Guide to Improving Customer Retention For Small Ecommerce Businesses

What is customer retention?

Customer retention means focusing your efforts and budget on keeping existing customers who are already choosing to spend their money on your goods and services and boosting their profitability to your business.

Your customer retention rate is a business metric that measures the percentage of your customers who return and make a purchase.

Why should you care about customer retention?

Think of all the time and budget you spent on acquiring the customer. All those sales and marketing campaigns and tactics you use to get their attention, draw them in and convert them. Why should you be satisfied with just one sale?

That's not to say you shouldn't still invest in acquiring new customers – you should. But according to Econsultancy, 70% of companies say it's cheaper to retain a customer than to acquire a new one. And it's money well spent: increasing your customer retention rate by just 5% increases profits by 25% to 95%, says research by Bain & Company.

Improving your ecommerce customer retention rate should be top of your marketing list, particularly as a small business. So what are the top customer retention strategies for small business?

Let's dive in:

Know your loyal existing customers

Before you can nurture your existing customers, you need to know who they are.

This means collecting and analysing customer data. Whether you track how much they spend in your online store, which customers are responding to email campaigns and social media, or other behaviours, you need to identify your VIPs.

Just like when you want to acquire customers, it's essential to segment your existing customers based on what you know about them. Then, you can tailor your retention strategy to make the most impact.

For example, you might segment them according to value (how much they spend), products purchased, or purchase frequency (do they buy weekly, monthly, seasonally, etc.).

Get the correct data at the checkout

Every part of your customer retention strategy relies on collecting the correct customer data at the checkout.

First, it means you can give your customers an exceptional customer experience. For example, collecting the right location information helps ensure the product is delivered accurately and on time.

Retailers report a 19% failed delivery rate due to inaccurate delivery address – a costly mistake. Especially when you consider that research shows 61% of Australian consumers feel negatively about a brand if their package isn't delivered (Loqate, 2021).

It's worth ensuring you get the right customer information when you have the chance.

Gathering the right customer data is also essential in your customer retention strategy, especially your email marketing campaigns – critical for any smaller business.

The good news is there's technology out there to make it easy to ensure you're gathering the correct information. For example, Loqate can be easily integrated into popular ecommerce and CRM platforms to validate delivery addresses, check and verify email addresses, and more.

Excel at the basics

Make it easy to do business with you, and customers will keep coming back to spend more money.

Research shows the higher the effort, the more disloyal a customer will become.

This means, at the very least, you need to get the basics of the ecommerce customer experience right – think shipping, customer service and product fulfilment.

Always make sure that products are arriving on time and correctly. With every item, include a thank-you note for customers.

But don't stop there – look at the whole customer experience and identify any sticking points along the way (you'll need customer feedback and data to back this up).

Here are some places to look:

  • Remove unnecessary steps at the online store checkout, such as extra form fields.
  • Where possible, include an express checkout using the customer details you already have.
  • Answer any questions immediately with live chat tools.
  • Anticipate customer questions before they are asked, and answer them with educational content, such as FAQs and videos.

Get personal with email campaigns

Email marketing has one of the best ROI of any marketing channel – an impressive $36 for every $1 spent. In fact, 59% of respondents say that marketing emails have influenced their purchases.

But for your existing customers, generic email blasts are not enough. Use customer information to send personalised emails that will make your loyal customers feel important to your brand.

By adding a few personal details to your email campaigns for existing customers, you can make it seem like every piece of content is for their eyes only and that you know them personally.

Check out these retention email marketing ideas:

  • Personalised product recommendations just for them
  • Special offer to bring them back to your online store if they haven't visited in a while
  • Welcome back message when they make a repeat purchase
  • Birthday email with a special offer

Listen and learn from your customers

The best way to know what customers want is to ask them. It can be time-consuming to keep sending surveys and feedback requests, but there is another way: build online communities around your brand.

Look at this statistic: 86% of Fortune 500 companies report that communities provide insight into customer needs.

It can also help build an emotional connection with your brand. Customers with an emotional connection can have a 306% higher lifetime value plus they will recommend brands at a much higher rate than those without (71% vs. 45%).

How do you create communities? One way is to build a select customer group to test and sample products and services.

For example, Carman's Muesli invites customers to join the Carman's Family. Members get a "Muesletter" packed with recipes, handy tips, exclusive offers and secret goodies, including the chance to try out new products for free.

When it wants to introduce a new product, the company contacts its community and says, "Hey, what do you think about this flavour or what do you think about this packaging?". This brings around 1,500 responses overnight, helping Carman's steer in the right direction while keeping customers coming back for more.

Reward your existing customers with exclusive perks

Give your loyal customers something nobody else has access to, such as early access to the Black Friday sale or a sneak peek of new product launches. This gives them the feeling of being appreciated, which means they're more likely to stay loyal.

Best of all, you can do this without spending much extra budget. It simply means communicating your sales or product releases to a select group earlier than otherwise planned.

The idea is to make your customers feel like they are shopping with somebody who knows them – a friend. Other perks might be exclusive discounts or free gifts. Think about what your VIPs really want, and if you don't know, ask!

Over to you

Your existing customer base is your business's most valuable asset. Focusing your efforts on improving the entire customer experience and rewarding customers for their loyalty is a surefire way for SMEs to improve their customer retention and drive a strong ROI over the long term. Which of these customer retention strategies will you try?