Retention marketing, also referred to as life-cycle marketing or loyalty marketing, is a modern concept that simply comes down to keeping consumers interested, satisfied, and spending. By delivering relevant and engaging content to your customers, you can increase the customers’ lifetime value (CLV) and, in turn, your business’s overall revenue.
According to Bain and Co., attracting new customers costs 7X more than keeping current customers. Research also shows that a 5% rise in customer satisfaction will produce up to 125% of income.
As per Accenture Interactive, 75% of U.S. customers like it when businesses deliver customized emails and make it more meaningful. The e-tailing group found that 41% of U.S. customers were purchasing more from retailers when they got personalized emails.
Ignoring customer retention and relying exclusively on customer acquisition results in customer churn, which eventually leads to a loss in sales and profit margins. As a result, smart eCommerce companies are placing a more prominent emphasis on retention marketing.
Over the last five years, the overall CAC(Cost of Acquisition) for B2B and B2C brands has risen by almost 50%—and while the paid CAC is still higher than the organic CAC, organic costs are also increasing at a faster rate. Increased customer retention rates reduce these costs — which is one reason why retention is vital to any business.
Successful retention strategy includes building a two-way and engaging relationship with the clients. In the new world of big data and predictive analytics, which provide us with in-depth consumer insights, personalization is the key to engagement. In reality, consumers are now expecting and demanding personalization.
The goal of retention marketing is not to increase the number of customers, but rather to:
- Increase customer’s retention rates and get former customers back to the purchasing process.
- Decrease customer churn rates and hold existing customers in the purchasing process.
- Drive the buying threshold and get customers to begin the purchasing process more frequently.
It makes sense for eCommerce brands to concentrate much of their marketing efforts on the acquisition of customers. But if a company has a large customer base, they need to change their approach and pay more attention to customer retention.
Without a retention strategy, all marketing tactics in the acquisition process are for nothing. A brand can work hard to get customers, but then lose them by failing to re-engage and re-market. This loss of customers is a costly error, as marketing retention has proven to raise sales by using less money than marketing acquisition.
Let’s look at why that could be valid, and how you can use retention marketing to help raise sales while investing less marketing money.
- Marketing to existing customers is better than selling to new clients. Brands have a 60 to 70% chance of selling to an existing customer, compared to a 5 to 20% risk of selling to a new customer.
- Any time a customer buys from you, the chances of repeat purchase goes up. After one purchase, the chances are 54% that they will buy when they revisit you. If a second or third purchase is made, the number will increase to a 60-70% chance of making another purchase.
- Repeat customers spend an average of 33% more than new customers.
- It costs less to attract current customers than to attract new ones. It can cost up to 5X more to buy a new customer than to maintain a current one.
- Established customers are expected to spend more money. People who have already bought from your brand are more likely to come back and spend more money when they do. In reality, according to the Adobe Digital Index, they spend 3X more per visit.
- Happy, loyal customers are helping you to attract new customers. When you’ve got satisfied brand followers, they’re going to turn into brand supporters. This helps to direct more customers to your company as consumers also trust and take advice from friends.
In reality, the retention of customers maybe even more critical than the acquisition of customers.
How to Calculate Customer Retention –
Now that you understand the importance of customer retention marketing let’s talk about how to measure whether or not your efforts are paying off. Here’s what you need to know to measure this critical metric.
1. The information you need.
What do you need to measure customer retention?
Choose a time. Preferably a more extended timeframe — such as a quarter — to give you the most accurate measurement, if not a year. You will then need to know the number of customers at the beginning of that period, the end of that period, and the number of new customers acquired during that period.
2. Formula to calculate customer retention.
The formula is quite essential. It is essentially the customers you had at the end of that time, minus the number of customers you received during that period – divided by the number of customers you had at the beginning of the time. Then multiply the number by 100, and you have the number of customers you have kept.
For example, if you started with 100 customers, gained 15 new customers, and ended with 105 customers, your formula would look like this:
((105-15)/100)*100 = 90% retention rate
A 90% retention rate is fantastic, but you should always be striving for 100%.
