Ecommerce Customer Retention: What Is It and How to Improve It

Tackling ecommerce customer retention can seem like a daunting prospect. If your store is struggling to keep the new customers you acquire, we’re here to help.

Customer retention is valuable to your ecommerce store. Research shows that existing customers spend 67% more than new customers. So as an ecommerce store owner, customer retention should be one of your top priorities.

In this article, we’ll walk you through the following:

• What ecommerce customer retention is.
• How to calculate your ecommerce customer retention rate.
• The benefits of improving your retention rate.
• Some retention rate-improving strategies you can implement today.

Let’s start by understanding what ecommerce customer retention is. ?

What is ecommerce customer retention?

Ecommerce customer retention is when customers continue buying from your ecommerce business over time.

It involves building relationships with your customers by meeting their expectations, providing exceptional customer service, delivering high-quality products and services, and so on.

When customers get all the above and more from your business, they will likely return to buy more from you.

Eventually, they will become loyal to your brand, which can be useful to you in two ways:

• When you bring in new stock, you will have guaranteed revenue from your loyal customers. This is why customer retention is often called the recurring revenue model. 
• Your loyal customers can become brand ambassadors and introduce more customers to your business.  

Customer retention is very important to any ecommerce business owner. So with this in mind, let’s calculate your customer retention rate.

How to find your customer retention rate

Ecommerce customer retention is a metric called customer retention rate (CRR).

CRR is simply a measure of your current customers who make repeat purchases over a period of time (expressed as a percentage). A high customer retention rate generally shows more customers returning to buy from you.

You can work out how well your store is doing in terms of customer retention using the CRR formula:

? Customer Retention Rate (CRR) = [(Number of Customers at the End of a Period – Number of New Customers Acquired During the Period) / Number of Existing Customers at the Start of the Period] x 100

To understand how this formula works, let’s have a look at how this works for 2 months. 

Assuming your store had 5,000 customers when the first month started. During the two months, you got 1,000 new customers, and at the end of the second, you had 5,600 customers. This would be your CRR: 

? CRR = [(5,600 – 1,000) / 5,000] x 100 = 0.92

To then work out this as a percentage, times it by 100. Like so:

In this example, your store has a CRR value of 92% over the 2 months. Now, should your ecommerce business have a similar CRR value? Let’s find out how to know if your store has a good retention rate in the next section.

How to know if your store has a good retention rate or not

There is no universally good or poor customer retention rate. This is because it varies based on many different factors, like the industry you’re in, your product type, your customer base, your business model, and so on. 

? Reports reveal that the average customer rate is about 28%, and a value between 15-30% is considered generally good.

This is quite a wide range. So most businesses use other, more specific metrics like the average order value to measure their success or failure. 

We recommend comparing your returning customers against your own benchmark. This enables you to grow over time by looking at your own CRR and improving it by tracking it in a spreadsheet and setting achievable goals. 

Alternatively, there are other customer retention metrics that you can measure to see how well your business is doing, such as:

• Customer lifetime value (CLV) – how much revenue a customer brings to your ecommerce store throughout their relationship with your business.
• Churn rate – an annual percentage rate at which customers stop subscribing to your products/services.

The benefits of improving ecommerce customer retention

Customer retention is extremely important to ecommerce businesses. If you’re an ecommerce business owner, you should always work to keep your CRR value as high as possible. Here are a few reasons why. 

Increased revenue from loyal customers 

Loyal customers will give your business more revenue than new customers. As mentioned earlier, existing customers spend 67% more than first-time customers. This shows that retaining your customers can increase your business’s revenue over time. 

That’s not all. Increasing your customer retention rate can also boost your ecommerce store’s profitability.

? A study by Bain & Company revealed that increasing customer retention by 5% can boost a business’s profits by close to 25%.

From this, we can comfortably conclude that loyal customers are more profitable. 

