Editor’s Note: This post was originally published in October 2016 and was updated for accuracy and comprehensiveness on Sept 5, 2019.
In ecommerce, if you aren’t moving forward then you’re falling behind. So while customer retention marketing may have been a distant lighthouse only a few years ago, it’s now table stakes for brands that want to thrive and not just survive.
Offering discounts is simply no longer a guaranteed way to attract new customers, let alone encourage them to return.
Luckily, customer retention marketing has the ability to make positive impacts on both your store and your customers, allowing you to set your business up for long term success.
Defining customer 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.
In other words, it supports pre-existing acquisition strategies to ensure that the customers you worked so hard to acquire keep coming back.
Why do you need retention marketing?
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.
This is a 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. In fact, customer acquisition costs have increased by 50% over the past five years.
While you may feel stuck between a rock and a hard place, retention marketing is actually the key to rising above all of these problems., 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 spending it!
Building a customer retention marketing strategy
The Harvard Business Review 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.
Knowing that your desired end result is an increase in retention, you need to determine the goals along the way to get you there. Here are a couple of ideas to get you started:
Many customers return to stores because they had a good customer experience. Making this the focus of your retention strategy will help you move beyond the simple sale in your customer relationships, and transition towards forming emotional, long-term connections with them.
92% 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.
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.
The best part about each of these ideas is that they can be combined to make an even bigger impact. Of course, 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.
Shoppers 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.
This method of retention marketing is very easy to start but can dangerously condition customers to expect discounts, making it difficult to encourage customers to return to your store in the future when you aren’t running a sale. This doesn’t mean that discounting can’t work, but rather that you need to be very mindful of how discounting affects your brand. Combining this tool with another in this list will help safeguard your bottom line, and let it pack a more positive and powerful punch!
2. Excellent customer service
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 which set the bar high. You probably take these things into consideration when you do your own shopping, even without realizing it.
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 - Zappos is seen as a brand that’s out for more than profits but has their customers’ best interests in mind. It’s a powerful, relationship-building incentive to continuously bring shoppers back.
Using customer service as part of a retention marketing strategy helps increase overall customer satisfaction. This encourages more referrals because customers like to share their experiences with friends both online and off. The potentially big payoffs make customer service a tool you should consider as part of your customer retention marketing arsenal.
Personalization pairs well with customer service because it directly impacts the customer experience. Shoppers appreciate brands who take the time to craft experiences that feel tailored specifically for them, and personalization lets you do that. This can be done through email marketing campaigns, product recommendations, and cross-selling.
Inkbox 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.
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 based on your brand, 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 as customers feel like your brand speaks exactly to who they are.
4. Loyalty and rewards programs
We’ve seen it time and time again, customer loyalty programs are the creme de la creme of retention strategies because they allow you to develop a relationship with your customers that extends beyond the purchase transaction. With the ability to reward customers for a wide range of actions and engagement, loyalty programs build relationships at every step in the customer journey.
By offering a wide variety of both transactional 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!
Maniology has done an excellent job of designing their Mani Circle rewards program that engages their customers throughout the entire customer journey. Customers are rewarded “stamps” whenever they place an order, on their birthday, for social sharing and whenever they leave a product review.
These Stamps can then be redeemed for a number of rewards ranging from discounted or free products and subscriptions to even earning early and exclusive access to sales and products for members that reach the highest levels of their VIP tiers.
By combining earning actions and redemption options that are valuable to new and long-term customers, Maniology puts several of the customer retention marketing tactics to use to build relationships with their program members.
Maniology provides discounts to both newly signed-up and already loyal customers, they have a wide variety of rewards and perks to make the Maniology brand experience feel personalized to each of their community members, and finally, they wrap it all together inside the Mani Circle rewards program to gamify loyalty and make every engagement customers have with them enjoyable and valuable.
Maniology 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.
Retention marketing isn’t a fad, it’s the way of the future... and the future is now!