In this guest post, Littledata takes a look at what it really means to have a loyal customer base and shares how you can quantify it with the help of Google Analytics.
Every ecommerce merchant knows to track customer acquisition.
As a flagship metric in the ecommerce world, there are few things more important than getting new customers to buy your product.
But as the old adage goes, it’s more expensive to get new customers than to keep old ones.
Keeping current customers, however, is a bit different from retaining current customers.
HubSpot refers to this “retaining” as customer delight — the art of nurturing customers by creating an incredible, end-to-end buying experience online.
When merchants value long-term customer delight, it shifts the focus from the product your store is selling to the interests, needs and desires of current customers. This should spur questions like, “What do my customers really want with my product? Are they happy right now? What do they need right now that we can adapt our product to address?”
From their first interaction with your store, customers should be delighted so that they can be retained and ultimately become loyal.
But is retaining customers the same as creating loyal customers?
While customer loyalty and customer retention have plenty of overlap, they’re not to be used interchangeably. These two are approached differently, tracked differently and measured differently — and for good reason.
Let’s use a quick illustration. Ronnie is an athletic shoe retailer selling through his Shopify store.
Ronnie has a customer base of about 300 people. 120 of them have bought more than one pair of shoes from Ronnie’s store over the past year. Because they’ve bought more than one pair from his store, Ronnie suspects these 120 customers are loyal to his shoe brand. However, the data shows that over 50 of them have also bought from other athletic shoe brands within the past year. Without checking the data, Ronnie centres his marketing campaigns around his 120-person “loyal” base without knowing that his real loyal base is about 70 people, not 120.
Marketing directly to this loyal base is a proven way to improve profit margins dramatically, but many merchants focus on a more general group of shoppers who exhibit only temporary retention.
At the end of the day, a retained customer may or may not buy from your store again. Customer retention doesn’t swear customers to your store forever — it leaves room for shoppers to buy elsewhere in the future. In other words, your customers are retained simply due to the fact that they are yet to shop elsewhere.
Groove HQ says that customer retention is the most surefire way to improve your bottom line — “businesses that grow their customer retention rates by as little as 5% typically see profit increases ranging from 25% to 95%.”
On the other hand, a loyal customer buys from your store continually. Not only that, but loyal customers become advocates for your brand, encouraging family, friends and colleagues to buy from you as well. This results in high-quality reviews online and trustworthy word-of-mouth referrals. The value of customer loyalty is far beyond monetary.
A recent study showed that “extremely happy customers” are over five times as likely to purchase from your store and seven times as likely to forgive an error or mishap.
On the outside, customer loyalty doesn’t sound like something that’s easily quantified.
Because humans are complex (and subsequently, so is buyer behaviour), loyalty is nuanced by nature. Regardless, there are two ways to measure customer loyalty.
The first way to measure customer loyalty is through primary research. This is done by tracking referral rates, loyalty programs and customer reviews. If your customers are willing to share something positive about your brand online and become an advocate for what you sell, you’ve found your loyal customers.
The second way to measure customer loyalty is ecommerce tracking via Google Analytics (GA). Many merchants may be surprised by the sheer number of metrics available within GA’s robust platform. Unfortunately, these same merchants don’t know how to leverage the data available within GA in order to get accurate customer retention and loyalty insight.
With or without a baseline knowledge of Google Analytics, any ecommerce merchant looking to grow a loyal customer base should know the metrics that matter in GA.
Why it matters
Simply put, Returning user engagement measures how active returning shoppers are on your site. Metrics like page depth, user behaviour and recency and frequency are helpful for tracking this type of user engagement.
More specifically, metrics like bounce rate, average pages per visit, percentage of returning visitors and time on site are useful for measuring returning user engagement in Google Analytics.
So why focus on returning users? Returning users are nearly four times as likely (3.7x, to be exact) to convert compared to new shoppers.
How to measure it
To calculate returning user engagement rate, take your current conversion rate from returning users and divide it by the rate of new users.
User behaviour is most accurately measured by frequency and recency — that is, how often users interact with your store and how recently they’ve visited.
Make sure to keep track of how many sessions it takes for a user to convert. Typically, it takes users more than one session to make an add-to-cart or purchase decision.
The proof is in the data: across the board, users with two, three and four sessions generate 38% of store revenue.
When it comes to returning user engagement, LoyaltyLion is the king of the pride. Structured loyalty programs offer merchants countless benefits and new revenue opportunities.
Why it matters
Returning visitor rate simply measures how often users return to your store. As mentioned above, this is significant because of the “rule of returning users” — shoppers who are coming back to your online store are more likely to buy than those who are first-time visitors.
Google Analytics provides a clean layout to measure RVR, but with one huge hole. Without differentiating between your types of customers, your conversion rate will be inflated, which is why many merchants think their conversion rate is terrific when, in fact, it’s not.
This leaves merchants unable to accurately measure or properly attribute the marketing and sales efforts that were successful.
Luckily, Littledata’s app differentiates between customer types.
With the Littledata tracking script, merchants can know exactly the number of users and the cohort (type) of users that buy from your store the most. This prevents conversion rates from inflating every time a returning user renews a subscription or makes a repeat purchase.
How to measure it
To calculate RVR, divide the number of return visitors to your store by the number of total unique visitors in a given time period. If you had 15,000 visitors last month and 5,000 of them were repeat shoppers, you have an RVR or 33.33% (5,000/15,000 = .33).
To track RVR in Google Analytics, go to the left sidebar and select Audience > Behavior > New vs. Returning.
Why it matters
When it comes to subscription-based ecommerce, merchants want to retain as many subscribers as possible. But subscribers and repeat purchasers aren’t the same thing.
Subscribers are customers who make recurring payments to receive your product repeatedly. On the other hand, repeat purchasers are just customers who have made isolated purchases on your store more than once.
Repeat purchasers who don’t purchase from your store again within a given time period become ripe targets for remarketing campaigns.
However, this is only possible with the help of Littledata custom dimensions in Google Analytics. For merchants who run a Shopify store, Littledata’s Shopify ID custom dimension even allows you to calculate monthly retention and churn rates.
This is also where customer lifetime value (CLV) comes into play. For example, let’s say Sam is a subscriber who first bought your product in April 2019. For shoppers like Sam who bought in April, what is their mean CLV in June? Or even after six months?
This metric helps merchants ask the right questions and save their stores money by segmenting the right customers: if the cost of acquisition for Sam is really high, is it worth keeping him as a customer over the long run?
Another note on subscriber goals — if you take a look in Google Analytics and see no transaction generated within a certain number of days (in other words, the customer did not re-order), this is a perfect opportunity to use remarketing tools like coupons and discount codes to “lure them back to loyalty.”
When it comes to subscription analytics, Littledata’s ReCharge connection offers accurate marketing attribution, the ability to track the entire customer journey, and fixed data for subscription revenue, including first-time payments and recurring transactions — all within Google Analytics.
For merchants on the path to scale, no metrics matter more for customer retention and loyalty than returning user engagement, RVR, and subscription goals.
Littledata is a smart analytics app that fixes tracking automatically for ecommerce sites. Audit your analytics, benchmark your site, and enjoy 100% accurate data with connections to Google Analytics, Segment, Shopify, Bold, Facebook Ads, Google Ads, Refersion and more.
About the author
Ari Messer is a co-founder and VP Marketing at Littledata.