The value of customer loyalty should never be underestimated, especially in ecommerce. If you assume that the customer journey ends as soon as the user completes a purchase, you’re making a huge mistake.
The point of conversion should be looked at as the start of a long-term relationship with the customer. Immediately after a purchase is when the customer is the most engaged and excited about your brand. This is where conversion rate optimization (CRO) comes into play. If your site isn’t optimized to meet the needs of the customer, it’s very unlikely that you’ll be able to convert that sale into a long-term customer relationship.
Every business needs repeat customers in order to drive growth. But that’s easier said than done. In this article we’ll take a closer look at how to improve your brand’s customer retention through optimization, and why it’s crucial for the long-term success of your business.
Table of Contents
Why is customer loyalty important?
To say that there are significant benefits to customer retention is a huge understatement. Research has shown that after a single purchase, a customer has a 27 percent chance of returning to your store. If that customer makes a second or third purchase, their likelihood of returning to your store for another purchase in the future increases to 54 percent.
The bottom line is: you’re going to find it very difficult to scale your business if your retention rate is low. Constantly trying to acquire new customers without focusing on your retaining current customers is an expensive and inefficient way of running a business. Customer acquisition requires a large amount of time and resources that would otherwise be allocated to growing your business in other ways. If you want to foster sustainable growth for your business, the first step should be to focus on increasing retention. Specifically, higher customer retention will equate to:
Lower Customer Acquisition Costs (CAC)
- Customer Acquisition Costs (CAC) is simply how much it costs you to acquire a new customer. For example, in 2019 if you spent $50,000 on lead generation and got 50 new customers from it, your CAC would be $100. The greater your customer retention rate is, the lower you’ll need to spend on acquiring new customers.
Higher Customer Lifetime Value (CLTV)
- Customer Lifetime Value (CLTV) is a metric that predicts the net profit a business can expect to receive from the entire duration of a relationship with a single customer. It considers a customer’s revenue value, and compares that number to the company’s predicted customer lifespan. The greater your customer retention rate is, the greater your CLTV would be because you’d expect a larger net profit from a single customer.
- Additionally, 39.4 percent will spend more on a product if it’s from a brand they’ve purchased from before, even if there are cheaper options elsewhere. That kind of price-blind dedication is invaluable in the hyper-competitive modern eCommerce space.
5 Optimization Tactics for Improving Customer Loyalty
Focus on personalization
Personalization is one of the most effective and simple ways to improve your business’s customer retention. If your customers can’t develop a connection with your brand, it’s very unlikely that they’ll be motivated to continue purchasing from you. Personalization is a key part of the user experience that helps build a connection between a brand and their target customers. At The Good, we focus on creating personalized, customer-centric user experiences for ecommerce sites. Here are a few proven-tactics we recommend you try on your own:
- User-specific email campaigns triggered by a customer’s actions on your site. Users who click one link are routed to one targeted email drip campaign, while those who click a different link trigger a completely different email drip campaign. Email is still a necessary way for brands to communicate and engage with their customers, so tailoring your email campaigns to the needs of the individual customer will likely improve retention and conversion rates. This will also help segment your customer base and give you a better idea of what your different segments prefer and engage with.
Design a consistent shopping experience across your brand
Customers expect the shopping experience you provide to be the same both online and offline. Few things are more jarring for customers than having a good shopping experience at a brick-and-mortar location, only to find the website confusing, outdated, and clunky.
Don’t expect your retention rate to be high if there is a significant discrepancy between your online and offline experience. Conversion optimization tactics can help ensure that your online shopping experience is just as pleasant as the offline one.
Reward your loyal customers
Give your loyal customers a good reason to continue purchasing from you. If you don’t regularly recognize their loyalty, they’ll switch over to a brand that does. Your goal is simply to make your best customers feel like you truly do value them. You want them to know that you’re grateful for their business and provide them with the best possible shopping experience. Here are a few successful tactics we’ve used in the past to improve customer loyalty programs:
- Special events and exclusive sales
- Early access to discounts
- Pre-order new products/lines
- Ability to give input on product development
e.l.f. Cosmetics has an impressive loyalty program that offers a wide range of benefits for its different member tiers. You earn points for every purchase made on their site, and can utilize those points to gain early access to sales, as well as receive periodic discount codes reserved exclusively for loyalty members. The more points you receive, the more benefits you’re able to utilize. They even offer points for referring a friend to sign-up. This tactic not only increases the brand’s marketing reach but also fosters a sense of community that feels authentic and rewarding.
Reinforce your customer service
Customer Service feedback and digital dashboards create a continual feedback loop that serve to improve initiatives that help customers make purchases quickly and easily. With this feedback loop, Brand Managers are able to identify initiatives that create a poor customer experience. As a result, assessing return on investment and allocating marketing dollars become more straightforward.
- Offer multiple customer support options. Giving your customers multiple options for customer support is very important, especially in the highly competitive ecommerce environment. Urban Outfitters provides their customers with 24/7 service through three intuitive customer support options: social media, customer support phone number, and a chatbot. Improving your customer support efforts may seem like a low-ROI venture, but the benefits you’ll experience in the long-term because of it will far outweigh whatever your initial investment is.
- Implement a live chatbot. If you aren’t already utilizing a chatbot on your site, you’re missing a significant opportunity to connect with your customers. If you’re operating a small business and can’t offer customers 24/7 support, a chatbot is an excellent alternative that can still provide customers with valuable help and information.
Adapt to the preferences of your customers
Conduct testing to determine how your customers use your site. Collect data from analytics, heatmaps, and user testing. Either select and use advanced tools yourself or engage with a conversion optimization partner to help.
With the results of your testing program, identify key trends in how your customers use your site. This data will help inform any changes you may need to make to improve your customer experience. Building a customer-centric website will have a positive impact on your customer loyalty, as well as your conversion rate.
Maximize your existing CRO efforts
Maximize your existing retention efforts CRO is like steroids for your existing customer retention efforts, creating a virtuous cycle. Customers come to your site and, due to your CRO efforts, convert at a relatively high rate. When they come back to your site, due to email marketing or retargeting, the repeat conversion rate is also relatively high because of the CRO techniques you’ve employed.
In a sense, it’s like compound interest that keeps building on previous investments. CRO boosts both your initial conversion rate and the conversion rate of repeat customers.
Want to Improve Customer Loyalty? Invest in the Experience.
Optimizing your site to increase customer loyalty could be one of the most beneficial things you could do for your business, yet it can also be one of the most challenging.
Focus first and foremost on user experience, and trust that it will amplify the effects of all your other marketing efforts. If you want to improve your business’s customer retention, start by taking a good look at your current customer journey and begin testing and optimizing different variations and improvements.
For ecommerce managers looking to optimize their website for a better retention rate, it may be time to consider investing in conversion rate optimization (CRO). Optimizing your website isn’t a guessing game. If you want impactful, long-term results from your optimization efforts, you’ll need to perform extensive testing and research to determine where your customers are getting stuck on your site.
If you’re looking to level up your conversion optimization expertise, The Good recently launched a private online community for just that. The Conversion Growth Lab™ is a place for ecommerce leaders to learn from expert industry practitioners and gain deeper insight into CRO.
By: Jon MacDonald
Jon is founder of The Good, a conversion rate optimization firm that has achieved results for some of the largest online brands including Adobe, Nike, Xerox, The Economist, and more. He regularly contributes content on conversion optimization to publications like Entrepreneur and Inc. He knows how to get visitors to take action.