Commerce Tips

How to Start Retention Marketing

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Retention marketing is the ecommerce wave of the future.  

There, I said it.  

I know other marketing strategies like virtual reality are taking off, but no matter how you slice it retention marketing is changing the digital landscape at a fast pace.  This is a direct result of increased competition and savvy shoppers.  Offering discounts is simply no longer a guaranteed way to attract new customers and encourage them to return.

retention marketing magnet

Luckily, retention marketing is the solution to this problem!  With the ability to make positive impacts on both your store and your customers, it allows you to set your business up for success long into the future.

But wait, I’m getting ahead of myself.  Before we go any further, I should define what retention marketing actually is.

 

Defining Retention Marketing

Retention marketing is a strategy that aims to increase a store’s amount of return customers while simultaneously increasing the profitability of existing customers.

retention marketing definition

In other words, it supports pre-existing acquisition strategies to ensure acquired customers keep coming back.  

Why Do You Need Retention Marketing?

As I mentioned earlier, competition across ecommerce industries continues to climb.  This is a direct result of awesome platforms like BigCommerce and Shopify making it easier for merchants of any size to build an online store.

retention marketing stores

More stores brings more competition, which leads to more merchants investing in paid advertising.  As more people require ad space, the cost of advertising goes up, and these increased prices begin to cut directly into merchants’ annual profit.

retention marketing acquisition cycle

This is an extremely vicious cycle that is clearly not sustainable.  This poses an interesting dilemma.  On the one hand, acquisition is extremely important because without acquired customers there’s no one to retain.  On the other hand we’ve seen how aggressive and costly the ecommerce ad market is.

retention marketing balance

While it may look like we’re between a rock and a hard place, retention marketing is actually the key to rising above all of these problems.  This is because retention marketing is ultimately all about balance.  When you’re able to strike a balance between acquisition and retention strategies, you’ll start to see more customers returning over time.  This shift allows you to gradually reduce the amount of acquisition marketing you’re doing and focus on retention strategies that make money instead of spend it!  

 

Building a Retention Marketing Strategy

The Harvard Business Review has found that increasing customer retention rates by as little as 5% can increase profits by up to 95%.  These types of results are mind-blowing, especially when you consider that it will also positively impact factors like customer lifetime value and purchase frequency.  

retention marketing profit increases

Many stores are still battling it out for the limited ad space available, making it the perfect opportunity for you to get ahead of the game with retention marketing.  In order to do that, you need to determine a retention strategy.  This strategy should be based on a retention marketing goal.  Here are a couple of ideas to get you started:

retention marketing customer satisfaction

Many customers return to stores because they had a good customer experience.  Making this the focus of your retention strategy will help you determine goals like increasing the number of satisfied customers or increasing how satisfied all customers are with your brand.

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Focusing on loyalty will result in a strategy that uses incentives and customer service as a way of increasing the likelihood of customers returning to your store.  The success of your retention strategy will then impact your average customer lifetime value and repeat purchase rate.

retention marketing customer referrals

78% of people trust a recommendation from someone we know, making word of mouth an extremely powerful marketing tactic.  Concentrating on brand advocates will help your acquisition efforts as customers bring new shoppers to your store by sharing their positive experiences.

retention marketing combine goals

The best part about each of these ideas is that they can be combined to make an even bigger impact.  Obviously there are many other ways you could build a retention strategy, but these three tried-and-tested ideas are a great place to start!

 

The Tools of the Trade

Regardless of what goals you set for yourself, there are a number of retention marketing tools you can use to accomplish them.  The following are some of the most popular and successful ways to encourage repeat purchases.