Reduce customer acquisition costs (CACs)

It’s more expensive to acquire new customers. To do this, you might have to:

• Pay for Google or social media ads. 
• Run marketing campaigns.
• Offer promotions with heavy discounts.
• And more. 

All of the above are quietly costly, and their costs keep rising. This is because customer acquisition in the current business climate is heavily competitive. As a result, some businesses are forced to pay more than they did to get customers to visit their websites. 

The good news is that customer retention helps to combat these high customer acquisition costs (CACs).

? According to Campaign Monitor, it costs 5 times more to acquire first-time customers than it does to retain existing ones.

This is to say that customer retention is a cheaper option for getting more purchases on your ecommerce store, so you should focus on it. 

Positive word of mouth and brand reputation

Customer retention is not just about squeezing more money from your customers over time. It can also help you to acquire more customers via referrals and build your brand. Customers that are loyal to your business can help you to achieve this. 

Loyal customers will likely recommend your brand to new customers, playing a crucial role in customer acquisitions. If you have loyal customers, they are likely satisfied with your services.

? Studies reveal that 77% of customers will recommend a brand even after only a single positive experience. This value could be higher for customers who’ve purchased from you multiple times. 

At the same time, new customers trust recommendations from individuals who’ve engaged with a business. This is why most new customers read reviews before buying a product online. 

A better understanding of customer needs

The longer a customer stays with you, the better you will understand their needs. You will get more knowledge on their purchase behavior, website behavior, product preferences, and what they value. 

This information will help you refine your products or services to meet your customers’ requirements better. This could display more accurate product recommendations, increasing the chances of conversion.

It will also help you build stronger relationships that can extend your CLV. A higher CLV proves that your customers bring more value to your business.  

Long-term growth and stability

Customer retention can also play a part in stabilizing your business and promoting its long-term growth. Repeat customers are a source of regular revenue for your business. With revenue coming in regularly, your business will have stable capital to fund its operations. 

? Businesses with stable customer retention report that 65 – 75% of their revenue comes from repeat purchases.

If you can retain more customers over time, your business will grow in the long term. They will bring in more revenue and customers, allowing you to control a large portion of the market share. 

We’ve just seen how beneficial it is to improve your customer retention. Now, let’s go through what you can do to improve it. ?

Ecommerce customer retention strategies

The key to retaining your customers is keeping them happy and engaged with your ecommerce business after their first purchase.

There are a few different ways you can do this, and in this section, we’ll walk you through some practical tips for improving your ecommerce customer retention rate. 

Personalize your customers’ experience

Personalization involves providing your customers with experiences shaped to suit their preferences. This helps your business to retain more customers because it makes them feel more valued and appreciated.

In addition, personalization enables you to deliver a more convenient customer experience and meet customer expectations better. Personalization is more important now since customers expect it, and they are disappointed if you don’t offer it.

? McKinsey’s Personalization report revealed that 71% of customers expect a personalized experience from a business.

At the same time, they’re willing to share personal information for it. This shows that customers value it highly. 

You can personalize customer experience by offering personalized product recommendations, content, and promotions. To offer personalized product recommendations on your WooCommerce store, you’ll need the Iconic Sales Booster for WooCommerce plugin. 

Personalize product recommendations with the Iconic Sales Booster plugin

Iconic Sales Booster for WooCommerce is a cross-sell plugin that allows you to cross-sell and upsell throughout a customer’s ecommerce journey on your store. This includes the product page, after a customer clicks the ‘Add to Cart’ button, at the checkout page, and post-purchase. 

With this plugin, you can personalize product recommendations by selecting specific products for which certain upsells or cross-sells will be suggested. This means that product recommendations will be more specific. 

It also allows you to customize the sales text when displaying these product recommendations to make it more appealing to suit your customers. 

With Iconic Sales Booster for WooCommerce, you can increase your ecommerce customer retention rate and average order value at the same time. 

Deliver exceptional customer service

Customer service is arguably the leading factor influencing customer retention.

? Exceptional customer service tends to attract repeat purchases, as 89% of customers will make a return purchase after a positive customer service experience. 

