Understanding the Value of Customer Loyalty and Retention
By Courtney O'Riordan • Last updated: Tuesday Jul 4th, 2023
It’s long been said that the best customers are the ones you already have, and this has never been more true than in the current eCommerce climate.
With the ongoing cost of living crisis and an increasingly crowded eCommerce space, customer loyalty and retention is now a core focus for online retailers.
In this article, we’ll explore the value of retaining customers, and identify the benefits of focusing on a retention strategy in a challenging economic environment.
Why should customer loyalty and retention matter to you?
A successful customer retention strategy can provide stability for businesses and customers during a time of enormous economic uncertainty. It can also:
- Foster customer loyalty
- Reduce customer acquisition costs
- Help a company meet long-term growth targets
With just 18% of companies focusing on customer retention compared to 44% focusing on acquisition, increasing your customer loyalty rates now will give you a competitive advantage in a saturated market.1
Further reading: To learn more about the importance of retention, read our blog ‘The Importance of Brand Identity to Encourage Repeat Customers’.
1. Provides guaranteed income
Although customer acquisition is and should be a priority for any growing business, it doesn’t necessarily provide the financial security of customer retention.
Not only is retaining a customer five times cheaper than acquiring a new one, but it’s also more profitable.2 This is primarily thanks to:
- Customer loyalty: Once you win a shopper’s loyalty, you can count on them to provide a steady stream of income that new customers can’t.
- Improved brand image: Even in times of difficulty, these loyal customers will return to the familiarity and reliability of your brand.
- Higher basket value: Your customers’ basket value will increase as they continue to make repeat purchases — so much so that they will spend an estimated 67% more than new customers.3
Securing a steady and dependable income for your eCommerce site will be hugely important when navigating through unpredictable economic fluctuations.
2. Enhances brand value
It’s important not to underestimate the power loyal customers have in maintaining the success of a brand.
While encouraging customer acquisition can drive short-term results, the long-term pay-off is considerably less than that of retention strategies.
It can be easy to get distracted by the pursuit of creating a viral product on social media. The immediate influx of sales, attention and success is understandably attractive to online businesses.
In spite of the hype, the majority of new customers eventually leave once the buzz has died down, leaving the business with the status of a once-popular social media brand.
Cultivating a band of loyal shoppers prevents this kind of unpredictability as they enhance your brand’s value in a much more natural way.
Their loyalty alone will make others view you as an established business worthy of their custom, and help widen your customer base.
Pro tip: eCommerce social proof and word-of-mouth marketing are perhaps the most powerful tools your customers have to offer. Your loyal customers can become advocates for your brand by spreading their positive reviews to their peers and, in turn, help you acquire new customers.
3. Retention leads to acquisition
A spend-friendly way to acquire new customers is to retain your current customers.
Focus on making your current consumers consistently happy with your products or services so that they continue to return. This will also make prospective customers more inclined to seek out your website and discover why others remain loyal.
Happy and loyal customers work as a form of social proof, encouraging others to check out your brand and instilling confidence in their purchases.
Considerations: Integrate positive reviews in unobtrusive on-site messages via solutions such as Digital Assistant.
Alternatively, promote user-generated content on your social media platforms to present a sense of community surrounding your brand.
Further reading: Discover more ways to add social proof to your site in our article, ‘Your eCommerce site is Using Social Proof All Wrong’.
How to improve your customer retention rates
The value of customer loyalty and retention goes far beyond the number of shoppers on your website; it impacts brand image, marketing campaigns, long-term revenue, and, ultimately, growth. If your eCommerce store is struggling to retain customers, here are some easy-to-implement strategies to help you improve.
1. Individualise your emails
As the industry evolves, you can count on an email marketing strategy as a reliable and effective tactic to nurture your relationship with your existing customers.
The chances are that you already have a sequence of emails in place for the post-purchase customer experience.
Consider upgrading these emails with personalisation techniques. With 91% of customers reporting that they are more likely to shop with brands that offer personalisations, individualising your communications will ensure customers are keen to return to your site.4
Personalising your emails to increase repeat purchases can look like:
- Including the name of the recipient in the subject line
- Delivering discount codes to entice customers back to your site
- Offering information, such as best-use advice, regarding a previous purchase
A personalised email lets customers know that they are individually valued, rather than being just another number to the brand.
In return for your personalisation efforts, you will be more likely to see your customer lifetime value increasing.
2. Simplify the product discovery process
One of the most effective ways to retain customers is by having a fast and accurate Search functionality.
Connecting customers with what they’re looking for is the basis of a happy shopping experience that will convert shoppers into returning customers.
If a site isn’t speeding up the product discovery process with an optimised search bar, then customers won’t have a reason to return.
An optimised search bar should offer:
- Fast and accurate results: Provide relevant results in a fraction of a second to keep customers on-site, in spite of misspellings or incorrect product names. As one Google study suggested, reducing load speeds by just a couple of seconds can increase customer advocacy by an 26%.5
- Visual search: Modern consumers are finding their shopping inspiration on social media platforms. Accommodate this by allowing your shoppers to upload images or screenshots straight from their camera roll.
- Voice search: Offer customers an alternative way to articulate their perfect purchase.
Enhancing the user experience and simplifying product discovery can make the difference between a customer returning to your site or shopping with a competitor.
Making it easy for customers to find products they want to buy is crucial to increasing customer retention.
3. Personalise the on-site journey
Personalisation and retention go hand in hand. Customers don’t just want a personalised experience, they expect it — this means personalising both the on-site journey and post-transaction communications
Whether by adding product page Recommendations or return customer Overlays, there are plenty of ways you can improve your customers’ on-site experience. These tools can connect to a customer’s browsing history and cross-sell and upsell accordingly, ensuring loyal customers feel valued and noticed by your brand.
All of these personalisation efforts will work to satisfy your customer’s need to be recognised as an individual, while building your reputation as a brand worthy of customer loyalty.
4. Reward loyalty
Creating a loyalty program could be vital in your customer retention strategy.
There’s a reason why the most successful retailers are known for their loyalty schemes. Consider Tesco’s Clubcard system or Starbucks rewards: both successfully encourage customers to return through the promise of personalised deals, discounted products or free items.
Take inspiration from loyalty programs you find to be enticing to set up your own.
As you capture data from sign-ups to your program, you’ll be able to follow up with emails that reward a user’s specific behaviour and build loyalty with your customers. This, in turn, will allow you to benefit from the 49% of consumers who agree that they have spent more after joining a loyalty program.6
Pro tip: Be sure to promote your loyalty scheme through on-site email capture Overlays to ensure sign-ups.
Customer retention is the way forward
Maintaining a successful eCommerce business throughout a time of significant uncertainty is daunting.
But placing importance on customer loyalty and retention will help to put your nerves at ease.
Focus your energy on implementing creative ways to keep customers engaged with your brand and returning to your site.
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