1. Discounting

I hesitate to bring this one up because it can be very dangerous, however the fact of the matter is that customers like clearly defined value.  One of the easiest ways to demonstrate value is by offering your customers products and services at a lower price or for free.  Many brands choose to do this with punch cards, promising their customers free products after a certain number of purchases.

retention marketing discounting

This method of retention marketing is very easy to start but can condition customers to expect discounts.  This doesn’t allow you to build deep relationships with your customers, and makes it more difficult to encourage customers to return to your store in the future.  This doesn’t mean that discounting can’t work but rather that you need to be very mindful of how discounting affects your brand.  I would definitely recommend combining this tool with another to pack a more positive and powerful punch!

2. Excellent Customer Service

This would be a great one to pair with discounting!  Customers have come to expect a certain level of customer service from every business they interact with.  These expectations include things like quick responses to customer inquiries and free shipping, and set the bar high.

retention marketing zappos

While other brands are content to stop at offering what customers expressly ask for, retention marketing allows you to take customer service above and beyond.  Take Zappos for example, who offers their customers free returns for 365 days.  This is an excellent demonstration of taking the customer’s expectation and raising the bar even higher, and these types of considerations continue bringing shoppers back.  

retention marketing referring

Using customer service as part of a retention marketing strategy helps increase overall customer satisfaction.  This in turn helps encourage more referrals because customers like to share their experiences with friends and on social media.  These big payoffs make customer service a tool you want to consider as part of your retention marketing arsenal.

3. Personalization

Personalization pairs very nicely with customer service because it directly impacts the customer experience.  Customers appreciate brands who take the time to craft experiences specifically for them, and personalization lets you do that.  This can be done through email marketing campaigns, product recommendations, and cross-selling.

retention marketing recommendation

The Disney Store does a great job of using customer data to recommend similar products.  On any given page, they are able to recommend a large number of similar products based on items customers have looked at in the past or what similar customers have purchased.  These recommendations make it easy to shop and ensure customers can always find what they’re looking for.

retention marketing similar products

One word of caution is to avoid advertising for the sake of advertising.  Retention marketing is most successful when both you and your customer benefit at the same time.  In the context of personalization, this means cross-selling products that would actually benefit the customer’s lifestyle or recommending products that are clearly related to their earlier purchases.  If you can accomplish that, your customer satisfaction and referral rates will continue to increase with no signs of stopping!

4. Loyalty and Rewards Programs

It should come as no surprise that this is my favourite retention marketing tool, and the one that I most highly recommend.  Here at Smile.io, we think of customer loyalty programs as the creme de la creme of retention strategies because they allow you to develop a relationship with your customers that extends beyond transactional data.  With the ability to reward customers for a wide range of actions and behaviors, loyalty programs build relationships at every step in the customer journey.  

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I understand that you might have some misgivings.  After all, the averager person joins around 14 programs but isn't necessarily engaged with any of them.  There are ways to fight these statistics, though.  By offering a wide variety of transactional, charitable, and experiential rewards you can help your loyalty program stand out from the crowd.  You can push it even further by introducing tiers, incorporating referral programs, and branding your loyalty program to match the rest of your business.

 

Bringing It All Together

The best way to understand the power of retention marketing is to see it at work!

Julep has done an excellent job of designing a program that engages their customers throughout the entire customer journey.  Customers are rewarded “Jules” whenever they order a new Beauty Box, on their birthday, and on the anniversary of their joining the program.  

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These Jules can then be redeemed in the Jule Box – a special section of the site reserved exclusively for Beauty Box members.  With rewards ranging from beauty products to the chance to name a shade of lipstick, customers are sure to find something that meets their needs.

retention marketing julep jule box

Julep clearly demonstrates how a loyalty program can combine several retention marketing tools into one.  Their program successfully weaves together, discounting, personalization, and rewards while creating a fun and unique experience that sets them apart from their competition.  

As you embark on your own retention marketing journey, remember that it is not a one size fits all solution.  It requires a lot of hard work and commitment, but I can promise you that the results are worth it.  Don’t believe me?  Just take a look at any of our amazing clients and see for yourself.  Retention marketing isn’t a fad – it’s the way of the future.

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