You’ve probably heard the statistic that it’s 5x more expensive to keep a customer than it is to obtain a new one. (Or 10x more expensive, or 25x… this stat has been making rounds for a while.)
Whatever the exact figure is, it’s a critical point for business owners to understand. This is especially true for ecommerce businesses, where competition grows more fierce by the day.
Consumers are inundated with options — and you need to put in the work so you can stand out from the crowd, win them over, and keep them coming back in the long run.
But what is this work I speak of? Glad you asked.
In this article, we’re going to explain the value of customer loyalty and retention, the difference between the 2, and actionable steps you can take today to improve them both.
How to Increase Customer Loyalty
Here’s an overview of the 10 strategies and tactics we’ll cover:
- Create a customer loyalty program
- Send email and SMS shipping notifications
- Calculate and track your customer retention rate
- Make sure customer returns are easy
- Send out customer surveys to see how happy they are
- Engage customers on as many channels as possible
- Show your customers that you really care
- Consider a subscription or auto-ship option
- Give a last-minute offer to customers who want to cancel
- Be honest about your mistakes, then fix them
But before we dive in, let’s get something straight:
Customer Loyalty vs. Customer Retention
Before we explore our 10 juicy customer retention and customer loyalty strategies, let’s go over the key differences between the 2 concepts.
Customer loyalty and retention intersect in a lot of ways (and can both be improved using similar strategies), but it’s important to note the difference:
- Customer retention is more like a mathematical equation. It’s looking at transactions — the number of customers who have purchased from you more than once. Businesses use customer retention strategies to make sure these customers buy again.
- Customer loyalty, on the other hand, casts a wider net. Loyalty is about building relationships and turning your customers into raving fans — fans who will recommend you to everyone they know, and will buy from you even if your competitor has an irresistible sale or a cool new product.
In short, every loyal customer is a retained customer, but not every retained customer is a loyal customer.
A retained customer hasn’t bought from your competitor… yet. But a loyal customer isn’t even tempted to stray from your brand.
Now, let’s get started.
10 Ways to Improve Customer Loyalty and Retention
Start a Customer Loyalty Program
When you do it right, these programs can work wonders for increasing customer loyalty. It’s right there in the name, after all.
A customer loyalty program can take many forms, like:
- Referral programs: Customers get a reward if they bring on family and friends as new customers.
- Points systems: With each purchase (or other action you’d like them to perform), customers earn points that they can redeem for rewards.
- Partner programs: Find related or relevant businesses to partner with and combine loyalty efforts, like a free reward from your partner if they make a certain purchase.
- Premium programs: Customers pay to be a member, unlocking special rewards that unpaid members don’t have access to.
- Freebies and discounts: If you don’t want to implement a full-scale program, you can occasionally offer a reward when certain actions or goals are met.
Tarte Cosmetics offers a great tiered points-based reward program — the more points a customer earns, the more perks they have access to.
There are loads of great tools out there to start a customer loyalty program in whatever industry, like Automizely Loyalty for ecommerce, UpMenu for restaurants, and ShopKick for brick-and-mortar stores.
Send Shipping Notifications via Email and SMS
According to PwC’s March 2021 Global Consumer Insights Pulse Survey, participants said that the #1 thing they care about when shopping online is fast and reliable service.
So, if you can’t deliver on these basics, your customer loyalty and retention strategy is doomed from the start.
But there’s good news: this is surprisingly easy to accomplish. It’s all about managing expectations.
Home decor and furniture company Pier 1 uses AfterShip to let customers know when a shipment is out for delivery, the expected arrival time, and any delays that might occur in the process.
This keeps customers in the loop about their orders and instills confidence that service will be reliable (even if, for some reason, it isn’t as fast as they would like).
Measure Your Current Customer Retention Rate
To make progress in the future, you’ll need to know where you are right now. Start by measuring your customer retention rate over a specific period of time, like the last year, quarter, or month.
Here’s how to do it:
- Look at the number of customers you had at the end of the period.
- Subtract the number of new customers you got during that period.
- Then divide that total by the number of customers you had at the beginning of the period.
- Multiply by 100 to get a percentage, and voila!
Keep in mind that a 100% customer retention rate probably isn’t going to happen.
Take Lingopie for example, a subscription service for language learning that uses TV content. The company measured a 79% customer retention rate over a period of 4 months. This may not seem high, but it’s outperforming big competitors like HBO Max, Netflix, and Disney+.
Research shows that the average customer retention rate in the retail industry is 63%, so if you’re in that ballpark, you’re doing well.
Make Returns Smooth and Hassle-Free
Nobody likes a complicated, drawn-out, frustrating returns process.
In a survey from Supply Chain Quarterly, 84% of participants said that returns play an important role in their opinion of a brand, and 74% said that retailers need to improve the returns process.
To step up your returns game, be clear with customers about the steps they need to take, then minimize the time and number of clicks it takes to get to the finish line. Consider a self-service app like AfterShip Returns Center to make returns quick and simple.
Running shoe company Brooks has a straightforward returns process (and a great 90-day, no-questions-asked return policy).
After applying for a return on the website, customers receive a brief email with the 3 steps they need to take to return their shoes, how long to expect before their refund, and a link to track their return once it’s sent.
Ask Your Customers What They Think About You
How can you tell if customers like you enough to keep shopping with you? Just ask them.
