9 powerful tips to skyrocket your ecommerce customer retention

Establishing a successful ecommerce store requires dedication and perseverance. While the initial launch phase can be both challenging and rewarding, witnessing sustained growth makes your initial efforts deeply gratifying.

A critical factor in achieving long-term success lies in fostering customer retention. A recent 2023 Wunderman Thompson survey revealed that 71% of ecommerce executives face the challenge of maintaining or surpassing prior customer experience (CX) standards amidst budgetary constraints.

While maximizing output with limited resources remains a universal challenge, loyalty programs can do a lot of legwork for you. By strategically leveraging such programs, you can enhance return on investment (ROI) and cultivate a loyal customer base, ultimately propelling business growth. In this article, we outline:

• Why customer retention is critical for business growth
• How to measure and track your retention rates
• 9 ways to improve ecommerce customer retention
• How to start boosting your ecommerce customer retention with a loyalty program
• Key takeaways

Continue reading to delve deeper into these essential aspects of ecommerce and unlock the potential for skyrocketing your customer retention.

Why customer retention is critical for business growth

Achieving sustained business growth hinges upon fostering robust customer retention. Retaining existing customers not only ensures recurring revenue streams but also nurtures a loyal customer base, translating directly to long-term profitability.

A business that only focuses on constantly trying to find new customers will spend a lot of time and money just to find themselves chasing a carrot on a stick.

Way back in 2001, Bain & Company suggested that just a 5% increase in ecommerce customer retention produced more than a 25% increase in profit. Today, thanks to the all-powerful Internet generating even more ways for businesses to engage with their customers, increasing your customer retention rate by 5% boosts your profits by as much as 95%.

How to measure and track your retention rates

Effectively measuring and tracking customer retention rates is fundamental to gauging the health and progress of your ecommerce business. This data provides valuable insights into your ability to retain existing customers, a critical factor in ensuring long-term profitability. Calculating your customer retention rate involves a straightforward formula:

(Total customers at the end of the period – new customer acquired) / (Customers at beginning of the period) * 100

Here’s an example:

Let’s imagine you had 4000 customers at the beginning of the quarter and you gained 200 new customers, but you ended the period with 3800 customers. Your customer retention rate would be:

(3800 – 200) / 4000 * 100 = 90

This translates to a 90% customer retention rate, indicating you retained 90% of your customer base during the quarter. Conversely, the remaining 10% represents your customer churn rate, another valuable metric to monitor.

While traditional methods like spreadsheets can be used to track these measurements, they can become cumbersome as your business scales. Consequently, employing a dedicated loyalty analytics tool, ideally integrated with your store, allows for real-time access to these crucial insights, empowering you to make data-driven decisions for optimized customer retention strategies.

9 ways to improve customer retention

Now you know why customer retention is important and how to measure and track it, let’s focus on how you can improve customer retention for your ecommerce store. You can use these ten tips and strategies (from expert experience and case studies) to move the needle in a positive direction.

1. Incentivize initial loyalty program engagement with “low effort” rewards

To foster long-term customer relationships and encourage repeat business, consider incorporating “low-effort” incentives into your loyalty program. These small tokens of appreciation acknowledge customer engagement without necessitating significant investment from the customers themselves. Most importantly, these incentives contribute to a program where points are earned frequently, allowing customers to return and redeem them sooner, making the program feel more rewarding and immediate.

Examples of “low-effort” engagement activities that could be rewarded include:

• Following the brand on social media platforms
• Subscribing to SMS marketing communications
• Celebrating customer birthdays
• Submitting product reviews

For example, Ana Luisa customers get loyalty points for “low effort” engagements such as following the brand on social media accounts, subscribing to SMS marketing, birthdays, and writing reviews.

Used in combination with the tiered loyalty program strategy, these “low effort” engagement rewards are a great tool to help nudge customers towards more active loyalty program engagement in the future.

2. Design a mobile-first loyalty program

In today’s mobile-driven world, customers have their phones within reach for most of their waking hours, including shopping and interacting with emails. This reality necessitates a mobile-first approach to your loyalty program.

