Increase customer retention rate ecommerce

If I were to bump into myself 10 years ago, when I started one of my first ecommerce projects, I’d give myself one single piece of advice – concentrate much more on the retention rate of the clients, rather than on attracting new ones! And also buy Bitcoin – but this is another fantasy I have. This article will concentrate on hands-on experiences, examples, and “how to’s” in order to improve the retention rate of your awesome ecommerce business.

The What and the Why

In a nutshell, the customer retention rate is the total number of customers you are able to keep during a period of time with respect to the number you had at the start of your period.

There is a popular quote marketer and ecommerce VPs are using – “your next best client is the one you already have”. Why is that? Plenty of studies show that, whatever the industry you’re into, it’s much cheaper and much more efficient to keep your already loyal customers close to you, rather than attracting new ones. Basically, Customer acquisition costs far outweigh customer retention costs. 

One study by the Harvard Business School found that increasing retention rates by a mere 5% can catapult profits by as much as 95%. Keep this in mind when running after new clients while ignoring the already established ones.

(How to calculate Customer Retention Rate)

Customer Retention Rate (CRR), more important than ever

As Amazon’s CEO Jeff Bezos once observed, customers tend to be loyal and really like you “right up until the second somebody offers them a better service”. What’s your job, as a marketer and/or store owner? To not give your clients reasons to leave you, or to give them plenty of reasons to stay with you. 

With the volatile situation worldwide due to COVID-19, the customer retention rate is more important than ever.

As people have more time on their hands, due to working from home, they tend to browse the online offers much more and thus the chances that they’ll find a better offer/service than yours increase.

In this Insight, we’ll take a closer look at the value of repeat customers and list tactics you can use to reduce customer churn.

  1. Start by setting correct expectations

Like in any relationship, everything starts with setting the right expectations. That’s why my ex is my ex and not my actual – but this is, yet again, another story to tell. 

Explain, in a very transparent manner, what happens after a sell – your client will receive a confirmation eMail, a discount code, or a support representative will accompany you on the wholesale process.

Make sure to let your client know, from the start, that you are available for him all the time and that you welcome his questions.

The post-conversion experience is of paramount experience, even if some ignore it. It will be able to solidify the customer relationship.

One of the most effective ways to increase retention rate is that of an experience-driven engagement event; this will reveal features and capabilities to the client that may have gone initially unnoticed. These can (and will) improve their experience in the future and drive up the usage of an enterprise service. 

So, in a nutshell – start the customer relationship on the right foot, managing correct expectations and guiding your clients toward the best shopping experience ever.

  1. Maintain customer relationship

Once you’ve made sure the first order from a client was a success, don’t stop there, passive, just praying to the skies for him to return. Be proactive. I guess you’ve heard this hundreds of times.

Your resources and energy should go in maintaining engagement with your existing customers, building up a relationship with them. 

Coming back to a real-life relationship (and my ex), just like any strong personal friendship, successful (or profitable) long term customer relationships require ongoing communication. You may want to send regular non-invasive and interesting newsletters.

(This guy is definitely going to return for more business!)

If you represent an ecommerce business, send your clients customized and personalized discounts, or let them know of a new peripheral that may fit their already bought item. Let them know you are thinking at them and are working FOR them.

If you are a service or information provider, invite existing clients/users to a complimentary educational Webinar – they may appreciate the gesture, especially nowadays, during the (partial) lockdown. 

What should you remember constantly?

Every interaction adds value to the relationship between your business and your customers.

Due to a stronger competition than ever and a wide variety of options, customers tend to change their mood and preferences often. Don’t let them jump to a competitor, keep them engaged and entertained.



3. Analyse the customer’s data

If content is said to be king, data must definitely be the Queen, in the ecommerce chess. Your store is bombarded with lots of data from all fronts, and Google Analytics does a great job of gathering it for you.

Knowing what is working and what you need to improve upon based on the aggregated data is key. Based on the data and the behavior of your clients is the best opportunity to deliver improvements in the retention rate.

Heatmap apps are also a terrific way of finding, even real-time, what your clients are doing on your store, how much time they spend on the cart page or about us page, for example. See where they are getting stuck or how smooth the buying process goes. Either choose and use advanced tools yourself or engage a conversion optimization partner to help.

The key is to constantly keep learning about your audience. Make knowing your customers and anticipating their needs your number one job – especially the VIPs, the ones that keep returning and buying from you.

