eCommerce Customer Retention: Strategies & Tips to Succeed

Guide to eCommerce Customer Retention (with Statistics & Strategies)

Guide to eCommerce Customer Retention blog image

eCommerce retention is the process of encouraging customers to make repeat purchases on an online store. It demands strategies like loyalty programs, personalized communication, and post-purchase engagement to improve customer loyalty and generate ongoing business.

In this guide, we will learn how to measure eCommerce retention and the best strategies to increase yours.

Takeaways
  • Repeat customers are valuable because they guarantee recurrent revenue
  • Special treatment, like loyalty points and exclusive content, increases retention
  • Key metrics include retention rate, customer lifetime value, and monitoring churn
  • Some of the biggest challenges include increased competition, cart abandonment, customer expectations, etc.

What Is eCommerce Customer Retention?

eCommerce retention is the effort to bring customers back for more purchases. It is mainly about giving a reason for people who have bought something once to choose the same online store again.

The idea is to maintain a strong connection and ensure customers keep selecting that particular platform whenever they decide to shop.

How Do You Measure Customer Retention in eCommerce?

In eCommerce, we measure customer retention by using a simple formula called the Customer Retention Rate.

This rate tells us how many of our existing customers keep coming back to our online store.

How to Measure Customer Retention in eCommerce

Customer retention is typically measured using the Customer Retention Rate (CRR).

This rate allows eCommerce businesses to determine what percentage of their existing customers continue to make purchases over a specific period, usually a year.

To calculate the Customer Retention Rate, you need the following information:

  1. The number of customers at the start of the year.
  2. The number of new customers acquired during the year.
  3. The number of customers at the end of the year.

How to Calculate the Customer Retention Rate for Your Business

The formula for calculating the Customer Retention Rate is:

Customer Retention Rate = ((Number of Customers at the End of the Year – Number of New Customers Acquired During the Year) / Number of Customers at the Start of the Year) x 100

Example Calculation of Customer Retention Rate

Let’s consider an example for an online clothing store:

  • At the beginning of the year, the store had 1,000 customers
  • During the year, the store acquired 400 new customers
  • At the end of the year, the store had 1,200 customers

Using the formula, we can calculate the Customer Retention Rate for this online clothing store:

Customer Retention Rate = ((1,200 – 400) / 1,000) x 100 = (800 / 1,000) x 100 = 80%

In this example, the online clothing store achieved a Customer Retention Rate of 80% for the year. This means that 80% of their existing customers continued to make purchases throughout the year.

A high retention rate indicates that a significant portion of customers remains loyal and continues to contribute to the store’s revenue.

On the other hand, a declining retention rate may signal the need for strategies to improve eCommerce customer satisfaction and engagement to retain more customers.

Other Essential Customer Retention Metrics to Track

In addition to the Customer Retention Rate, there are several other metrics to keep an eye on when it comes to customer retention in eCommerce.

These metrics help you get a more complete picture of your business’s health and can guide your strategies for keeping customers coming back.

  1. Churn Rate: Churn Rate is the opposite of retention. It tells you how many customers you have lost during a specific time. To calculate it, divide the number of lost customers by the total number of customers at the beginning of the period. A high churn rate is a red flag, indicating that many customers are leaving, and you need to investigate why.
  2. Customer Lifetime Value (CLV): CLV shows how much money you can expect to earn from a single customer over their entire relationship with your business. A high CLV means each customer is highly valuable to your eCommerce store, so it’s important to focus on retaining them.
  3. Repeat Purchase Rate: This metric measures how many of your customers make more than one purchase. It’s a direct indicator of customer loyalty. The higher the repeat purchase rate, the better your retention strategies are working.
  4. Net Promoter Score (NPS): NPS measures how likely your customers are to recommend your eCommerce store to others. Satisfied customers tend to refer friends and family, contributing to better retention.
  5. Customer Feedback: Listening to customer feedback is essential. It helps you understand their needs, concerns, and preferences. Analyzing customer feedback can guide improvements in your products, services, and customer experience.

What Causes Low Customer Retention in eCommerce Stores?

Low customer retention is a significant problem for many eCommerce stores.

