3 tips to increase the retention rate in e-commerce
Published on: March 24, 2020
Updated: August 29, 2023
Winning loyal customers in e-commerce is becoming more difficult every year. This makes it all the more essential to retain them in the online store over the long term. With the following tips, online retailers can sustainably increase the retention rate. The prerequisite for this is an understanding of how relevant the retention phase of the customer journey is.
Customer Journey: Retention Phase
Online retailers struggle the most in the early stages of the Customer Journey. No wonder. With so much competition in e-commerce, it has become difficult to win the battle for attention. Once this has been won, the aim is to guide the potential customer elegantly through the online store to the final click, the beloved order button. Purchase is the magic word. Of course, this purchase is essential for the success of the online store. But it’s even better if it doesn’t stop at a single purchase. The retention phase is crucial for the transition from “new customer” to “regular customer”. It starts directly after the purchase. Online retailers should also focus on this. After all, it’s a shame if all the efforts made in the first phases of the customer journey vanish into thin air.
It takes time to gain trust and turn the prospect into a buyer. Once the customer has placed his trust in the online store, everything must be done to further strengthen it. However, the business of customer loyalty is tough. Customer expectations are increasing. Online stores are increasingly interchangeable, and products and prices are more comparable than ever. Meeting or even exceeding customer expectations is a fundamental requirement for customer loyalty and presents online retailers with major challenges. Whether the investments are worthwhile can be seen, among other things, from the retention rate: The higher it is, the better.
Retention Rate: What is it?
Retention Rate: The retention rate, as the name suggests, provides information about how successful the customer retention measures are.
To calculate the retention rate, a certain period of time is selected. To do this, the number of newly acquired customers is divided by the number of number of customers at the end of the period. This number of customers is then divided by the number of customers at the beginning of the period and multiplied by one hundred.
(new customers – customers at the end of the period) / customers at the beginning of the period x 100 = customer retention rate .
Conversely, this means that the more satisfied customers are are, the longer they stay. The churn rate is low and the retention rate is high.
But now from theory to practice: How can online retailers convince customers in the retention phase and increase the customer retention rate?
How to increase the retention rate in e-commerce?
To do this, online retailers must develop a special Customer experience. This pays off directly in terms of customer satisfaction and thus on customer loyalty.
Here are three tips on how online retailers can optimize the customer experience in the retention phase through post-purchase emails and thereby increase the retention rate:
1. Be Human! Leverage Human Experience
Shoppers are customers and that they play a huge role in the Company’s success is no longer news. Companies try increasingly integrate themselves into the lives of their customers. Part of this to of it. The first step is to think of them as more than just customers. Because first and foremost, they are people. Anyone who recognizes this also understands how the communication with them needs to be in order to build a sustainable relationship: personal, authentic, human.
So not only is a formative customer experience a differentiating factor for online retailers, but also the human experience. It’s no longer just about B2B or B2C, but about H2H – human to human. To achieve this, for example, a personal approach in e-mails is essential.
IKEA relies on personal and proactive shipping communication.
To build a strong relationship, the E-commerce company or brand should also present itself in a more “human” way. This succeeds by not only addressing the customer (human being) personally, but also personally, e.g., by an employee of the company, in the e-mail.
A question for feedback also supports the human Experience approach. A question such as “Are you satisfied so far?
or is there still something we can do for you?” is quickly asked and brings two benefits at once: In addition to valuable incentives for improving the processes of the company, an honestly meant question shows additional appreciation – for the person behind it.
Recognizing and implementing this is an enormous opportunity in e-commerce. Yet, to date, many fail to build a relevant relationship. In a study by Salesforce, 52% of customers – including 56% of consumers – said that companies are generally impersonal. That can quickly lead to detachment. One way to counteract that is personalized content.
2. Personalized Content
To strengthen the customer relationship immediately after the purchase, online retailers need to interact more personally with people. In a study by Acquia, 76% of respondents affirmed that they are more loyal to a brand when it understands customers on a personal level.
And what’s more personal than already “knowing” them and showing them that? This is easier to implement than it might seem at first glance. All online retailers need for this is data they have anyway: The purchase history or the products of the last purchase. Based on this data, product recommendations can be quickly and easily displayed directly in the next email.
For online retailers, the use of product recommendations often focuses on the cross-selling effect. After all, they achieve up to 8% more sales and up to 67% larger shopping carts in the online store.
The effect of relevant and high-quality product recommendations is, however, more significant in terms of customers.
Online retailers thus optimize the customer experience. Through the the last individual purchase is taken into account, not only personalized product recommendations appear, but also ones that are tailored to the customer’s needs. This conveys customers the impression that their specific needs are understood.
Besides, a matching product set to the last purchased item offers inspiration and brings customers back to the store.
The online retailer Ulla Popken already uses personalized product recommendations in post-purchase emails:
Personalized product recommendations show customers that the retailer knows exactly what they’re looking for.
Product recommendations based on purchase history in post-purchase email intensify the relationship with both new and existing customers. As a result, they have an increased positive effect on the retention rate.
3. transparency and relevance
As mentioned in the first point, a relationship must be needs to be established. This requires something that is hard to get: trust.
But gaining it is worthwhile. Salesforce found in the study State of the Connected Customer study, Salesforce found that 89% of customers are more loyal to a company.
they trust. Anyone who uses and understands Human Experience knows also what is essential for many people to build trust:
Honesty and transparency.
This is also the result of the above-mentioned survey, in which honesty (82%), reliability (76%), transparency (70%), and authenticity (61%), among others, are listed as the most important components for building trust. These core values should also be reflected in the e-mails.
Transparency is particularly desired after the order has been placed.
When will my package arrive? Can this promise be kept?
These questions are essential for customers and should therefore be regularly checked by relevant personalized e-mails. In the retention phase human experience in the retention phase, online merchants should not leave this process to external service providers, but keep it in-house. This ensures a seamless experience and pays dividends for the brand.
Relevant emails that provide transparency to the ordering process and deliver on promises made have a positive impact on the customer experience. This also has a positive impact on retention rates.
The retention phase as part of the customer journey is crucial for the sustainable success of the online store or the company. For this reason, it is necessary to measure the retention rate.
and analyze it on a continuous basis. The better the customer retention, the more successful the company is.
Furthermore, it is recommended that the tips for improving retention rate in the post-purchase phase should not be used separately, but as a supplement to each other. Anyone who wants to be successful in the tough e-commerce business in the tough e-commerce business must build trust with people (customers).
The solution: the extension of the customer experience by the human experience.
Want to learn even more about the topic? Then sign up for our webinar “3 Best Practices: How to stand out from the e-commerce competition with an outstanding CX” on March 31 from 11:00 to 11:45 am.
This was a guest post by 8select.
8select provides teams with a technical platform to manage their experts, product knowledge, product data, customer interactions and deliver interactive content along the customer journey. They deliver their solution to their customers as SaaS with API interface for easy integration across all touchpoints. The administration and configuration of product recommendations becomes scalable, simple and efficient with 8.HX.