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You've read dozens of articles, tried hundreds of tactics, and promoted many sales, but your customer retention rate isn't where you want it to be.
Tip: Before trying nine other strategies, start with building the right foundations.
As much as we wish we could replicate the success of one brand on our own, customer retention requires way more work. There's truly no general strategy.
"You should always be aware and mindful of Unit Economics and how you're structured to make money. Then map your customer journey, audit how you collect data and what you collect, find out where your biggest issues lie and prioritize what you will address," explains Juliana Jackson, Digital Analytics Architect at Media.Monks.
She also suggests collecting qualitative research (through surveys, NPS scores, and interviews) to craft a complete story. This data will be more valuable than anything else.
Your retention strategies depend on your brand, your offerings, and your customer's needs. What works for some businesses won't work for others.
We'll dive into a few common factors that impact customer retention. Plus, share tactics that work for some of the top-growing DTC brands, hopefully inspiring your own creativity.
First, let's dig into some basics.
What is customer retention?
Customer retention rate is a metric that measures a customer's loyalty over a given time. This metric is how you understand how impactful your customer retention strategies are.
Customer retention aims to extract as much value from your current customer base by providing memorable, exciting, and seamless shopping experiences. A high customer retention rate means shoppers continue returning to your store to buy more of your products without considering competitors.
How to measure your customer retention rate
To measure your retention rate, you need
- Choose the length of time you want to measure (three, six, 12 months, etc)
- The total number of customers at the beginning of the period
- The total number of customers at the end of the period
- The total number of customers acquired during the period
Once you have these numbers, you can follow the calculation below.
However, this metric alone doesn’t give you all the necessary answers. Customer retention is finicky, so you need to create your own playbook.
"There is no 'perfect' metric. You need to look at different ones in pairs. For example, CAC/LTC is critical in combination because they determine your net contributional margin over various payback periods. We focus on LTV over a period: one month, three months, six months, etc… And the most important of those is the month one retention. Focus there first, and watch your 6-month LTV skyrocket," explained Steve O'Dell, Founder of Tenzo Tea.
“My TLDR: increasing retention rate is hard, and it rarely has anything to do with the smarts of your marketing team.” - Juliana Jackson, Digital Analytics Architect at Media.Monks
Factors that affect customer retention
You can send all the emails promoting new products that you want, but if you have poor business practices, your retention is doomed anyway. Here are seven factors to consider:
- A high-quality product
- A strong brand mission and vision
- A seamless purchasing experience
- How fair your pricing is
- The competitors in your market
- How many customers trust you
- If you set reasonable expectations with customers
If you check these boxes, it's time to consider what experiences you can create to improve brand loyalty and drive repeat purchases.
“Oftentimes, I think marketers forget that it starts with a product. The best retention strategy in the world cannot keep customers returning if they’re not happy with your product offering. If your customer retention rate is looking grim for a specific product, look into reviews, feedback, and customer service inquiries. Compare that product’s retention with another product’s retention rate.” - Julia Perez, CMO at OWYN
9 customer retention strategies by ecommerce marketing experts
Even though your retention strategy will be unique to your brand, it helps to get inspiration from others who are doing a good job. Here are nine examples from several growing brands.
1. Solve a real pain point for customers
How often do you buy anything without a purpose? Sure, everyone has guilty pleasure purchases, but most of the time, we make purchases to solve a problem.
- Your original skincare routine isn't working anymore, so you need new products.
- Your purse is scratched up, so it's time for a new one.
- Your chair gives you back pain, so you want an ergonomic chair.
You can tell… Most purchases are driven by a specific pain point.
And if you want customers to return to your store and continue purchasing your products, your brand needs to be the best option for solving that pain point.
How? First, understand what the pain point is.
Let's look at KURU Footwear as an example. This comfortable footwear brand centers its messaging on how its shoes will eliminate foot pain, which you can find across Google Searches, its website, its email content, and more.
Check out what shows up when you search KURU Footwear in Google:
When you click on the website, the same "pain relief" and "comfortable" messaging is on the homepage.
"This is built into our reason for existing. Our technology eliminates foot pain (solving the customer's real pain point). When your product eliminates a REAL pain point for your customers, they will naturally come back asking for more of the same," explained Sean McGinnis, President at KURU Footwear. "We validate this with every NPS survey we send to customers post-purchase, and also use our customer product reviews to validate each style."
