What Is Ecommerce Customer Retention And Why It Is Important For Online Businesses

There is an increasing amount of competition in the eCommerce industry.

Today, there are over 12 million to 24 million eCommerce sites across the entire globe! The eCommerce industry is one of the fastest growing industries today, with over 23% year-over-year growth rate.

That means more options for consumers. 

And more competition for brands. 

That is why keeping the interest of those who show interest in you is of utmost importance. This is what eCommerce customer retention is all about. 

Companies are always looking for ways to improve their customer retention strategies, and in recent years there’s been a focus on the importance of eCommerce customer retention owing to the eCommerce boom after the pandemic.

Customer retention is a key factor in any business model, and eCommerce is no exception. We all know how important it is to retain customers, but it’s one of those things that is often overlooked by business owners or managers in favour of the acquisition. 

The retention and attrition rate of customers can have a huge impact on your bottom line, so it’s important to understand why and how you can reverse the negative trend.

In this blog series, we will help you understand and execute eCommerce customer retention strategies and how to go about it.

What is eCommerce Customer Retention? 

There’s no doubt that eCommerce customer retention is a key component of your business. But what is eCommerce customer retention? And how can you make the most of it?

Ecommerce customer retention is the process of keeping customers happy, so they continue to shop with you and recommend your business to others. 

It is essentially the process of keeping customers loyal to your business. When you retain customers, they will continue to buy from you again and again. The longer customers stay with you, the more likely they will make larger purchases and recommend your business to friends and family.

Why is eCommerce Customer Retention Important? 

For businesses, customer retention is a key part of growth. 

It’s not just about getting customers to buy your product or service—it’s about keeping them happy and engaged so that they continue to do so over time.

Retention is important because it can help you achieve long-term growth. If you have a high retention rate, you’ll find that you don’t have to constantly find new customers because your existing ones will keep coming back for more.

Additionally, if customers stay with your company for longer periods, they will be able to spend more money with you over the life of their relationship with your brand.

To take advantage of this opportunity, you need to know how to keep customers returning. 

Retention is More Cost-Effective than Acquisition

Customer retention is a key metric for any business, and eCommerce is no exception. The truth is that it’s way more cost-effective to retain an existing customer than it is to try to find new ones. 

According to the Harvard Business Review, it costs five times more money to acquire a new customer than it does to retain one.

The reasons for this are pretty straightforward – once you have an established relationship with your customers, they’re more likely to buy from you again because they know what to expect from your brand and products. 

Plus, they’re already familiar with your processes, policies, and payment methods — so there’s less friction when they come back than there would be if they were new customers.

And you can use this money saved to invest in improving your existing products and services to offer a better experience for them.

Retention Boosts Brand Loyalty

One of the first reasons eCommerce customer retention is important is because it boosts brand loyalty. When your customers feel valued and appreciated, they will be inclined to remain loyal to your company and buy from you again in future.

If a company keeps its customers happy, nothing stops them from recommending it or buying from it again.

Return Customers are More Profitable

Did you know that return customers generate 23% more profitability than average customers?

The longer someone stays with your company, the more money they’ll spend with it—and the more value you’ll be able to derive from their relationship with your brand over time. 

This is especially true if that person is an early adopter who brings in other consumers through word-of-mouth marketing or referrals from other users who also like what you’re selling!

Customer retention is a key component of customer lifetime value (CLV). If you can increase CLV by encouraging repeat purchases and upselling, you’ll be able to boost your bottom line in no time!

Loyal and Regular Customers Help you with Feedback

Growing a brand is not just about getting more sales but also about improving your customer service, ensuring that customers have an enjoyable experience and can easily find what they’re looking for.

The best way to do this is by retaining your customers. 

When you have a loyal customer base, you can use their feedback to improve your product range and services, ultimately leading to more sales.

Your business needs to leverage the 36% of customers who would share their experience (whether good or bad) 

If a customer has a good experience with your company, they will be more likely to come back for more. This means that you have an opportunity to ask for feedback from them on what went well, what could be improved, and if there was anything else they would like to see in future products or services.

In turn, this can help you improve things for all of your other customers too!

Return Customers Aid in your Word-of-Mouth Referrals

Customer retention doesn’t just help keep your current customers returning; it also helps you increase sales by encouraging referrals. 

This is because happy customers are more likely to recommend your business if they feel their needs were met or exceeded during their first experience with your brand. 

If someone has had a great experience with your company (and when we say “great,” we mean super easy returns policy, for example), they’ll probably want other people to try it out.

In fact, referral marketing has proven to be 37% more effective than other retention strategies.

Word-of-mouth advertising is one of the best ways to attract new customers – but it takes time and effort on your part to get this started. A loyal customer base will quickly spread the word about your business when they have a good experience with it, so it’s worth investing time into keeping them happy!

If statistics are to be believed, the retail industry sees an average retention rate of about 63%. 

Who Manages Customer Retention? 

The answer is that it’s a lot of people.

Customer retention should ideally be a priority for everyone in the company, from the CEO to the support staff. 

But at some point, someone has to take charge of keeping customers happy and ensuring they continue to do business with us.

If we’re talking about a small company with just one person handling customer service, then that person is responsible for keeping customers happy and retaining their business. For larger companies with multiple departments involved in customer support, someone has to oversee all those teams and ensure they’re working together effectively on retention efforts.

In other words, there’s no one-size-fits-all answer to this question because there will always be different roles involved in running such an important department in any business, large or small. This is because to manage customer retention, you need to understand how your customers behave. You also need to know how they interact with your company and what they like about it.

For instance, customer retention teams are responsible for optimizing every touchpoint with customers. They work closely with Customer Success and Marketing teams to identify opportunities for improvement across the entire customer lifecycle – from onboarding to product usage, to onboarding, to renewal or churn.

Furthermore, customer retention is often seen as a challenge that lies outside the design realm. Companies tend to think about their design process as something that happens at the beginning of product development – after all, how can you design something if it doesn’t exist yet? 

But here’s where we need to rethink our approach – customer retention isn’t just about designing new features; it’s also about improving existing ones and making them more effective.

Customer Retention Statistics you Need to Know

• Spending on customer experience technologies is projected to reach $641 billion in 2022.
• 89% of marketers heavily prefer email marketing for the retention of customers and 27% on social media.
• Acquisition can cost 7x more than retention. However, a lot of companies focus more on acquisition rather than retention.
• On average, US companies lose over $83 billion due to bad customer retention strategies.
• Globally, the average value of a lost customer is $243.
• 71% of consumers have ended their relationship with a company due to poor customer service.
• In most industries, the rate of customer retention is below 20%.
• 59% of consumers who had a bad customer experience reduced or stopped their purchases completely.
• On average, 91% of customers consider another purchase after positive customer service.

Source

Conclusion 

All eCommerce businesses should make their customer retention a top priority. 

The return on investment from a well-executed customer retention strategy is significant, and far exceeds an eCommerce company’s costs. 

This is why a great customer retention strategy is of enormous importance and something that every online business should invest in. It keeps customers coming back for more, and prevents them from going elsewhere to get it. This essential element of a successful eCommerce site has everything to do with the customer experience and building relationships with the people who matter most. 

The goal of customer retention is simple – Reduce churn rate by making it easier for current customers to stick around. But how do you do this?

In the next chapters of this series, we’ll be diving deep into how you can improve retention so stay tuned!

Ready to kickstart your customer retention strategy? 

Book a demo of LimeChat today.