It can be tempting for businesses to spend most of their resources on acquiring new customers. And it is understandable because that is how you grow your business. But what is more important to your success in the long term is “customer retention.”

Customer retention refers to the process of convincing existing customers to stay and engage in repeated sales. Retaining customers is critical to any business’ success. As per the Forrester Research, it costs 5 times less to keep an existing customer than to acquire a new one. Plus, returning customers tend to spend three times more than new shoppers.

With so much depending on customer retention, you must develop a proper strategy for your business. It is vital to understand the customer retention metrics so that you know where you currently stand.

Once you’re equipped with the knowledge about relevant metrics, you will be in a better position to devise a strategy that will enhance your store’s profitability. Let’s take a look at the three key metrics and why they matter.

Repeat Purchase Rate

Repeat purchase rate, also known as repeat customer rate, is the percentage of customers who will purchase again from you. It is a measure of how loyal and valuable customers are to your business.

Calculating the repeat purchase rate is an excellent way to evaluate the effectiveness of your customer retention strategy. A higher metric indicates that a large number of customers are willing to purchase more than once from you. Here is how you can find repeat purchase rate.

  • Count the total number of customers on monthly, quarterly, yearly or any duration that suits the business
  • Now count the number of repeat customers. If you own a Shopify store, you can find this information in the Customers over time report
  • Divide the number of repeat customers by total customers
  • Multiply the result by 100, and you get the repeat purchase rate

Repeat Purchase Rate = Repeat customers / Total customers x 100

Purchase Frequency

Purchase frequency refers to the average number of purchases that a customer makes from a seller in a given period. This number is essential because repeat purchases contribute 40 percent to a store’s total revenue. To find purchase frequency, follow these steps.

  • Calculate the total number of orders for a given period
  • Count the number of unique purchases made in the same period
  • Finally, divide the total number of orders by unique customers to get purchase frequency
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Purchase Frequency = Number of orders / Number of unique customers

Average Order Value

Average order value, or shortly AOV, is a measure of the total amount spent by customers each time they place an order. It is an important ecommerce metric because it shows you the monetary value of purchase frequency and repeat purchase rate.

To calculate average order value, simply divide your total revenue in a given period by the number of orders placed during that period. The result looks something like this in an equation:

AOV = Total Revenue / Number of Orders

You should work on these metrics one at a time or improve them in order to make your business more profitable.

Below, we share key customer retention strategies that will help you improve these metrics and maximize your customer retention.

1.  Facilitate the buyers’ journey

The route from prospect to becoming a customer is not a straight line. A prospect customer passes through three stages before they decide to purchase from a seller. These stages are:

  • Awareness: A prospect faces a pain point and realizes that you offer a solution (product/service) for it
  • Evaluation: The prospect analyzes all the solutions, including those offered by your competitors, and take action to solve the problem
  • Conversion: Here, the prospect chooses a solution and makes a purchase

Since repeat customers are already aware of your product/service, you should focus on analyzing what convinces them to convert. Once you understand the buyers’ journey, you can facilitate them in each stage and optimize your services to further improve customer retention.

2.  Keep the customers in a loop

If you aren’t reaching out to your customers constantly, you will lose them. It is necessary for any business to actively communicate with customers and keep them engaged. Try to offer quality content on your website and share educational posts on your social media profiles.

If you don’t have time to keep all the profiles updated, you can use social media engagement tools to manage your pages. Try to share engaging content, including quizzes, polls, and surveys, to stay in touch with the customers.

3.  Offer a loyalty program

Loyalty programs can massively enhance your customer retention. If your customers know that the seller will reward them for repeated purchases, they will keep coming back to your store in the future.

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Loyalty programs do not need to be complicated or expensive. Offer a simple incentive or something of value that will compel the customers to shop at your store again.

4.  Invest in customer service tools

No customer retention strategy can work without world-class customer service. When customers need help, they want a business to respond instantly and solve their issues. In fact, 8 out of 10 customers will even pay more for a product/service if they receive exceptional customer service.

Therefore, consider strengthening your customer service team and invest in a Customer Relationship Management (CRM) software. CRM is particularly helpful for the small e-commerce store as it solves a whole lot of customer service issues for them.

CRM offers a number of solutions like customer services, contact management, scheduling, email marketing, and sales automation, etc. However, you might not need to use all these features. So, the best CRM for small business is the one that has the option of customization.

You can customize it to your requirement and only use features that are working for your business. It helps you save money and increase the efficiency of your customer services.

5.  Send email newsletters

Sending newsletters is a strategy that can significantly increase your customer retention rate. You can use it to promote branded content and educate your customers about your product or service. In this way, you can stay in touch with your customers during times when they aren’t making any purchasing decisions.

Make sure you send emails that help your customers and compels them to buy from you and not your competitors. Share behind-the-scene videos or photos and tell them about new deals and upcoming offers so that they feel connected to the business.

Summing up

Attracting new customers indicates business growth, but you cannot afford to lose existing customers. It is because existing customers are more likely to buy from you, compared to new customers. The customer retention strategies we shared will ensure recurring revenue flow and success for your business. However, don’t expect them to yield results overnight. You have to be patient as you adopt them.



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