2. Create educational content and distribute it
You wouldn't purchase a new software product and not expect a tutorial, right? Retail products must meet the same standard.
Plain and simple: a customer needs to use your product correctly to see successful results. When that happens, they will purchase from you again.
Let's say you purchased a serum to improve hair growth. For a product like that, you're not going to see results after one use. So you need to know
- How often to use the serum
- How long to use it for
- How you should apply it to your scalp
- When to expect results
But if the brand doesn't provide any of that information upfront, there's a high chance customers misuse the product, see poor results, and never purchase from it again.
This is why customer education is so important. In fact, 68% of customers will use a product more if they know how to use it, according to a TSIA study.
As an ecommerce brand, there are many channels you can use to share educational content—from TikTok to a good old-fashioned blog. Emails, however, are essential for sending post-purchase educational flows.
These flows are the best way to hit up new shoppers with valuable tips. Here's a great example from Green Philosophy:
In this email, Green Philosophy is educating shoppers about how to clean their pillows—a great way to ensure product quality. If customers keep the pillows in good shape, the product will last longer, they'll feel satisfied with their purchase and are more likely to purchase from Green Philosophy again.
3. Optimize your product pricing
We all know basic economics around supply and demand, but there's quite a bit more strategy involved in pricing optimization for ecommerce products.
Pricing optimization is when you analyze customer data, product quality, and market data to determine the best price to attract customers, drive enough sales to be profitable, and satisfy quality expectations (for the price the customer paid for your product).
You need to be careful about your pricing strategy because if the cost of a good doesn't match the quality in consumers' eyes, they won't purchase from you again. Yet, you don't want to undervalue your products in a highly competitive marketplace.
That's why pricing optimization is about more than just looking at what your top 1-2 competitors are doing. Instead, you'll look at
- Demographic data
- Geographical market data
- Historical sales data
- Operating costs (materials, inventory, warehousing, shipping, etc)
- Demand fluctuations
- Competitive advantages (and disadvantages)
- Lifetime value and churn data
The most challenging part is aligning the value customers get from your product with your pricing. Tools like Dexter can help you optimize pricing through A/B tests. Additionally, you can
- Keep track of your customers' willingness to pay by sending abandoned cart emails that ask shoppers why they abandoned their cart.
- Use predictive analytics to see if a specific customer segment is more likely to abandon their shopping session than others.
Pricing optimization is an ongoing task. Market trends always change, which will always impact your cost of goods, operating costs, and product demand.
4. Send direct mail to current customers
Thinking back to the days of direct mail, was there a catalog you looked forward to receiving? For me, it was the Sears Christmas Catalog. I'd rip it out of the plastic and sit for hours, flipping through the products and sales.
It was exciting, and I can't say I share the same thrill when I receive an email from a brand.
That's why some brands are revisiting the idea of sending direct mail to current customers. And it’s not just sending a thank you note in the same package the customer is already getting. I'm talking about sending a dedicated postcard, catalog, or letter to bring recent customers back for another purchase.
Julia Perez, CMO at OWYN, recently dabbled in direct mail as a retention tool. "We had the idea to start sending direct mail to spread awareness about our new retail expansion (we are an omnichannel brand). But when I found out about PostPilot, we pivoted and have been using direct mail for DTC initiatives that address churn. We know that customers are inundated with emails from companies, so we thought, 'let's try to reach them and get them to come back in another way—through their physical mailbox.'"
Right now, the OWYN team sends postcards to customers who have churned after a certain number of days. These shoppers get a 30% discount to use. Here’s what it looks like.
According to Julia, these campaigns are seeing a 15X ROAS.
"I think that means they like it! For direct mail, test multiple offers, be mindful (but not granular) about segmenting, and take the advice from the good people at PostPilot because they are experts," she shared. "Marketers need to think beyond email marketing as a retention strategy in 2022 and beyond. Everything must be multi-channel. SMS, direct mail, email, and even ad retargeting can be considered retention marketing."
5. Gamify your products by giving them a “collectible” feel
This tip will only work for some brands, but Braxley Bands is the perfect candidate for building excitement by making products feel collectible. They already have a ton of SKUs to choose from, but they often release new bands in batches, calling them "collections."
