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Having a base of loyal customers is the dream of any eCommerce business owner. The benefits are pretty self-explanatory, but to give you some numbers – increasing customer retention by 5% can lead to an increase in profit as high as 25%. Studies show that 67% of returning customers spend more in their 3rd year of buying from a business than in their first 6 months.

Not to mention, competition in the eCommerce industry has grown substantially in the past couple of years, meaning acquisition costs are up too. So investing in retention is more important than ever.

In this guide, we’ll break down some of the most effective and actionable customer retention strategies for eCommerce businesses.  

How to Calculate Your Customer Retention Rate

Before we dive into it, it’s important to make sure you calculate your current customer retention rate correctly. To do this you will need 3 pieces of data:

1. S= Existing number of customers at the start of the time period
2. E = The number of total customers at the end of the time period
3. N = The number of new customers added within the time period

Once you’ve got those numbers, insert them into the formula:  [(E-N)/S] x 100 = CRR
According to Omniconvert, the average customer retention rate for eCommerce brands is around 30%.

The most helpful metrics to pay attention to when you track your customer retention rate are:

1. Repeat customer rate
2. Purchase frequency
3. Average Order Value (AOV)

Strategies to Increase Customer Retention

1. Post-purchase communication

Since we’re talking about customer retention, it makes sense to focus on what happens after the customer hits the ‘buy now’ button. Let’s say a customer just bought a pair of shoes off your site. As great as the product may be, they probably won’t come back if the customer experience is mediocre, and that includes the post-purchase part of the journey.

Communicating with your customers post-purchase is key to retention. Have you ever heard the phrase pre-parcel anxiety? It’s the stress that shoppers experience after they paid for a product, and while they wait for their package to arrive. It’s caused by feeling ownership of something but not having it in your physical possession.

Considering this, the worst thing you can do is ghost your customers right after conversion. Make sure they get a confirmation message right on the thank you page and send them a more detailed confirmation over email. Notify them when their tracking number is created, when the order is in the mail, and when it arrives.

Whether you opt for push notifications or emails, ongoing communication will make your customers feel more at ease until their package arrives. Plus, it will strengthen trust and transparency in your brand.

2. Automate When Possible

Automating processes will enhance the customer experience and make life much easier for you. The post-purchase communication we just discussed, for example, can be automated through tools like Mailchimp or Klaviyo.

Another step to make things easier for you and your customers is to automate returns. According to Sendcloud’s report, the majority of customers will check return policies before placing an order. When you automate eCommerce returns, you can make a workflow that makes processing a return a breeze.

For example, a customer gets in touch to return an item. In real-time, AI bots pick up the customer’s intent, check if their products are eligible for a return, update your CRM, CMS, and courier, and send the customer a prepaid return label. That’s much more efficient than chatting to a customer service representative, then having to wait for days until the return request is processed.

Of course, investing in a number of different automation tools can be costly. Deciding what you want to prioritize and invest in really depends on the size and churn of your business.

3. Start a loyalty program

Loyalty programs are a great way to increase your CRR because they motivate customers to purchase more often to earn rewards. So it’s a profitable exchange for both you and the customer, where everyone benefits from the repeat purchases.

Ultimately, there is no limit to what can be done when it comes to loyalty programs so you can unleash your creativity. You can encourage customers to take part by giving them welcome points when they create an account, for example. You could start rewarding them on their second purchase, or after they spend a set amount of money.

Not only will you increase your revenue that way, but you will also up customer loyalty and engagement. 

4. Go all in on email marketing

Speaking of customer engagement, email marketing plays a critical role in converting and retaining customers. Shopify data shows that in comparison to other marketing channels, email has the highest conversion rate at 4.29%, followed by search.

However, it’s vital that each message you send adds value to your customer’s experience. Otherwise, you run the risk of ending up in the spam folder. 

A great way to start is with follow-up emails. For example, a week after a customer’s first purchase you can send a thank you email, and make it even more impactful by recommending products related to the initial purchase. After the initial follow-up, make sure to send personalized messages regularly, to notify shoppers about promotions, new products, or upcoming sales.

If you have any products that are perishable, consumable, or otherwise have a set lifespan, it’s a good idea to send well-timed emails to keep your brand top of mind when the customer runs out and needs to re-purchase the product.

Not all emails have to be promotional. You can leverage email marketing to send customers valuable, relevant content. You can curate links to articles, how-to guides, or videos that might resonate with your customers, as part of your newsletter.

5. Nurture your customers on social media channels

Social media has enabled brands to connect with their customers on a daily basis and get real-time feedback from them. During the customer’s first purchase, or through email marketing, you can encourage them to follow your social media channels.

Social media campaigns that engage your followers and create a sense of community around your brand have proven to be one of the best strategies to retain customers.

Some ways to achieve that include:

• Hold contests on special occasions
• Share relevant and useful content your customer base would be interested in 
• Engage with your customers through your posts’ comment sections, and answer all direct messages quickly
• Share exclusive discounts and offers only for your social media followers

6.  Leverage user-generated content

User-generated content is a brilliant retention strategy for two reasons – it makes your customers feel recognized and appreciated when you post their content to your brand account and you get quality content and higher engagement. It’s a win-win situation.

You can start by creating a hashtag with your brand name or another keyword that resonates with your brand and ask your followers to post content with that hashtag.

An example of a company that made stellar use of UGC is GoPro. They recently put out a #GoProSnow challenge. The best images were featured on GoPro’s Instagram page which has around 17 million followers – a great way to gain visibility for their customers.  

7. Personalize the customer journey

The entirety of the customer journey should be personalized in the same way your email marketing and customer support interactions are. Your customers should feel as though you understand exactly what they need even before they do. 

There are various ways to leverage personalization in your customer journey:

• Use a CRM tool to segment your customers based on their demographics, online behavior, and pain points. Each of these groups can be targeted with custom messaging and emails. 
• Offer personalized recommendations on your homepage or other product pages.
• Identify customers who have abandoned their carts or haven’t made a purchase in a long time. Send personalized emails or launch a retargeting campaign to re-capture their attention.

8. Offer a subscription plan

Subscription plans aren’t suitable for every eCommerce business, but if you sell a product that’s consumable, or that otherwise needs to be regularly restocked, subscriptions can be an incredible source of recurring revenue.

Traditionally, subscription plans were reserved for supplements, food, and beauty products. However, with a bit of creativity, you can come up with a subscription plan for almost any type of product. To be successful, a subscription plan needs to offer two things:

• Personalization – One of the main benefits of the longevity of a subscription plan is that it allows the brand to get to know the customer really, really well. Over time, you can reach high accuracy in your personalization.
• Value – It’s not the overall price but rather the value for money that is the key factor that makes subscribers stick around.

Take subscription-based cat litter brand Pretty Litter, for example. They market themselves as the world’s smartest cat litter because the crystal changes color when your cat might be having an illness, making it easy to tell when something is wrong with the cat’s health. The company’s Head of Business Intelligence, Joe Barger, suggests what you actually gain from subscribing to Pretty Litter’s service is:

• Convenience – no need to worry about when to refresh the litter or carrying heavy bags around
• Peace of mind – a daily check of whether your cat is healthy

Once you figure out how you can offer your customers value through a subscription plan, the sky is the limit.

Final Thoughts

Yes, reaching new audiences and capturing new customers is exciting, but for an eCommerce business, retaining existing customers ultimately results in greater ROI.
Focus on building relationships with past customers through email marketing and social media, pay attention to their needs and preferences, and consistently think of ways to make them feel seen and appreciated. Your customer retention strategies will have a substantial impact on your business growth.