Understanding the causes is the first step in addressing and improving customer retention:

  1. Poor Customer Experience: If your online store is challenging to navigate, slow, or does not provide essential information, customers may get frustrated and look for alternatives. An unresponsive or confusing website design, complicated checkout process, or lack of customer support can also destroy user experience.
  2. Lack of Personalization: Customers appreciate when businesses understand their preferences. If your eCommerce store does not offer personalized product recommendations or relevant content, customers may not feel a connection with your brand, reducing their loyalty.
  3. Competitive Market: The eCommerce market is highly competitive, with many options available to consumers. If you do not stand out or offer something unique, customers may switch to competitors for better deals, products, or experiences.
  4. Inadequate Communication: Consistent communication is vital for customer retention. If your store does not keep in touch through email, updates, or promotions, customers may forget about your brand and shop elsewhere.
  5. Lack of Trust: Customers need to trust your online store to make repeat purchases. Security concerns, unreliable shipping, or unclear return policies can destroy trust and retention.
  6. Unsatisfactory Products: Low-quality products, frequent stockouts, or inaccurate product descriptions can leave customers disappointed. This often leads to them seeking better alternatives elsewhere.
  7. Ineffective Customer Support: If customers find issues and your customer support does not provide timely and helpful solutions, they may feel undervalued and decide to shop elsewhere.

Why Is Customer Retention Essential for eCommerce Businesses?

Customer retention is important for the success of any eCommerce business. Here’s why it matters:

  1. Boosts Revenue: Repeat customers spend more than new ones. They are already familiar with your brand and trust your products, making them more likely to make larger purchases.
  2. Reduces Marketing Costs: Getting new customers is more expensive than retaining existing ones. Loyal customers require less marketing spend because they already know and like your brand.
  3. Word of Mouth: Satisfied, loyal customers become brand advocates. They refer friends and family to your store, helping you get new customers without extra marketing effort.
  4. Valuable Feedback: Repeat customers can provide valuable feedback, helping you improve products and services. Their insights can guide you to meet their evolving needs effectively.
  5. Stability and Predictability: A strong customer base provides a stable and predictable revenue stream, making it easier to plan and grow your business.
  6. Competitive Edge: High customer retention gives you a competitive advantage. It is harder for competitors to lure away loyal customers when they are content with your store.
  7. Long-Term Relationships: Building long-term relationships with customers can lead to higher CLV, as we have already discussed. As customers stay with your store, their CLV increases, contributing to sustainable growth.
  8. Resilience: In times of economic uncertainty, businesses with loyal customer bases tend to weather the storm better. Repeat customers keep revenue flowing even when getting new customers becomes challenging.

Customer Retention Statistics and Trends

Understanding customer retention statistics and trends is important for eCommerce businesses, helping you to make better decisions.

What Is the Average Customer Retention Rate for eCommerce Stores?

The average eCommerce customer retention rate hovers around 30%. This means that, on average, 30% of customers return to make a second purchase from an online store.

However, you have to consider that the average customer retention rate for eCommerce stores varies across industries and businesses. It is important to gather enough data to determine your own niche average rate.

How Much Does Customer Acquisition Cost Compared to Customer Retention?

Customer acquisition can be more expensive than customer retention for eCommerce businesses.

Generally, it is 5 to 25 times more expensive to get a new customer than to retain an existing one.

Here are a few reasons why customer acquisition tends to be pricier:

  1. Marketing Costs: Attracting new customers often requires big marketing investments. This includes expenses for advertising, promotions, and outreach efforts.
  2. Initial Engagement: Convincing someone unfamiliar with your brand to make their first purchase usually demands more resources and effort than convincing a previous customer to return.
  3. Conversion Challenges: New customers are further up the sales funnel and may need more convincing before they commit to a purchase. This requires additional marketing and sales efforts, as we saw.
  4. Customer Education: Educating new customers about your products, brand, and values can be time-consuming and costly. Repeat customers are already familiar with your offerings.
  5. Competition: The eCommerce market is highly competitive. Attracting new customers often involves competing against other businesses, which can drive up acquisition costs.

On the other hand, retaining customers generally costs less because they already know your brand and products.

Existing customers are also more likely to respond positively to personalized marketing efforts and points programs, requiring fewer resources for convincing them to make a repeat purchase. All these factors are responsible for customer loyalty in eCommerce.

What Is a Good Customer Retention Rate for eCommerce Stores?

A good customer retention rate for eCommerce stores typically goes higher than 40%.

This means that you are above average and, out of all your customers, around 40% of them come back to shop with you again.

What Is a Bad Customer Retention Rate?

A bad customer retention rate is anything below 20%.