When delivering exceptional customer support, offer hands-on and hands-off solutions. With customer support teams who are well-trained to handle customer inquiries, you can have a hands-on approach to customer service. On the other hand, you can deliver hands-off customer service through the ‘My Account’ page.

To do this, you’ll need to customize this page and add content that will be valuable to customers after they purchase. This boosts customer satisfaction, and they will likely buy from your again.

Create custom account pages using the WooCommerce Account Pages plugin

To create custom account pages and add useful custom content to them on your WooCommerce store, you’ll need the WooCommerce Account Pages plugin. This plugin allows you to create as many custom ‘My Account’ pages for your customers. 

It gives you full control over this page, allowing you to add new tabs to it effortlessly. It also allows you to add custom content to it, and you can use this feature to add content that your customers might find useful such as user guides, an FAQ section, coupon codes, contact forms, etc. 

Implement customer loyalty programs

You should also implement programs that reward customers for making repeat purchases or engaging with your ecommerce website to inspire brand loyalty.

This rewards program can be a points system that customers earn and makes them eligible for certain rewards when they accumulate a given amount of points. 

? In a survey conducted by Annex Cloud, 87% of shoppers reported that they want ecommerce brands to have loyalty programs.

Since customers are always looking for deals, these rewards will motivate them to keep shopping with you so that they earn them. 

Loyalty programs can also benefit you as the store owner. They provide valuable customer data, for instance, their purchase frequency and favorite products. You can use this data to deliver your customers more personalized and engaging experiences conveniently. 

Have a user-friendly website

To provide a seamless shopping experience, you must ensure that your website is user-friendly. It should be mobile responsive and fast-loading; customers should navigate it easily. A user-friendly website will improve customers’ experience and increase the likelihood that they will buy from you again. 

A huge part of making your ecommerce website user-friendly is improving how you display your products. You can do this on your WooCommerce store using the WooThumbs and WooCommerce Show Single Variations plugins. 

Improve product display with Woothumbs and Show Single Variations plugins

When you display variable products in groups, it can be difficult for customers to find their preferred variation. This might frustrate them, which lowers their overall experience. Fortunately, you can avoid customer frustration using the WooCommerce Show Single Variations plugin.

This plugin allows you to display variable product options as single products on the shop page, product page, search results, and filtered results. This helps your customers to find what they need in just a few clicks. They will save time while looking for products and have a seamless browsing experience. 

? Product images help to sell your products in ecommerce. In fact, 75% of customers rely on product images to make a purchase decision.

You can use the WooThumbs plugin to upgrade your WooCommerce store’s product gallery and help customers make more informed purchase decisions. 

This powerful plugin allows you to create a custom layout for your product image gallery, add multiple product images per product variation, and even embed a product video. It gives your product gallery a slick and visually appealing appearance, which helps attract customers interested in your products. 

Use email marketing

Email marketing is a marketing strategy that provides a direct communication channel with your customers. It helps ensure customers don’t forget your business after buying from you.

? Email marketing is such an important tool, and according to Orbelo, 80% of small businesses use it for retention marketing. 

To make it more effective, you can use emails to inform your current customers of sales, promotions, new products, etc. You might also send them emails with special promotions for occasions, like their birthdays, to connect with them and show that you appreciate them. 

Allow seamless returns and refunds

Your returns and refunds policy can make a difference between your business retaining customers and losing them.

? According to Insider Intelligence, 57% of customers abandon a brand after a negative return experience. 

If you don’t want to lose customers due to this, you should implement a hassle-free return and refund policy. This will inspire your customers to trust you, and they will be confident in making repeat purchases from you.

In addition, this can also boost your reputation and win more customers for you. 

Create engaging content

You can boost customer retention by creating engaging, entertaining, or informative free content. This could be in the form of videos, blog posts, or social media updates. 

For example, if you deal in cosmetics, you can create a blog that offers tips and advice on skincare or makeup. This content boosts customer engagement with your business and provides more value to them.