You’ve probably received tons of surveys from other companies. Turn that into fuel for your own customer loyalty and retention strategy.
One tried-and-true option is the Net Promoter Score (NPS). It involves asking customers, on a scale of 1-10, how likely they are to refer a friend to your company. People who give a rating of 9 or 10 are “promoters,” or people who are more likely to generate word-of-mouth business for your brand.
Jewelry company Taylor & Hart takes its NPS score seriously, automating the process and continuously following up on customer surveys.
That’s how they’ve managed to keep one of the highest NPS scores in their industry — and strong customer loyalty and retention to back it up.
Keep Customers Engaged Across Multiple Channels
Today’s customer has multiple touchpoints with brands, from emails to text messages to social media. The more of these channels you can engage customers on, the better suited you’ll be on your quest to master your customer loyalty and retention strategy.
A good start is to install omnichannel marketing apps like Automizely Marketing and Automizely SMS. These tools let you continuously engage and interact with your customers via channels like email marketing, push notifications, SMS (text messages), and more.
Consider engagement in an app or loyalty program. It’s natural for members to “fall off” before completing any number of actions, like making a purchase, logging information, or signing up for a new account.
A simple solution is using push notifications to bring them back in.
Fishing app Fishbrain does this by sending a push notification to users’ phones when they start to log their catch, but don’t finish the process. A quick, well-timed message like this can work wonders for your customer retention and loyalty.
Make Your Customers Feel Special
There’s nothing like getting a gift you don’t expect. Every once in a while, share the love with your customers so they know you’re thinking about them.
This can come in many forms, like an occasional freebie for no reason or a quick note of appreciation.
A wonderful example of this is from T-We Tea, a local tea shop in San Francisco. They saw an online order pop up from a repeat customer and decided to slip in a kind note with her shipment.
The note reads:
“OMG, Hi Francesca! So lovely to see your name come up! We miss you dearly up here but know you are always doing epic things! XOXO, Team T-We”
In a blog, Francesca wrote that because of this, T-We will always be one of her top stops when she wants loose leaf tea. T-We really knows how to gain customer loyalty.
Offer a Subscription Service or Auto-Ship
According to McKinsey, subscription ecommerce sales have skyrocketed in recent years, growing from $1.2 billion in 2014 to $7.5 billion in 2018. And it’s just going to keep growing.
This kind of service works well for a lot of product types, including food, supplements, clothing and accessories, household supplies, pet products, personal hygiene products, cosmetics, and more.
So if you sell these products, or any other products that customers need or want regularly, consider adding a subscription or auto-ship option to your store.
Vitamin Shoppe does this by offering a monthly vitamin refill to customers. As an added incentive to sign up for the service, customers get an extra 10% off their orders and free shipping.
For someone who knows they’ll want a refill, this is a total no-brainer.
Entice Customers to Change Their Minds About Leaving
Have you ever started canceling a membership, only to be drawn back in with a special offer? Don’t be ashamed — many of us have been there.
That’s because it’s an effective customer retention strategy. Sometimes, an extra perk is all a customer needs to change their mind.
Adobe uses this “intervention” technique to keep members from canceling their Adobe Creative Cloud subscription after the free trial is over. The company offers two free months of the service, enticing them to sign on for a one-year subscription.
In an ecommerce setting, this strategy can be used to build customer loyalty and retention when a customer takes steps to cancel commitments like their product subscription, auto-ship, or loyalty program membership.
Admit When You Make a Mistake — Then Make It Up to Them
As much as we strive to be perfect, mistakes happen. Instead of brushing them under the rug, speak to your customers with transparency and integrity.
Acknowledge that you goofed and that you’re willing to compensate for it.
Cosmetics company e.l.f. does this beautifully. When a first-time customer experiences a delay in their shipment, e.l.f. sends a special email apologizing for the inconvenience, explaining that it’s not the company’s status quo, and offering a $10 gift card to the store.
Not only does this exemplify your values as a company, but it also greatly increases the likelihood that the customer will make another purchase using their gift card.
Customer loyalty strategies like this are a true win-win — for customers as well as the companies who serve them.
Creating Customer Loyalty and Retention Is Worth the Work
Learning how to gain customer loyalty can be a tough road. First, you’ll need to understand your customers and what they expect from you. Then, you’ll need to get creative in implementing your insights.
But when you put in the work, the value for your business is immeasurable.
To wrap up, here’s an overview of the 10 steps we discussed to boost your customer loyalty and customer retention:
- Design a customer loyalty program with an app like Automizely Loyalty
- Make the experience reliable with email and SMS shipping notifications
- Calculate your customer retention rate and keep track to make sure you’re growing
- Make the returns process as smooth and easy as possible through an app like AfterShip Returns Center
- Measure your Net Promoter Score (NPS) by sending out customer satisfaction surveys
- Use an omnichannel approach to engage your customers and build deeper relationships, with apps like Automizely Marketing and Automizely SMS
- Surprise your customers with a special gift or message to make them feel special
- Offer a subscription or auto-ship option if you have a product that needs a refill
- Convince customers to stay on board with a special offer when they start the cancellation process
- Be transparent about your mistakes and go the extra mile to apologize
That’s a wrap. Now it’s your turn to get out there and turn those customers into raving fans. 🏆