Retention rate is the percentage of customers that return over and over again to use your product and services by the end of a given period. A higher retention rate means there’s value in your product/service, and customers are happy and satisfied with what you’re offering. That leads to a sustainable source of revenue. On the other hand, low retention indicates a deficiency in the product or services that you offer. It makes no odds how good your acquisition strategy is to add new users. They’re going to be a higher church rate if there’s a low retention rate, no matter what. Which means a loss for the business.
Why is retention rate Important
Existing customers tend to buy more which is more profitable than investing time and money in someone whose actions are unpredictable. Instead, you can nurture the existing one. Getting new clients proves more expensive than retaining the existing ones. Research done by Frederick Reichheld shows that increasing customer retention rates by 5% increases profit by 25% to 95%. Upselling new products to loyal customers is much easier and more profitable rather than focusing on selling new products to new clients. According to Forrester’s research analyst, product recommendations like upsell and cross-sell make up 10-30% of e-commerce revenue. Satisfied customers are the loyal ones, they’re most likely to refer your product to their family and friends. So there you have, new customers at no cost.
Challenges faced by e-commerce stores
Here are some of the challenges that e-commerce stores face while retaining customers.
- Poor support is a major reason for customers to switch brands. Better customer service creates positive, emotional experiences that drive customer loyalty. However, poor service fails to connect with customers, Leading to low corporate morale, damage to reputation, and client loss.
- Lack of engagement results in the failure of e-commerce stores to connect with customers. Customers will forget about your brand at the time of decision-making Since no interaction took place.
- Lack of data and insight hinders brands to understand and anticipate customer behavior. As a result, they fail to provide personalized service and products.
- Customers’ tastes and preferences change constantly. Failing to adapt to the change will fail to satisfy customer needs. As a result, they leave.
Strategies to increase retention rate
A. Understanding customer behavior
Understanding the customers’ behavior and intent behind customers’ purchases helps businesses adapt their offerings to better suit the needs and requirements of their target market. It creates a relationship of understanding and trust which ultimately increases brand loyalty. It helps build a rapport with your audiences and helps retain a customer base. Hence, brands can make better decisions regarding their products and services.
1. Analyzing customer data and feedback
Here, customer data is collected, gathered, and analyzed across a wide range of channels. Having insights like page views and time on the page is a great way of identifying customer behavior. and that along with customer feedback, helps your team focus on an effective strategy to offer a flawless customer experience.
2. Identifying the common reason for customer churn
Identifying the root cause behind customer churn is crucial for businesses to take timely measures. Your whole strategy and investment might go in vain if you don’t know why your customer is leaving. There can be many reasons for that, you might have been going after the wrong customers, it can be poor customer support, there might be bugs or glitches, the pricing may not be right, and more. Make a concentrated effort to understand the reason, and start working on it before it’s too late.
3. Mapping customer journey
Mapping the customer journey involves studying the customer’s interaction with the brand right from the awareness stage, through to post-purchase. It helps evaluate the taste and preferences of the customer, their pain point, and more. And then making use of those valuable inputs to improve the customer experience.
B. Improve the shopping experience
A positive shopping experience improves customer satisfaction and loyalty, leading to repeat business. The satisfied customers also suggest the product and services to their known circle through word of mouth. So there are many advantages to an improved shopping experience. Here are a few tips on how you can improve the shopping experience.
1. Streamlining the checkout process
Customers get frustrated when they have to fill out various forms, or insert their personal and billing information. They’ll just leave your site when the checkout process is time-consuming and complicated. A simple and easy-to-navigate checkout process smoothens customers’ purchase journey. It improves the overall shopping experience and increases conversions by minimizing the likelihood of cart abandonment.
2. Offering personalization options
The tastes and preferences of every customer are different. There isn’t anything like one size fits all. Personalization option helps brands create tailored messages for customers as per their needs and requirements and engage them with the same to act upon it. With the help of automation tools like a chatbot, you can collect customers’ data and offer personalized experiences during their shopping journey. It assists them to make better decisions.
3. Enhancing the mobile shopping experience
Customers already spend a lot of time browsing through apps on their phones. They browse product and service information via mobile devices. They use mobile phones for the whole shopping journey. Therefore you must pay more attention to improving customers’ mobile shopping experience.
4. Providing excellent customer service
Excellent customer service not just helps in retaining customers, but also helps in increasing sales. You must offer information that customers are looking for during their online purchases. Customers are most likely to abandon the online purchase if they don’t find the information they’re looking for. So, assist customers in every step of their buying journey. It will help recoup customer acquisition costs. Happy customers serve as case studies, they also provide testimonials and positive reviews.
C. Incentivizing customer loyalty
Loyalty incentives are an interesting tactic to keep your customers hooked. Here, brands offer various types of rewards, discounts, and offers to retain existing customers. Here are a few tactics on how you can incentivize customer loyalty.
1. Implementing a reward program
A reward program is a strategy to incentivize and reward loyal customers. Rewards are given to customers for certain actions like purchasing a certain amount, leaving feedback, referring to friends, etc. The rewards can be in the form of discounts, freebies, gift vouchers, etc. It’s an effective strategy to retain customers.
2. Offering exclusive promotions and discounts
Incentivizing loyal customers with special deals and discounts creates a sense of exclusivity and encourages customers to continue doing business with your brand. It is done by sending personalized offers to customers based on their purchase history and preferences or by offering early access to new products and services.
3. Encouraging customer referrals
It’s a way of incentivizing customers with rewards who refer your brand to other people. It’s an easy and effective way to retain existing customers, as well as attract new ones. Happy customers aren’t hesitant to refer to your product and services.
D. Utilizing technology
Technology makes it easier to gather customers’ data and understand them better. Automating customer service helps create targeted marketing campaigns customized to specific customers’ needs. You can utilize technology the best way by:
1. Adopting AI and machine learning
AI and machine learning can be used to analyze customer behavior patterns, predict customer action, personalize communication, and automate customer service. They keep a record of customers’ actions as data and then use that information to evaluate customers purchasing trends, inclinations, and behavior. Hence, adopting Al and ML helps gain a deeper understanding of the reasons for customer churn, construct a predictive model of customer churn, and maintain good client relationships.
2. Implement a chatbot for customer service
eCommerce Chatbot provides round-the-clock support to customers. It responds to customers’ queries, offers solutions to their concerns, and provides useful information about products and services. AI chatbots are powered by NLP and Machine learning, which makes them capable of understanding human language and emotions and responding naturally. It provides a great customer experience.
3. Marketing automation
Marketing automation automates repetitive marketing tasks like email marketing, social media management, lead nurturing, and advertising. It saves time and resources, allowing marketers to focus on complex tasks like creating strategy, content making, etc. It improves the efficiency and effectiveness of customer engagement by streamlining marketing efforts.
Conclusion
If there’s any better way to ensure the growth and profitability of your business without having to bear the pain of new customer acquisition, it’s retaining your existing customers. Nurture your already existing customers and pay good attention to them. Follow the strategies mentioned above and keep them hooked.