Here’s why prioritizing mobile is crucial:

• Shifting shopping preferences: A 2021 study by Klarna identifies a growing preference for mobile-based online shopping. Data from the United States reveals a majority of shoppers now prioritize mobile devices over computers for online shopping activities.
• Mobile email dominance: Further insights from Statista’s Consumer Market Insights team in 2022 indicate that emailing remains the second most popular mobile activity (65%) in the US, exceeding 59,934 respondents.

But email isn’t the only story. With email open rates potentially declining due to spam filters and user preferences, a comprehensive mobile approach is key. This includes:

• Seamless mobile loyalty program experience: Ensure your loyalty program is fully functional and user-friendly on mobile devices. Customers should easily access their points, track progress, and redeem rewards through a dedicated app or mobile-optimized website.
• Strategic SMS and push notifications: Leverage the power of SMS and app push notifications to keep customers engaged with your loyalty program. Send targeted messages with exclusive offers, reminders about expiring points, updates on new reward tiers, and birthday promotions.

By prioritizing a mobile-first loyalty program, you can effectively reach customers on their preferred platform, maximize engagement, and ultimately drive program success. This comprehensive strategy ensures your loyalty program is readily accessible and caters to today’s mobile-centric consumers, regardless of their email habits.

“E-mail is fast, convenient, cheap and effective. For me, you can’t beat it. But the world is moving to mobile-only, and fewer people accessing e-mail on big screens so tailor your message and content accordingly.” 

— Paige Arnof-Fenn, Founder & CEO of Mavens & Moguls

3. Set up a tiered loyalty program

Leveraging tiered loyalty programs is a powerful strategy in the pursuit of long-term customer retention. These programs not only incentivize repeat business but also cultivate a sense of community and brand loyalty. Opting for loyalty program software that allows you to move beyond a generic approach to a tiered program offers a spectrum of benefits that progressively increase in value as customers become more engaged and spend more, which you can easily do with loyalty program software. 

“Avoid creating a one-size-fits-all loyalty program by offering tiered benefits to increase your ROI. This way, customers can unlock higher levels of benefits or exclusive perks based on their loyalty and spending. This tiered approach encourages people to continue engaging to access elevated rewards. The result is a sense of achievement and exclusivity that promotes customer retention.” 

— Jas Banwait Gill, Growth Manager at SwagMagic

Astrid & Miyu, a jewelry brand, revamped their loyalty program with a tiered system offering increasing rewards for higher engagement and spending. This strategy not only boosted enrollment by over 50,000 in just nine months, but also led to a 220% increase in annual purchases by redeeming members compared to non-members. The tiered approach, with its mix of transactional and experiential rewards, incentivized repeat purchases and increased average order value by 21% for their highest tier. By personalizing the rewards based on customer behavior, Astrid & Miyu fostered a stronger sense of loyalty and significantly improved customer lifetime value.

4. Cultivate Customer Loyalty Through Personalized Interactions

Personalization isn’t just a trend; it’s a critical component of effective ecommerce retention strategies. Research from Twilio last year showed that nearly half (49%) of customers say they will likely become repeat buyers after a personalized shopping experience, and 62% said a brand will lose their loyalty if they deliver an ‘unpersonalized’ experience. 

“[Our best tip] for us—it’s excellent customer service and personalized interactions. As manufacturers of sentimental products, we know that we should always make our customers feel that their needs are our top priority. 

We also go above and beyond to ensure they receive personalized interactions with our staff members. This can be as simple as using a customer’s name in communications or as complex as tailoring product recommendations based on previous purchases.”

— Nicky Dutta, CEO of Lorel Diamonds

LoyaltyLion’s case study with Primal Kitchen showcases the power of personalization in driving ecommerce retention. By implementing a personalized and seamless loyalty program, Primal Kitchen achieved a remarkable 71% increase in loyalty purchase revenue. Additionally, leveraging LoyaltyLion’s technology, they established new communication strategies that yielded a 240% surge in purchases from loyalty program members within just 16 months. This illustrates the significant impact personalization can have on fostering customer engagement, boosting loyalty program participation, and ultimately, enhancing customer retention rates.

5. Make good use of your data

Data-driven strategies are the bedrock of successful ecommerce customer retention efforts. As evidenced by the success of Primal Kitchen, leveraging data to create personalized customer experiences can yield impressive results. In a short timeframe, they achieved a significant increase in both loyalty purchase revenue and program member engagement through data-driven initiatives.