Some Customer Retention Marketing Strategies You Can Try
Let’s get down to the nitty-gritty and explore some tactics to improve the number by helping create an emotional bond with your customers and make your marketing smarter.
Collect all sorts of customer details – addresses, birthdays, gender, color preferences, number of orders – via on-site displays. These data can be collected either directly through form fields or indirectly through hidden areas.
Then the most crucial part – you can use that information to create personalized marketing messages.
1. Email Marketing
What happens after a customer makes a purchase? Is that the end of the road?
Email marketing continues to be an essential medium for building customer relationships.
At the very least, you can use order follow-up emails to say thank you. But you can also take this opportunity to ask for inputs or consumer reviews or to highlight other items that might be of interest.
Use email to let your loyal customers know about new product launches, discounts, or special offers. Frequent email contact will help you keep up to date with your shoppers.
2. SMS Marketing
SMS is a crucial resource in the toolbox for the marketer. Our clients get the best outcomes by strategically layering SMS messages into their consumer life cycle interactions and promotions and email.
Careful planning, thorough market analysis, compelling an enticing message, and the course-desirable offering is important.
Short, quick, and concise. People are reading these messages on little screens.
3. Personalized discounts
The King is personalization. Have you thought of using what you know of your customers to customize discounts? For example, if you know significant celebration dates, such as their birthday, or wedding, you can use those dates to send a special congratulations and discount message. This is going a long way to creating a relationship with your shoppers.
4. Loyalty programs
The Customer Loyalty Program aims to create consumer loyalty by offering incentives to consumers who consistently endorse company goods and services. Customers can benefit from these programs: discounts and promotions, incentives, gifts, coupons, or unreleased items.
Your customer builds up equity with your business when you reward them for shopping with you.
Loyalty services work well for brands that opt-out of offering discounts or brands with a lot of competition in their category. Loyalty rewarding your shoppers will help you keep your head and shoulders above the competition, eventually increasing the lifetime value of each of your customers.
5. Referral Bonuses
Research shows that referral programs can increase a customer’s commitment to your business. You see referral bonuses in both B2C and B2B customer loyalty programs.
eCommerce businesses can offer bonuses to customers who recommend their products or services to colleagues, friends, or relatives. Research by referral marketing company Extole shows that 13% of friend referrals convert to a sale.
How to use Retention Marketing Campaigns
As you start to put together ideas for retention marketing plans, consider launching one or more of the following types of campaigns.
- Onboarding Campaigns: Create a program for welcoming and cultivating new customers and clients that takes them to the “WOW” moment. Build a great first impression that will stick with consumers and keep them coming back.
- Active Customer Campaigns: Don’t forget about the consumers who come back to your brand regularly. It is essential to build strategies to continue engaging and educating these loyal customers, even though they seem to be going nowhere.
- Lapsing Customer Campaigns: Develop promotions explicitly tailored for consumers who tend to be on their way out of the purchaser’s process. Such clients may be people with accounts or free trial deals that are about to expire.
- Re-Engagement Campaigns: A “missing” customer might be someone who has opted out of a paid subscription or who has not returned to your company for more than a year. A re-engagement drive is trying to pull them back.
For eCommerce stores, customer retention marketing isn’t optional; it’s a necessity. If eCommerce businesses spent half of the time and energy they put into acquiring new customers to keep their customers, their sales would skyrocket.
Here’s what to keep in mind:
Get to know your customers: The more you know about them, the more you will be marketing to them and using on-site displays like pop-ups to collect customer data and then use the data to generate more personalized meaningful messages.
Email is your friend: Use email marketing to send order follow-up emails, rescue abandoned carts, seek reviews from customers, or alert consumers to newer products, special deals, or sales.
Invest in a loyalty program: Such services have point structures and reward customers that will set you apart from the competition and discourage consumers from jumping on the ship.
Repeat customers are so vital to the success of your company. They’re cheaper than new clients, they’re loyal, and they spread the word by telling friends and family about you. So give them a little love and concentrate on holding them.
We at Zoronto are a full service retention marketing agency that works exclusively with DTC eCommerce stores. We create tailor-made strategies for your business and implement it from start to finish. Interested in how we can help you.