In recent years, there has been a decline in brand loyalty. Whether driven by younger generations willing to try other brands or a shift in the economy, customers are less loyal than they were pre-pandemic.
Several things impact customer retention and loyalty, including social influence, inflation, and a retailer’s customer experience. The customer experience, in particular, plays a crucial role: A SAP Emarsys Customer Loyalty Index report found that 20% of consumers now cite memorable experiences as a key driver of their loyalty, showing brands that prioritize exceptional customer service, unique in-store experiences, or engaging digital interactions are more likely to build long-term loyalty.
So, why is customer loyalty important for ecommerce brands? Although acquisition is critical, customer retention costs significantly less than continually needing to attract new ones. In addition to the repeat revenue and tendency to spend more per purchase, loyal customers act as brand advocates, generating free advertising and brand awareness through social media and word of mouth.
Customer acquisition vs. retention: Key statistics
Did you know that acquiring a customer costs 5 to 7 times more than retaining one? Not only this, but this number is increasing: Recent research has found that even in sectors with potentially easier customer acquisition, such as ecommerce, there’s been a 222% increase in costs for new customers over the last eight years. This is because acquisition requires extensive marketing efforts, including major advertising and campaigns.
On the flip side, statistics show that an increase in customer retention by 5% can lead to a company’s profits growing by 25% to around 95% over a period of time. Cross-selling and upselling to loyal customers require fewer resources and use more straightforward tactics, such as discounts or small gifts.
The increase in profits, unsurprisingly, has to do with higher customer lifetime value (LTV), which occurs as loyal customers spend more over time, make repeat purchases, and are less price sensitive. LTV can also play an essential role in ecommerce, allowing brands to find their best customers and replicate them.
The importance of customer retention in ecommerce
The statistics above show customer retention is more cost-effective than continuous customer acquisition. However, there are even more benefits for ecommerce brands:
- Revenue predictability: Repeat customers create a predictable and stable income stream. This can help brands with more accurate forecasting and planning.
- Brand advocacy: In ecommerce, word of mouth, user-generated content, and brand ambassadors are crucial. Loyal customers help generate positive reviews and organic growth.
- Competitive advantage: Ecommerce is a crowded space. A focus on customer retention and loyalty differentiates your brand, making it harder for competitors to lure customers away.
- Product and brand development: Interactions with your loyal customers not only boost their trust, but provide brands with invaluable feedback that allows them to continuously improve the customer experience and products.
Gaining these benefits means creating strategies to increase your customer retention and boost loyalty.
Strategies for increasing customer retention and loyalty
Retailers that want to get ahead must implement retention strategies across the customer lifecycle, not just at the beginning of the relationship. Not sure where to get started? We’ve got you covered.
Brands looking to increase customer retention and loyalty should consider leveraging the following strategies:
Provide exceptional customer service
Bad customer service can swiftly cost you customers. Zendesk found that more than half of consumers will switch to a competitor after only one bad customer service experience, while 73% jump ship after multiple bad experiences. It leaves brands little room to have a poor retail support strategy.
Your customer service strategy should be personalized while quickly and effectively resolving issues. Moreover, customers should feel that brands went above and beyond. Start by improving simple things, such as:
- Offering multiple communication channels (phone, email, chat).
- Responding quickly. No one wants to feel ghosted or wait for an hour listening to terrible music before talking to a human.
- Personalizing communication by tailoring interactions to specific needs. And don’t forget to use the customer’s name.
- Simplifying processes with straightforward policies (think returns) and resolutions.
- Collecting feedback and making adjustments and improvements in areas that are common pain points.
Implement reward and loyalty programs
There are many perks to loyalty and reward programs. For example, think about REI’s member rewards. Customers who purchase a co-op membership earn cashback rewards on purchases made throughout the year. The reward they receive encourages them to spend more while acting as a bonus for shopping loyally for outdoor equipment. It’s one reason REI has over 23 million members and has retained some extremely loyal customers.
There are several types of loyalty and rewards programs ecommerce brands can use. Whether using points, cashback, discounts, or something else, these programs can lead to increased revenue, brand advocacy, and differentiation.
One side benefit that’s not always considered is the collection of data. Loyalty programs provide valuable insights into behavior and preferences, enhancing marketing and product development efforts.
Offer a seamless fulfillment and shipping experience
Historically, consumers didn’t think too much about an order taking 7 to 10 days to arrive. Now, customers expect fast and free shipping.
According to recent surveys, 80% of American shoppers expect free shipping above a certain order threshold, 66% expect free shipping on all orders, while 60 percent of U.S. consumers expect free shipping to take two days or less.
Customer satisfaction around fulfillment is dependent on your third-party logistics partnerships. Choosing the right fulfillment partner will be a key driver in customer retention and loyalty, and this includes their ability to provide services that enhance the delivery and unboxing experience, keeping your omnichannel fulfillment operations and inventory management running smoothly.
Establish personalized engagement
Retention and loyalty begin with feeling valued, and personalization is an excellent way to show customers that you care. By using data and analytics, you can personalize customer experiences and tailor email marketing strategies. For example, you can send customized offers or recommendations based on purchase history.
It’s also about engagement and finding meaningful ways to spur interactions. Ecommerce retailers can use tactics like exclusive communities, interactive content like polls, quizzes, or contests, or educational content like tutorials and guides.
Create meaningful follow-ups and feedback loops
Strong relationships aren’t built off of one-time interactions. They take consistent, meaningful engagement. After that initial sale, retention and loyalty require some nurturing. Use channels your customers like–this could be text, email, or a community board. Invite dialogue and actively listen to what they say.
It’s vital to continuously refine your products to show your customers you’re hearing what they’re saying. Better yet, send timely messages to help them care for or use their items. Notifications are a simple way to stay in touch, from when an item is supposed to arrive to letting a customer know it may be time to purchase a favorite item again.
Building customer loyalty isn’t just good business; it’s the secret to lasting success in ecommerce. Ready to elevate your retention strategy? Connect with a 3PL expert today and discover how exceptional fulfillment can transform satisfied buyers into lifelong fans.