Making the bands feel "collectible" is done by introducing every collection as a limited edition one. The brand also uses the hashtag #JoinTheBand for customers to show off their bands and engage with Braxley on social media.
6. Double down on customer support
Nothing kills a shopping experience more than bad customer service. Investing resources behind your customer support channels is essential if you care about your retention.
Every shopper expects
- An easy way to contact your support
- A quick response
- A fair outcome
If you don't offer that, the results can be detrimental (to say the least).
One recent survey found that 65% of customers will switch brands because of a bad experience. But the numbers aren't all bad; three out of five customers said good customer service is essential for them to feel loyal to a brand.
What can you do? Make it easy for customers to reach out if they have questions. Your contact page should be easy to find, and you can use channels like email to let customers know how they can get help. Check out this example from Plantmade:
Tip: Instead of expecting your customer support team to continue "putting out fires," help make their life easier by learning how to prevent fires simultaneously and show customer appreciation.
“Product and product experience is by far the most important factor. If you have a great product and pair that with a world-class experience, people will come back again and again. The onboarding experience is incredibly important. Always make sure you're under-promising and over-delivering.” - Steve O’Dell, Founder of Tenzo Tea
7. Set up a referral program
Referral programs are a common acquisition strategy—getting your most loyal customers to recommend your brand drives impactful results.
But did you ever consider how a referral program can also be used for customer retention? The benefits are two-fold:
- A referral bonus shows appreciation toward your loyal customers, giving them another reason to stick around.
- 92% of consumers trust recommendations from friends and family. This strategy alone lowers CPAs of these new customers and gives you a chance to provide them with an equally good experience that turns them into evangelists.
When you remind customers that they can engage with your referral program, they relive all of their positive feelings toward your brand (which could inspire them to make repeat purchases).
Referral programs have many benefits, but if you need help figuring out where to start, we have an in-depth guide on how to build a referral program that works here.
8. Create a loyalty program with exclusive experiences
For many years, brands have used loyalty programs to improve retention. We've all engaged with them (Starbucks, Sephora, and Petsmart… To name a few).
But it isn't that these programs exist that makes them successful—it's the experience the brand provides to those who are members.
Are there any exclusive perks you can offer to loyalty members? You can drive more purchases at the same time by making these experiences only available to members on a specific tier, like VIPs.
"I really love Aura Bora's secret menu. It's an experience they created that's exclusive to loyalty members who have reached a certain status. I love that they actually keep it an exclusive experience instead of touting something as VIP, then opening it to all," she said.
Bonus: remind customers about their points balance and expiry
Customers always sign up for a loyalty program and forget about it. Part of this goes back to what I just said about providing an exciting membership experience that keeps users engaged.
However, you should also reach out to customers to remind them about the perks of participating in your program. You can do this easily by reminding them how many points they have, how far off they are from getting a valuable reward, and if/when their points expire, so they act immediately.
9. Send winback campaigns
Haven't heard from a customer in a while? Send them a winback campaign to remind them that they're missing out on fantastic products. These emails benefit CPG brands, where customers eventually need to restock their goods.
Plan to send these emails around the time when a customer should be close to running out of product. And even if you don't sell consumable items, you can still build excitement for past shoppers and get them to make another purchase.
Here are a few tips for your winback email campaigns:
- Add UGC and reviews to build trust
- Share interesting information, like a new product, current bestsellers, product benefits, or a special discount
- Let customers know how they can reach your customer service team in case they have any questions or need help
And make it easy for customers to make these purchases. For example, Graza shares a QR code that makes it easy for customers to reorder an item immediately from the container.
“This is great for people who try it the first time by picking it up from the store rather than buying DTC,” said Alex.
Retention is far more important than acquisition
Retention looks different at every business, and there are many factors that play into whether you have a successful retention rate.
Either way, there's one thing we can all agree on: Retention is far more important than acquisition.
Steve O'Dell says it best, "I'd go so far as to say that there is not a great company in the world that doesn't have world-class retention systems. Improved retention also unlocks more aggressive acquisition or increased net income."
The strategies mentioned in this article will help you create new methods for improving your customer retention and LTV. But don't forget to start with the basics—and build the right foundations.