Moving forward, with the impending demise of third-party cookies, the importance of first-party (zero-party) data collection rises significantly for ecommerce brands. Loyalty programs offer a valuable avenue to gather this crucial data, providing valuable insights into customer behavior and preferences. Additionally, traditional research methods like interviews and focus groups can further enrich the data pool.

“We gather qualitative data throughout the customer journey via focus groups, interviews, and questionnaires. Doing so enables us to capture highly detailed customer feedback that reveals how satisfied our customers are with our service and what contributes to or takes away from their experience. 

This way, we can identify ways to ensure desired outcomes for our clients, as well as how to optimize the relationships we share with them.”

— Daniel Kroytor, Founder and Director of TailoredPay

6. Deepen Brand Connection Through Your Loyalty Program

Building a loyalty program goes beyond simply offering discounts and rewards. It’s a powerful tool for strengthening brand connection and fostering customer loyalty by showcasing your core values. Here are two effective ways to achieve this:

• Highlight Your Brand Story: Integrate your founding story and brand values into your loyalty program communications. Share compelling videos or narratives on your website and post-purchase emails that capture the essence of your brand. This fosters a deeper connection with customers who resonate with your mission and purpose.
• Rewards that Reflect Your Values: Craft loyalty program rewards that directly align with your brand values. For example, if sustainability is a core value, offer rewards that promote eco-friendly practices, like discounts on reusable products or partnerships with environmental organizations. By aligning rewards with your values, you strengthen the emotional connection with your customers who share those values.

“Add personalized thank you page videos. They’re like post-purchase emails—but far more personal and in essence they have a 100% ‘open rate’. Plus, data from our app shows that customers come back 2.2x on average to check for shipping updates. And when you add triggers you can completely tailor the post-purchase experience.” 

— Fintan Meagher, former ecommerce retailer (three years), currently a content marketer with ReConvert 

7. Use a post-purchase feedback strategy

When you’re considering your brand’s customer retention strategies, fostering post-purchase engagement plays a critical role in cultivating customer loyalty and encouraging repeat business. By engaging with customers following a purchase, businesses gain valuable insights into the customer experience while simultaneously fostering positive brand sentiment.

“Adopting an approach that emphasizes post-purchase engagement has been our golden ticket to cultivating customer loyalty and fostering repeat business. When we interact with customers following a purchase, it opens a window for us to gauge their shopping experience and identify any problems they might have faced. 

This timely interaction empowers us to swiftly address their concerns, transforming potential negative encounters into uplifting experiences. The result? Contented customers are more likely to return for more and spread the word about our brand.” 

—Zach Dannett, Co-Founder of Tumble

One widely employed method for implementing a post-purchase feedback strategy involves the utilization of customer feedback surveys. While such surveys may not yield a perfect response rate, they serve as a valuable tool for gathering crucial customer experience (CX) information directly from the source. This information can then be leveraged to refine processes, improve product offerings, and enhance the overall customer journey, further solidifying customer loyalty and leading to increased customer retention rates.

8. Offer exclusive early access to sales or new products

Encouraging customer retention through exclusive early access to sales or new products is an extremely important and well-tested customer retention strategy. By extending privileged access to loyal patrons, your business can instill a sense of exclusivity and appreciation, creating relationships and bolstering brand loyalty. Imagine the allure for one of your customers, when they are among the first to experience the latest offerings from your brand or gain entry to time-sensitive promotions before the general public. This exclusivity not only elevates customer satisfaction but also generates a heightened level of engagement and enthusiasm, driving sustained interaction with the brand.

A prime illustration of this approach is the Sephora Beauty Insider program. This initiative grants loyal customers exclusive early access to sales, new product launches, and personalized beauty rewards, creating a dedicated community of beauty enthusiasts who receive VIP treatment. By offering these tailored privileges, Sephora not only reinforces customer loyalty but also improves brand affinity, translating into sustained patronage over time.

