Just 1% of your online customers can generate up to 40% of your website’s total revenue. That alone should tell you that a good customer retention rate is the key to a successful e-commerce business is finding ways to keep visitors interested and coming back to your site again and again.
Whether you run an online store, distribute leads, or conduct other business online, you can benefit greatly from understanding retention rate marketing.
Below we’ll break down what the customer retention rate is, how to calculate it, and give you our top ideas for improving the customer retention rate on your site.
What is Customer Retention Rate?
Retention rate is the percentage of customers a business has retained or maintained over a certain period of time. It is influenced by the number of users you get on your website and the number of regular customers that result from these users.
It is the opposite of the customer churn rate, which is the rate at which customers stop doing business with you over a given period.
Customer data shows that acquiring a new customer is often more expensive than maintaining a current customer. That is just one reason that engaged customers are so valuable.
Our conversion rate optimization guide shows that customer retention is essential for long-term success. Repeat customers are likely to represent the bulk of your sales funnel.
Ways to Improve Customer Retention Rate
If you want to run a successful e-commerce business, you will need to integrate an effective customer retention strategy that reduces customer churn. Below, you will find some valuable tips on improving retention rates and decreasing churn rates to help increase your profit and customer loyalty.
Outstanding Customer Support
It is only natural for an existing customer to stop working with a company when they are treated poorly. If your customer service is lacking, your client will get frustrated and look at other options. Implementing effective customer engagement strategies can help maintain customer satisfaction and prevent the loss of clients due to poor customer service. A lost customer will cost you more in the long run, so maintaining customer satisfaction is essential to earning a repeat purchase.
Exceptional customer support can be achieved with tools that help you keep in touch with the customer journey. You can also use web forms and customer feedback surveys to understand the customer experience better. This can result in increased brand loyalty, improved retention rate, and recurring revenue.
Personalization
Personalization plays an essential part in the purchasing decision process and should thus be part of your customer retention strategy. Typically, consumers are more likely to buy from a website offering personalized recommendations. Personalized retention rate marketing ensures that your product is getting in front of the right eyes. Consistently showing personalized offers can help you maintain a captive audience that is more likely to buy from you.
For example, product recommendations can be tailored to returning customers based on their previous purchases. If the customer buys a particular item from you once, there’s a good chance that they will buy a similar item from you again if they are satisfied with your company. This, in turn, closes sales while boosting customer retention and revenue growth.
Customer Loyalty Program, Rewards, and Referral Bonuses
There are many benefits to a customer loyalty program. Customers love to be rewarded, and, from a business perspective, it pays to reward your most loyal ones. A loyalty membership program based on rewards for things like purchases and referrals is one way to keep your customers (and their friends) on the line. The game plan here is to keep your customers engaged and excited to continue using your website, designed according to web accessibility laws, and lead to a higher customer retention rate.
A great way to start your loyalty program is to offer points for any minor activity on your website. For example, you can offer points for creating an account, making purchases, subscribing to your newsletter, or sharing your brand on social networks. Even relatively minor calls to action can boost your brand presence and put your customer to work as part of your marketing strategy.
Studies show that people are more inclined to purchase from a website referred to them by a friend. This system can help reduce marketing costs and increase revenue per customer simply by utilizing good old-fashioned word of mouth. Referral bonuses for recruiting a new customer can come in the form of a discount, free products, or loyalty points. You can also utilize social media as a means of integrating a customer retention program.
Introduce Web Push Notifications
Push notifications are widely used in mobile applications, but they are also an effective tool in web browsers.
Web push notifications are messages sent by a website to its subscribers. The notifications are pushed on the desktop as a means to reach out to the users while they are surfing the web. It can be viewed as a reminder alarm sent to the users to promote what your website offers.
Keep in mind that this tool is a permission-based service, which means that some customers may block this notification. However, when the customer allows this tool, they are immediately added to your subscribers’ list.
When used correctly, web push notifications can be a great sales agent for the current customer.
How to Calculate Customer Retention Rate
For an e-commerce business, monitoring your customer retention metrics is essential because it is a measure of customer engagement and helps you identify who is an active customer. From there, you can learn the customer lifetime value of your customer base.
You can calculate the customer retention rate with a simple formula:
Customer Retention Rate = ((Customers at End of Period – Customers Acquired During Period) / Customers at Start of Period) X 100
For example, say that you want to calculate your customer retention rate for the last month. At the beginning of the month, you start with 40 customers. By the end of the month, you get 20 new customers. However, you also lost five customers. The customer retention rate calculation would be as follows:
( (55 – 20) / 40 ) ) x 100 = 87.5% is your customer retention rate.
Best Customer Retention Rates By Industry
The ideal customer retention rate is 100%. This would mean you retain every client you acquire. However, that is not exactly realistic.
The average customer retention rate by industry is:
- Retail: 63%
- Banking: 75%
- Telecom: 78%
- IT Services: 81%
- Insurance: 83%
- Professional services: 84%
- Media: 84%
Don’t panic yet if your retention is not as high or your churn rate is in flux. A fluctuating retention rate can be troubling, but it’s common and can often be attributed to normal fluctuations in the market.
To Sum Up
The golden rule of business is that the customer should be your number one priority. A current customer has a higher lifetime value to your business than a one-time client, after all. The customer acquisition cost is much higher than the cost of a retained customer. That is why it’s so important to build up a customer retention program.
Keep customer satisfaction in mind as you utilize the above customer retention rate tips, and you’ll be well on your way to winning a loyal group of customers who can sustain your business.
