21 ways online retailers can improve customer retention rates

Understanding how to retain the customers that you have spent money acquiring is vital for any online business. 

Attracting a new customer can cost five times as much as keeping an existing one, so companies need to pay as much attention to retention as they do to acquisition. 

Here are 21 tactics e-commerce firms can use to keep customers coming back for repeat purchases, and avoid losing them to competitors... 

Customer retention: the stats

• Loyalty programs and rewards were the most popular factor (39%) in persuading customers to make repeat purchases, followed by strong after sales support (20%) and personalised offers after purchase (14%).
• An infographic from Zendesk paints a slightly different picture, as it found that a third of consumers (34%) believe that exceptional customer service is the best way to build customer loyalty compared to 20% who want rewards and 13% who want exclusive or relevant offers. A further 54% of respondents said they would consider increasing the amount of business they do with a company in return for loyalty rewards. 
• Attracting a new customer costs five times as much as keeping an existing one. (Lee Resources 2010)
• Globally, the average value of a lost customer is $243.(KISSmetrics)
• 71% of consumers have ended their relationship with a company due to poor customer service. (KISSMetrics)
• The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20% (Marketing Metrics)

So how do you increase customer retention?

Of course, the fundamentals are important. Among other things, you need a great product,and you need the right kind of pricing (not necessarily the cheapest), and to offer excellent customer experience. 

As the stats above suggest, customer service is all important, but rewards for loyalty and personalised, relevant offers also work well. 

Here are 21 tactics to improve customer retention rates..

The importance of delivery for retention

Get the last mile right

Delivery can be a pain for online retailers. They may sell great products, provide an excellent online experience, yet the final step in the process is in the hands of third parties who don't necessarily share the company's values. 

Here, a reliable courier and close monitoring of service levels helps, but you can also keep customers informed on the progress of their delivery, and make the process as convenient as possible. 

Kiddicare's SMS service is an excellent example of this. Customers can be kept informed of despatch and delivery by text, and also have the option to rearrange delivery if they want to. 

Get the packaging right

Not all retailers have complete control over the delivery process, but they can ensure that the packaging has that 'wow factor', as in this example from Burberry: 

You could also add little extras and surprises, a tactic used by Glasses Direct. According to its founder Jamie Murray Wells: 

We have always relied upon word of mouth recommendations from customers, so we add little gifts to orders, provide a little extra service, and try to surprise and delight our customers. This is the best form of marketing for us. 

Offer fast delivery options

Retailers should never underestimate the 'want it now' mentality. If customers know that they will receive goods quickly when they order, they'll keep coming back. 

Set and beat customer expectations

There's something to be said for underpromising and over-delivering. For example, John Lewis will state that a delivery will take three or four working days but, in my experience, they frequently arrive sooner then that. 

Registration and repeat purchases

Personalisation

Learn about your customers and present relevant products to them based on their preferences and buying history. 

Persuade customers to register

Registration can be a pain, but if retailers can persuade customers to register without making it a barrier to purchase, then there are huge benefits in terms of retention. 

They can track orders, receive special offers and, most importantly, repeat purchases are easier if delivery and payment details are saved. 

Easy repeat purchases

Amazon’s one-click payments are a big part of its success online, as it makes purchases incredibly simple so encourages shoppers to keep coming back. In combination with next day delivery via Prime, it makes it almost too easy to buy from the site. 

It works by saving the customers card details and delivery address so they only have to enter a username and password.

It's also especially valuable on mobile as consumers don’t want to waste time trying to enter credit card details on a smartphone.

                         

Easy password/account retrieval

Most web users have so many passwords that remembering them all is almost impossible. This means that, if they haven't purchased from a site for a while, then a forgotten password can be a real barrier. 

For example, I was unable to create an account on HMV as I had previously set one up with my email address. This meant a long reset procedure which could have been avoided with a simple security question. 

Or, as Amazon does, allowing users to create a new account with that email address can skip this issue: 

Retargeting via display ads

Retargeting can be a pain for web users, but when used effectively, it is a valuable tactic for retaining customers.  

A well timed and well executed offer can be enough to tempt customers back to a website to purchase items they were looking at. 

Customer services

Social media customer service

Offering great customer service via social media can help customers to avoid the pain of the call centre queue, and offer a more personal touch.

For example, Blackberry offers the personal touch by including pictures of the people ‘manning’ the profile:

 

Improve email customer service

According to recent stats, email is the preferred customer service channel for 44% of consumers. However, email customer service is often poor, or non-existent. 

Answer customer calls

Call centres are massive sources of pain for customers. Indeed, 48% of consumers say it's the most frustrating customer service channel.

This can be due to poor service offered by agents (and I've experienced plenty of that) but also because it takes so long to get your call answered at times. 

Brands like first direct, which often answers calls instantly, and normally within a minute, have a clear advantage over competitors just because they avoid pissing customers off by making them wait. 

Offer free and easy returns

Offering free and convenient returns is a great way to persuade first-time customers to buy, but is also a great retention tactic. 

If customers know they can return items easily if they change their minds, they are more likely to come back again. On the flipside, charging for returns 

According to Craig Adkins of Zappos:

Our best customers have the highest returns rates,but they are also the ones that spend the most money with us and are our most profitable customers. Zappos' modus operandi is not to give its purchasers the cheapest footwear on the block, but to give them the best service: hence, a 365-day returns policy, and free two-way shipping.

On the flipside, charging for returns, though retailers have costs to cover, can deter customers from returning to a website. The cost of the return needs to be weighed against the risk of losing repeat business.

Email marketing

Offer accessories for previous purchase

This is a useful tactic for post-purchase emails. If customers have bought an iPad, why not offer them relevant accessories, covers etc? 

Post-purchase emails

If a customer has just made their first purchase, this is a good time to follow up with a welcome email and some up and cross sell suggestions. 

Birthday / event emails

Emails triggered by specific events, such as a customer's birthday, abandoned checkouts etc can be a very effective retention tactic. Check out these stats from Email Marketing Reports. 

Reminder emails

If a customer hasn't made a purchase for a while, then a gentle nudge may be enough to tempt them back. It also helps to sweeten the email with a discount. 

Rewards

Reward your most valuable customers

At last year's JUMP, NET-A-PORTER head of marketing Neil Bridgeman talked about the attention it gives to its most valuable customers, it's EIPS (extremely important people). 

These EIPs “represent an inordinate amount of revenue”, and as such they’re very well taken care of. Here’s how:

• Orders from EIPs are picked, packed and despatched first. 
• They are assigned personal shoppers and invited into the London office for wardrobe planning. 
• They get first choice of new products (some of which are very limited). 
• They receive personalised lookbooks and see exclusive previews and presentations. 
• EIPs have personal shoppers. 
• EIPs have products bought specifically for them by the buying team.

Offer rewards for loyalty

I was pleasantly surprised to receive a text from O2 recently, offering me a free gift for being a customer for four years. It was a £15 voucher (no strings attached) for the retailers mentioned. 

Not a massive amount, but a nice gesture nevertheless. 

Refer a friend for gift vouchers / money off 

This is a common tactic for financial sites. For example, first direct will credit your account with £100 for every friend you refer. 

Naked Wines uses a similar tactic, offering a £40 voucher for friends, and crediting customers' accounts for their efforts. 

Offer exclusive deals for social followers

Luxury flash-sale site Gilt Groupe has been offering exclusive sales to Facebook fans. This gives people a real reason to keep coming back, and to use the brand's Facebook store. 

 

What other tactics can companies use to improve customer retention? Please leave your suggestions below...