If less than 20% of your customers return for additional purchases, it is a sign that your eCommerce business might be struggling to retain its customer base.

Low customer retention rates can indicate that customers are not satisfied with their shopping experience, that you are not effectively engaging them, or that you’re losing them to competitors.

What Is a Realistic eCommerce Customer Retention Rate?

A realistic eCommerce customer retention rate typically falls between 20% and 40%, being 30% the average rate.

Best Strategies to Improve eCommerce Customer Retention

Here are ten effective eCommerce strategies to improve customer retention:

Strategy #1: Personalized Email Campaigns

Personalized Email Campaigns

Source: Campaign Monitor

Implement personalized email marketing campaigns to target customers with product recommendations, exclusive offers, and content that matches their preferences and purchase history.

Personalization increases engagement and encourages repeat purchases.

Strategy #2: Loyalty Programs

Loyalty Programs Lover

Source: MAC Cosmetics

Develop and promote a loyalty program that rewards customers for their repetitive purchases.

Offer incentives such as discounts, early access to sales, and exclusive perks for loyal customers.

Strategy #3: Exceptional Customer Support

Exceptional Customer Support Hotels.com

Source: Hotels.com

Provide outstanding customer support that is readily available to address inquiries, concerns, or issues.

A prompt and helpful eCommerce customer service team can turn dissatisfied customers into loyal advocates.

Strategy #4: Product Recommendations

Product Recommendations Sephora

Source: Sephora

Utilize data analytics to suggest relevant products to customers based on their previous purchases and browsing history.

Cross-selling and upselling can increase the average order value and customer satisfaction.

Strategy #5: Post-Purchase Engagement

Post-Purchase Engagement Moo

Source: Moo

Engage with customers after their purchase by sending follow-up emails.

Request feedback, reviews, and suggestions.

Listening to your customers and acting on their input demonstrates your commitment to their satisfaction.

Strategy #6: Abandoned Cart Recovery

Abandoned Cart Recovery Bearsvile soap company

Source: Bearsville Soap Company

Implement an abandoned cart recovery strategy through email reminders.

Offer incentives like discounts, free shipping, or bonus items to entice customers to complete their purchases.

Strategy #7: Subscription Models

Subscription Models amazon

Source: Amazon

Introduce subscription options for products that customers frequently purchase, such as consumables or items with a regular replacement cycle.

Subscriptions provide a convenient and predictable shopping experience while guaranteeing recurrent revenue.

Strategy #8: Retargeting Ads

Use retargeting strategies on ads to reach customers who have previously visited your website or made purchases.

Retargeting Ads airbnb

Source: Airbnb

Display personalized ads to remind them of your products and promotions.

This keeps your brand top-of-mind and encourages returning visits.

Strategy #9: Social Media Engagement

Social Media Engagement Zara

Source: Zara

Maintain an active and engaging presence on social media platforms.

Interact with customers, respond to comments, and share user-generated content.

Building a community around your brand provides a sense of belonging and encourages customers to return.

Strategy #10: Mobile Optimization

Mobile Optimization amazon

Source: Magenest / Amazon

Make sure that your eCommerce website is fully optimized for mobile users.

With the increasing use of smartphones and tablets for online shopping, a mobile-friendly site provides a seamless and convenient shopping experience.

Biggest Challenges in eCommerce Customer Retention:

eCommerce customer retention is important, but it comes with a unique set of challenges:

  1. Increased Competition: New businesses are continually entering the market, making it harder to stand out and retain customers.
  2. Cart Abandonment: Many shoppers add items to their carts but leave without completing the purchase. A high shopping cart abandonment rate is a common challenge for eCommerce businesses.
  3. Customer Expectations: Customers today have high expectations. They demand personalized experiences, quick deliveries, and seamless interactions. Meeting these expectations can be challenging.
  4. Data Management: Effectively managing customer data for personalization and targeted marketing is complex. Without the right tools and strategies, the numbers you gather can be useless.
  5. Channel Proliferation: eCommerce businesses need to engage with customers across various channels, from email and social media to mobile apps. Coordinating these efforts can be overwhelming.

