, personalization drives results.
You can use a customer's purchase and returns history to inform how you engage with her in the future.
This could include product tips, strategically placed incentives, or product recommendations. And again, the key is timing the messages to meet the customer's needs.
While sophisticated personalization capabilities are incredibly valuable for this, personalized messaging doesn't have to be too complex.
The main purpose of personalization is relevance. We want the shopper to feel as though we are speaking to her, not simply to our customer base.
Customer loyalty is fueled by an ingrained customer relationship, and a high level of engagement.
Leverage loyalty opportunities in conjunction with purchase recency: re-engage current shoppers with the goal of creating loyal, repeat customers.
Remember that customer loyalty is more than points and discount codes.
Loyalty is about aligning with the needs and interests of your customers, making them feel heard and involved in a meaningful community, and providing messages and incentives that are relevant to them.
Continue to be relevant to shoppers, and they'll continue to engage with you.
Customer retention is pivotal in ecommerce. Repeat customers generate more revenue, and more profitable revenue, than one-time shoppers.
As we have seen, recency and relevance are significant drivers of customer retention.
The path from the first and second purchase is one of greatest hurdles in the customer lifecycle.
By maximizing your Shopify repeat customer rate, you can dramatically influence customer retention, loyalty, and customer lifetime value.