9. Provide exceptional customer service with live chat support

Delivering exceptional customer service is key to building customer loyalty and a competitive edge. Live chat functionality on your online store empowers enables real-time communication, allowing customers to connect with knowledgeable representatives for product inquiries and order concerns. This immediate access to personalized assistance fosters trust and brand confidence, ultimately increasing customer satisfaction and loyalty. Taking this a step further by integrating your loyalty program with your helpdesk software unlocks valuable data and segmentation capabilities for your customer support team.

Imagine your team identifying high-value customers (based on loyalty tiers or purchase history) and prioritizing their inquiries in the queue. This ensures prompt assistance and reinforces the value of their loyalty. Additionally, with access to loyalty data, support reps can offer loyalty points or exclusive rewards to resolve concerns and compensate for inconveniences. This personalized approach transforms negative experiences into positive ones, significantly strengthening customer loyalty.

Renowned department store chain Nordstrom leverages live chat support with dedicated specialists on its website. Going beyond basic customer service, these specialists offer expertise in the specific areas that Nordstrom specialize in, elevating the online shopping experience for the store’s customers.

How to start boosting your ecommerce customer retention with a loyalty program

Growing your business is easiest to do when you take good care of your customers with a well-developed customer retention strategy. With our tips in mind, here are some actions to take to get started and build a great customer retention strategy:

Design your emails with mobile in mind:

• Purpose: Most people use their phones for everything, including shopping and checking emails.
• Action: Build your email campaigns prioritizing mobile responsiveness and design.

Set up a tiered loyalty program:

• Purpose: Tiered programs incentivize repeat business by offering increasing rewards based on customer spending and engagement.
• Action: Implement a loyalty program with different tiers and benefits to motivate customers towards higher levels of engagement.

Make it personal (develop methods of personalization):

• Purpose: Personalization is crucial for customer experience, increasing the likelihood of repeat purchases.
• Action: Develop methods like using customer names, tailoring product recommendations, and sending personalized greetings or discounts.

Make good use of your data (especially zero-party data):

• Purpose: Data, particularly zero-party data collected directly from customers, helps understand their preferences and tailor marketing efforts effectively.
• Action: Utilize customer data and feedback to personalize communication and product recommendations.

Include video in your thank you emails:

• Purpose: Video thank yous can be more engaging and have a higher open rate compared to text-based emails.
• Action: Create and include short video thank you messages in your post-purchase email sequence.

Use a post-purchase feedback strategy:

• Purpose: Gathering feedback after purchase helps identify areas for improvement and address any customer concerns promptly.
• Action: Implement a post-purchase feedback strategy, such as surveys or email requests, to collect customer insights.

Incentivize initial loyalty program engagement with “low effort” rewards:

• Purpose: Offering small rewards for simple actions like following social media or writing reviews encourages initial engagement in the loyalty program.
• Action: Provide “low effort” rewards in your program to nudge customers towards further engagement and loyalty.

Boost repeat purchases with dynamic product recommendations:

• Purpose: Increase the likelihood of repeat purchases and boost customer retention rates.
• Action: Leverage data and customer insights to curate personalized product recommendations tailored to individual preferences and behaviors. This can be achieved by analyzing past purchases, browsing history, and even demographic information.

Provide exceptional customer service with live chat support:

• Purpose: Encourage customer retention by creating a sense of exclusivity and appreciation, fostering stronger brand loyalty.
• Action: Extend privileged access to loyal customers through early access to sales, new product launches, or exclusive offers. This could involve allowing them to shop before the general public or offering them additional discounts on specific products.

While implementing these strategies individually is possible, it can be challenging to achieve consistent and reliable performance when utilizing separate tools for each approach. Dedicated loyalty software solutions, such as LoyaltyLion, offer a comprehensive approach to drive brand loyalty throughout the customer lifecycle.

Key Takeaways

The ongoing success of an ecommerce store hinges upon its ability to cultivate customer loyalty and retention. Retaining your existing customers not only secures recurring revenue streams but also fosters a loyal customer base, which is central to long-term profitability. To achieve this, your business must prioritize quantifying and tracking retention rates while implementing diverse strategies to maintain customer engagement.

Book a demo with us today to find out how investing in a dedicated loyalty software solution such as LoyaltyLion can streamline retention efforts and drive brand loyalty throughout the customer lifecycle, ultimately propelling sustained growth and success.