Top Tools for Monitoring eCommerce Customer Retention:

Monitoring and improving customer retention in eCommerce requires the right tools. Here are some top options:

  1. Google Analytics: This powerful tool provides valuable insights into customer behavior on your website. It helps you understand how users interact with your site, what content they engage with, and where they drop off.
  2. Kissmetrics: Kissmetrics is designed to help you track user interactions. It offers insights into customer retention, allowing you to understand the customer journey better.
  3. Mixpanel: Mixpanel is a good analytics tool that enables in-depth user behavior tracking and analysis. It’s particularly useful for understanding how users engage with your platform.
  4. Zendesk: Zendesk offers customer support and engagement tools. It helps you provide excellent customer service.
  5. MailChimp: Email marketing is a powerful tool for retaining customers. MailChimp allows you to create and manage email campaigns, making it easier to engage your audience.
  6. OptinMonster: Reducing cart abandonment is a relevant retention strategy. OptinMonster helps by allowing you to create targeted campaigns to re-engage users who have abandoned their carts.
  7. Rejoiner: Rejoiner focuses on email marketing to win back and retain customers. It is especially useful for reaching out to users who haven’t made a purchase in a while.
  8. Retention Science: This tool uses artificial intelligence to predict customer behavior. It provides personalized product recommendations, making it easier to keep customers engaged.
  9. LoyaltyLion: Loyalty programs are effective for customer retention. LoyaltyLion helps you create and manage loyalty programs to reward and retain your most loyal customers.
  10. Yotpo: Yotpo offers solutions for collecting and displaying customer reviews, which can boost trust and credibility. It also provides tools for creating and managing loyalty programs.

When is the Best Time to Shift Focus from Customer Acquisition to Retention?

The timing for shifting focus from customer acquisition to retention depends on the following factors:

  • Early Stage: In the early stages of your eCommerce business, it is essential to invest in customer acquisition to build your customer base and gain brand recognition.
  • Break-Even Point: Once you have reached a point where your customer acquisition costs are balanced by revenue, you can start allocating more resources to retention.
  • Data-Driven Insights: Use data to identify when customer retention strategies can yield the best results. This could be when you notice customer churn or declining engagement.
  • Post-Purchase: Immediately after a purchase, it’s vital to engage customers with post-purchase emails and offers to kickstart retention.
  • Continuous Effort: Customer retention is an ongoing effort. Keep monitoring metrics, implementing strategies, and adjusting as needed.

Conclusion

eCommerce retention is not an easy task.

You need to plan and constantly evolve how you are dealing with your primary customers.

A good way of doing it is by providing a good navigation experience. You can start by selecting one of the hosting services we included on our list of the Best eCommerce Hosting Providers.

This way, more than focusing on digital marketing strategies, your eCommerce website design and structure will perform greatly too.

Next Steps: What Now?

  • Optimize Your eCommerce Website: Ensure your eCommerce website is well-optimized for SEO to increase visibility and drive more profitable traffic.
  • Secure Your eCommerce Domain: Secure a domain name that reflects your eCommerce niche, an important step for building a strong and profitable online presence.
  • Affiliate Marketing for eCommerce: Explore affiliate marketing to expand your reach and increase sales through profitable partnerships for your eCommerce business.

Learn More About eCommerce

Frequently Asked Questions

How do I keep customers coming back to my eCommerce site?

To keep customers returning to your eCommerce site, focus on providing exceptional customer experiences. This includes offering high-quality products, seamless navigation, a user-friendly interface, and excellent customer support.

Don’t forget to regularly update your content and products to keep your site fresh and appealing.

You can also implement loyalty programs, personalized recommendations, and email marketing to engage past customers.

What is the one key of customer retention?

The key to customer retention is building strong relationships with your customers.

Understanding their needs, providing value, and consistently delivering outstanding service is relevant in any market.

Happy customers are more likely to remain loyal and spread positive word-of-mouth, which contributes to long-term retention.

How do I retain customers on Shopify?

Retaining customers on Shopify demands multiple strategies.

Optimize your website for a simple shopping experience, provide quality customer service, and offer incentives like discounts, loyalty programs, and subscription options.

Leverage Shopify apps for email marketing, loyalty programs, and other customer engagement tactics to increase retention.

What is a good customer retention rate on Shopify?

A good customer retention rate on Shopify can vary by industry, but generally, a retention rate of 20-40% is considered healthy.

This means that 20-40% of your customers return to make repeat purchases.

Continuously work to improve this rate by using marketing retention strategies.

How do you solve customer retention problems?

To address customer retention issues, start by identifying the specific problems. Conduct customer surveys, analyze data, and seek feedback.

Once you understand the pain points, implement solutions such as improving customer support and product quality, offering better incentives, and refining your marketing strategies.

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