In this article, we look at some of the ways online retailers can improve customer retention.
Customer retention makes a big difference for retailers. According to stats from Marketing Metrics, the likelihood of selling to an existing customer is 60-70%, and the same figure for new customers is 5-20%.
It’s therefore important to focus on keeping customers happy, providing a great service, and giving them reasons to come back and buy again.
Great Customer Service
Customer service interactions can be about dealing with customers when things go wrong, but it should be seen as an opportunity to leave a good impression with customers by dealing efficiently with their questions and ensuring that they end up being happy with your service.
Good customer service makes a big difference. Unhappy customers who have experienced poor service will not buy again, and they may tell others about their negative experience.
Zendesk found that shoppers who had a bad customer service interaction with a company were 50% more likely to share this on social media than those who had good experiences (45% v 30%).
This affects customer retention too. 42% of customers bought more after a good customer service experience, while 52% didn’t buy again from a company with poor service.
Good customer service can be about things like smooth handling of returns, responding quickly to customer contacts, and making sure problems are solved with the minimum of hassle.
Easy Repeat Purchases
Making it easy for customers to checkout means shoppers are more likely to return after their first purchase.
A smooth checkout process that works for all customers, new and existing, is the best way to achieve this.
Also, if you can encourage customers to create an account and save their delivery and payment details, repeat purchases are much smoother.
Email Strategy for Customer Retention
A strong post-purchase email strategy helps to keep retailers in touch with customers, helps to keep them engaged and and can improve retention rates.
These include order confirmations, replenishment emails, sales notifications, and win-back emails for customers who haven’t made a purchase in a while.
Identify Your Most Loyal Customers
There’s a lot that online retailers can do with data to improve customer retention rates.
One important step is to identify your most loyal customer segments, as this helps to gain a greater understanding of their behavior, which can inform future strategy.
The RFM model is one way to do this. It looks at the following:
- Recency. Looking at how recent interactions with customers helps you to distinguish between active and inactive customers.
- Frequency. How often do customers purchase from a retailer?
- Monetary value. How much do they spend?
Image credit: Mike Baxter via Econsultancy
It’s based on a simple theory, that customers who have made a recent purchase, and frequently spend more than average are more likely to buy again.
Armed with this information, retailers can segment these higher value customers, and target them more effectively. For example, Promotions could be tailored to them, or if they seem to be buying less often, they can be tempted back with an offer or two.
Use of Personalization
Data can also be used to promote customer retention through personalization; of site content, email content, promotions and product recommendations.
It can make repeat purchases easier for customers. Here’s an example from Tesco. Knowing the shoppers’ favourites and making intelligent recommendations helps the shopper fill their basket up more quickly.
It can also help to make emails more relevant, with product recommendations tailored according to the customer’s preferences and purchase behavior.
Reward Customer Loyalty
If customers feel that their custom is valued, they’re more likely to be loyal.
This can be done in a number of ways, by segmenting loyal customers and tailoring content and offers to them, or through a loyalty program.
Net a Porter’s EIP (extremely important person) scheme is one such example.
It’s open to people who spend a lot on the site, and provides perks like personal shoppers, access to private sales, new collections and more.
Some of the best loyalty programs are relatively simple, with clear rewards tied to purchase, which encourage customers to buy regularly.
For example Starbucks Rewards offers free drinks for regular customers, as well as speeding up checkout and offering features like personalization of orders.
Delivery Performance and Options
Delivery is important to shoppers, and can have a big impact on customer loyalty.
Customers have high expectations around delivery, and retailers need to provide choice around price and speed, as well as providing a reliable service.
Performance matters a great deal. If you can deliver goods on time as promised, customers will be confident enough to order again and again.
This is a challenge for retailers, as shipping is often outsourced to couriers and postal services and beyond their direct control. It’s important to choose couriers wisely and to carefully monitor performance levels.
Choice around delivery also matters. Customer preferences vary – some prioritise price, others speed and convenience.
If shoppers know that you can deliver items quickly, or cheaply, then this gives them a reason to make repeat purchases.
Apps for Customer Experience
Mobile apps can help retailers to appeal to their most valuable customer segments.
Downloading an app takes some time and effort, and this suggests some degree of commitment to the retailer.
For the retailer, apps allow them to tailor the experience to the customer, and the result is that apps still account for a high percentage of online sales.
The best retail apps make it easier for customer to buy thanks to saved details, and a user experience which is tailored to their device.
Delivery subscriptions are generally a loss-leader for online retailers, but they can be very influential in persuading customers to make repeat purchases.
It fits on with the reciprocity principle, one of Dr Robert Cialdini’s Six Principles of Influence.
This is one of the reasons for the success of Amazon Prime, and why retailers like ASOS have introduced similar schemes.
It’s also good value for shoppers. For example, ASOS Premier Delivery costs $19 but pays for itself within two orders, and customers who order more make some impressive savings.
Since there’s a friction to cancel and go elsewhere, and customers want to make the most of their subscription, services like this also mean that these sites become the first port of call for customers when they need something.
Have a Positive Social Impact
Customers feel better when buying from companies that have a positive social or environmental impact.
Indeed, a Nielsen survey found that 55% of consumers are willing to pay extra for products or services from companies that have dedicated social impact plans.
If they feel good about a purchase, they’re more inclined to spend, and to keep coming back for more.
For example, Patagonia has donated 1% of its profits to environmental causes since 1985, while clothing retailer Everlane is ‘radically transparent’ about its pricing, ensuring that factories it uses are ethical and workers are paid fairly.