You can also include social sharing links on this content to increase interactions further. By keeping your customers’ attention, you will likely retain their loyalty. 

Offer promotions and sales regularly

Sales and promotions such as discounts, free gifts, special offers, and other incentives encourage customers to make repeat purchases. This is because customers are always looking for good deals and to gain something more from a purchase.

? While 70% of customers buy to solve a problem, the remaining 30% buy to gain something. 

For this reason, you can incentivize your existing customers to do business with you again by offering periodic sales, discounts, or exclusive promotions. 

Implement subscription-based models

Implementing a subscription-based model can improve customer retention if you sell products with recurring use, such as consumables.

Let’s say you sell products that require frequent replenishment, like cooking supplies, dog food, coffee, etc.. You can let your customers subscribe to a regular supply of these products. Then replenish them as soon as they run out. 

Subscription-based models automatically enroll customers into a repeat purchase plan, making it easy and convenient for them to do so. This convenience can help to increase retention rates. 

Conduct post-purchase follow-ups

You can also keep customers coming back by following up after they’ve completed a purchase. The order confirmation/thank you page provides an excellent opportunity to do this.

You can customize this page and make it work for you in retaining your existing customers by:

• Adding useful content to it, such as user guides, an FAQ section, etc., to give your customers more value.
• Adding a personalized ‘Thank You’ message to show your appreciation. 
• Adding a link that instructs them to continue shopping or one that leads them to your current promotions or a discount code. 
• Adding a survey to acquire customer feedback on their experience. 
• Improving this page’s design and layout to enrich user experience.

Generally, the is page helps you retain customers by reaching out to them in different ways after they’ve bought from your business.

To implement post-purchase follow-ups on the order confirmation page, you’ll need the Flux Checkout for WooCommerce plugin. 

Improve your Order Confirmation page with Flux Checkout 

Flux Checkout allows you to create a custom order confirmation page that suits your customers better. With this plugin, you can improve the thank you page’s layout and make it more user-friendly. It enables you to display a customer map that customers can use to confirm their shipping address visually. 

It has a custom content section on which you can add any piece of content that may be useful to your customers, for instance: 

• Pieces of text like a ‘thank you’ message or a message from the founder. 
• A video, for example, with instructions on how to use the product. 
• A PDF document, for example, contains a recipe for preparing the dish customers have bought. 
• And more. 

It also helps you to improve customer service by adding a direct link to your contact pages which customers can use when they face issues or have inquiries. 

Social media engagement

? Social media is a huge part of businesses today, and 63% of businesses use it as a customer retention tool.

You can do the same by engaging with your customers on social media platforms. This involves sharing valuable content, answering their questions, and addressing their concerns. Engaging with customers helps to build customer relationships that encourage them to be loyal to your business.

Also, by responding to customer inquiries and concerns on social media, you can show your customers that you’re attentive and responsive to their needs. This level of support can go a long way in retaining customers.

? Want to learn about the 4 other ecommerce metrics you should be focusing on this year? Check out our ecommerce metrics guide.

Improve your ecommerce customer retention today

Customer retention has a lot of benefits for your ecommerce store, including reducing CAC, increasing revenue, increasing your customer base, and so on. This is why it is important for you to improve your ecommerce customer retention rate. 

You can implement various tips using the plugins we’ve mentioned in this guide. The Iconic store makes it easy to get all of them in one purchase via the All Access Club. 

Alternatively, you can acquire them individually here: 

• Iconic Sales Booster for WooCommerce – to personalize product recommendations. 
• WooComerce Account Pages – to boost hands-off customer service via custom ‘My Account’ pages for your customers. 
• WooCommerce Show Single Variations – to make it easy for customers to find their preferred product variation by displaying product variations as single products. 
• Woothumbs for WooCommerce – to upgrade your WooCommerce product galleries. 
• Flux Checkout for WooCommerce – to improve the order confirmation page and conduct post-purchase follow-ups.