  1. Offer customized incentive, discounts, and coupons to your customers

Keeping in mind that you’re in business to make money, a great way to increase repeat orders and to keep your customers close is to offer customized coupons or cashback to customers, all based on their orders history.

The biggest retailers were fast to implement this strategy – we see it at Amazon, eBay or Alibaba, which give you coupons or discount codes to use on different categories. Brick and mortar businesses are widely using the same strategies, as well.

One simple example – suppose your customer buys products worth of $200, then you can issue a cashback of $20, or 10%, on their next order. Remember – you need to determine your profit so that you don’t lose money! You’re not running a charity). 

This way you’re appealing to their inherent greed and they’ll want to come back to your business and use those $20 in order to buy something else while collecting future cashback.

After several orders, you may want to innovate – offer free items when your clients buy a certain number of products or reach a certain value. Several companies that are doing it are Corona (Receive bottle openers, branded beer sleeves, etc.) or Pure Protein Bars.


     5. Cross-Sell and Upsell



These are two of the most widespread methods of increasing sales and the retention rate.

Cross-selling means selling two or more products instead of only one – invite the customer to buy a phone case that goes perfectly with that shiny new $1,199 phone. It’s for the best, after all!

Upselling means providing your customers with at least an option to buy a higher-priced alternative to the product he’s looking at, in order to generate more profits – and offering a better product to your client.

  1. Give something back to the community – but be honest with yourself

We’ve seen an increase in Corporate Social Responsibility (CSR) campaigns in the last years, and for good reason. Big corporations like telecom companies or ecommerce behemoths like Amazon or eBay are often employing CSR strategies in order to improve sales.

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

CSR basically demonstrates that you’re a business that takes an interest in wider social issues, rather than just those that impact your profit margins, which will attract customers who share the same values as you do.

Be aware, though that CSR is ineffective if consumers perceive company CSR motives as self-serving. CSR enhances customer satisfaction and loyalty intentions in communal relationships via consumer inferences of a company’s warmth.

For example, TOMS, an apparel company, does CSR great. TOMS is selling shoes for profit, but for each pair that is being sold, the company donates another pair to someone who really needs them. This CSR practice really improves customer retention rate, opposed to an oil company that heavily pollutes but, once in a while, it plants several dozen trees in an effort to keep its image “clean”.

Increasing CRR per different niches of activity

The above strategies are usually working for most ecommerce businesses, but you may want to employ different strategies when you’re selling high-value goods vs digital ones vs $1.99 goods off Aliexpress.

(source: Shopify.com)

If you are selling/dropshipping very expensive products, it will make sense for you to try cross-selling. Let’s say you’re store is offering only high-end kitchen furniture; it makes sense for you to offer your customers at a very good price or even for free a nice bowl for fruits with that great looking kitchen closet. As per the graph above, when selling high-end products you should mostly focus on gaining new customers rather than retaining the existing ones, but it isn’t necessarily a set in stone rule.

If you are selling cheaper products, like my online comic shop, I’ve found that the best way to increase customer retention rates is to constantly communicate with the clients.

When I make mistakes (and I’m a master of making mistakes), I openly admit them and offer something for free for the trouble, or at least come up with a hefty discount – while staying in the profit margin. I also send customized “Thank you” eMails based on the amount and value of purchases, and a monthly newsletter with a friendly tone of voice and interesting facts and tips on the entire industry. 

I avoid sending newsletters that only advertise the products I sell. I’ve found, after some A/B testing, that my clients appreciate an objective perspective on the entire industry rather than a shameless self-promo.

Increasing retention rates for digital goods

If you are selling digital goods, like video games, online courses, e-books, or software, the best retention rate optimization strategies rely on your offering special prices/discounts and great customer service combined with constant point-on newsletters.

The importance of segmenting your clients is of higher importance in this instance compared to selling physical goods. Segment your visitors and send them to push notifications according to their purchases and activity on your site.

Intelligently segment users and classify them into groups of loyal, semi-loyal, and lost users, in order to target them differently. 

It also greatly helps if you gain a solid understanding of visitor loyalty and churn rates because you can take proactive measures to boost your retention levels.

A heatmap of your visitors is invaluable when selling digital goods, providing you with an accurate and comprehensive view of the user journey across all your brand’s digital touchpoints.

What are you doing to retain your valuable customers? What strategies did work for you, and what didn’t? Let us know in the comment section below!