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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 ecommerce firms can use to keep customers coming back for repeat purchases, and avoid losing them to competitors... 

Customer retention: the stats

  • Increasing customer retention rates by just 5% increases profits by 25% to 95%. (Bain & Co).
  • 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)
  • According to our Cross-Channel Marketing Report 2014, 82% of companies agree that retention is in fact cheaper than acquisition. 
  • The Cross-Channel Marketing Report also found that marketers are more focused on acquisition than retention. 

Q: Is your company more focused on acquisition or retention marketing?

So how do you increase customer retention?

Of course, the fundamentals are important. Among other things, you need a great product, 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 often 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. 

For example, after a recent order from IKEA, I had three text reminders about delivery, then a four hour slot. I also recieved a call from the driver an hour before the package arrrived. 

This miminises the risk of missed deliveries, and keeps customers informed. 

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 among others. 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

This is vitally important, as delivery issues are guaranteed to deter repeat purchases.

In a nutshell, it's about under-promising and over-delivering. While Zappos promises delivery within five business days, the majority of orders are shipped overnight. 

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. 

It shouldn't be any harder than submitting an email address and waiting for a password rest email. It often is though. 

Amazon allows users to create a new account with that email address, which is one way of avoiding the problem, though it does disable the previous account. 

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.

Here's an example from New Look. The level of personalised customer service offered is impressive. 

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. 

Problems include the sheer length of time it takes many companies to respond and no reply email addresses which prevent a conversation. 

Giving employees responsibility

One of the biggest gripes when calling customer services is the fact that, no matter how they may understand your issue, the staff have their hands tied by 'the system' and can only work within certain limits. 

This means frustration for the customer, and the inevitable demands to speak to a manager. It's not good for employees either (I've been that call centre agent in the past) as they simply can't do the job properly. 

The solution is simple: trust your employees and give them the responsibilty. The best staff will respect you for it and customer service will improve. 

That's what Zappos does: staff can give people a free pair of shoes if they feel the situation merits it. No need to have people waiting for a call from their team leader. 

Treatment of staff in general is important for customer retention too. If staff feel valued, they're more likely to deliver great service. 

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. 

Zappos reassures customers that they can return items easily, and free of charge, if they need to.  

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.

Looking at the right customer service metrics

In the past, I've worked at call centres where team leaders and management spent more time worrying about service levels and call metrics rather than whether or not customers actually received good service, which is what really matters. 

In fact, staff were often told to manually note down customer details for a later callback rather than actually dealing with the problem there and then.

That may mean targets set by management are met, but it does nothing at all for the customer. 

In contrast, Zappos focuses on metrics which measure whether the customer's problem has been dealt with, and whether agents have made a connection with the caller.  

This is better for customers and staff alike. 

Email marketing

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. 

Here, with my birthday around the corner, M&S has offered me a generous 25% off just about anything as a treat. 

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 our JUMP event in 2013, 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...

This is an updated version of an article orginally published in 2012. 

Graham Charlton

Published 3 July, 2015 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

2565 more posts from this author

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Mark Bolitho, New Business Director - Ecommerce at more2Small Business

Hi Graham, nice post.

I began reading this and I was reminded of the model of an old record club I belonged to years ago.

Your point about registration is spot on. Yes, in the wrong place it's not well perceived, but if someone can be persuaded there are benefits in doing so it opens up a whole world of possibilities for the retailer or brand.

If they can create the 'club' membership mentality and model, and perhaps provide some real incentives (not necessarily financial) if someone buys a certain amount of product over an agreed period of time there's an opportunity for a nice win-win if handled well.

Cheers,
Mark.

over 3 years ago

Albie Attias

Albie Attias, Ecommerce Director at King of Servers Ltd

Good list Graham. There's an overarching tactic that can help with retention too - build a rapport with your customer. You achieve this through the way you communicate with your customers, your tone of voice, the language you use, the way you design your website. Do it well and you imprint your brand in your customer's mind, increasing the likelihood of a return visit and lasting relationship. As an example, I think Innocent are a great example of a brand who get this right.

over 3 years ago

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Mark Bolitho, New Business Director - Ecommerce at more2Small Business

Good point, well made Robin.

Sad fact is that many are 'wowed' in this way, but I do think that the big luxury brands could gain as much utility from promoting the 'less is more' approach here.

Are any doing so, I wonder, or is one brave enough to try if not...

over 3 years ago

Mary Anne A.

Mary Anne A., Sales at Signs Visual

All good and important points. I like the fact that "improving email customer service" was included in this list because I feel that this is very important in retaining the customers a company has . Great article!

Mary Anne A.
T. 212-945-8706
sales@signsvisual.com
http://www.signsvisual.com

11 months ago

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Pauline Ashenden, Marketing Manager at Eptica

Graham, you are right to focus on the importance of customer service to retaining customers – yet retailers are still failing to deliver this across multiple channels. Recent research with 40 top retail brands found that they could only answer an average of 55% of all questions asked via the web, email, chat and Twitter. Fail to deliver good service and customers will simply move to your competition – more on the results here: http://www.eptica.com/blog/evaluating-2015-uk-retail-customer-experience

11 months ago

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Justin Butlion, Product & Marketing Hacker at Yotpo

This is a great list Graham. Something that I was surprised wasn't listed is the idea of using data to understand which segments of your customer base are being retained and then reverse engineering their experience. This would provide valuable insights into the marketing channels, UX and market segment which is working best for the business. I covered this approach and few other ideas in my recent post on the subject - http://blog.yotpo.com/2015/07/14/10-ways-to-improve-customer-retention/.

From your experience do you think that the average online store owner has the tools and skills needed to run this kind of analysis? Maybe its a gap in the market.

10 months ago

Peter Duffy

Peter Duffy, Director for Strategic Accounts at Blue Circle

Excellent article.

Yes indeed, happily there are many opportunities to dramatically improve customer engagement/retention with email marketing. Two additional suggestions:

Merchandising emails - integrate CRM data and product attribute data in real time. Price, category, inventory level, etc. So ( for example) if somebody browses/carts a £100 pair of shoes, and the shoes are subsequently reduced to £80, that is a wonderful opportunity to re-engage that specific consumer. Setup is straightforward and these campaigns can be 100% percent automated, so it's a 'quick win'. There are lots of opportunities in merchandising emails, and the ROI on merchandising emails is terrific.

Repeat orders - some e-commerce businesses have the inbuilt advantage of repeat orders, but different SKUs have different lifespans - for example contact lenses can be dailies, fortnightly, or monthly. If someone orders (say) two 14-day lenses, use an email platform that can calculate 2X14=28, and can send an email reminder to that consumer at the appropriate time.

10 months ago

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Daniel Lee, traveller at 90002

I agree that owners of online business gotta always improve their websites and investigate the potential customers' needs. The advices you mentioned are excellent, I'd like to add the necessity of eye tracking surveys ( for example https://cooltool.com/market?items=services ) The web company I worked at for 2 years used to compose special questionarries for users , so that they could learn the areas of their visual interest.

10 months ago

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Jonathan Nwosu, CTO at Sentview

Some great suggestions! Thanks for sharing your thoughts. Another way to increase customer retention rate in a way that is cheap, quick and efficient is to use Sentview.

At www.sentview.com it is possible to find out what customers like and dislike about your product. The feedback obtained from multiple social media video platforms can be used by companies to improve customer experience which enables you to better understand your customers, so you are in a better position to increase customer retention rate and satisfaction.

7 months ago

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