E-commerce: Why customer retention % of successful D2C brands is always above benchmark

By Anuradha Chandrasekaran
10 October, 2022

We are back with another exciting topic in the e-commerce category. This week we will focus on the growth and power of your existing customers.

It seems now more than ever; that brands are dusting off their customer retention strategy. There is a 42% rise in the Google search term ‘customer retention’ (2018-2021), which shows this growth output is on the rise, and rightly so!

In 2022, acquisition budgets are likely to have been cut, but the need for growth in revenue remains. It can cost five times more to attract a new customer than to retain a new one, so how can you make your budget stretch?

In order to succeed in the eCommerce industry, it is crucial for brands to focus on customer retention. A recent study by Deloitte revealed that a 5% increase in customer retention can lead to a 25% increase in profits. So, what do brands need to do in order to retain their customers?

But what exactly is customer retention?

Customer retention, also known as customer loyalty, is the ability of a company to retain its customers over time. It is a key metric for e-commerce brands because it indicates how well a brand is able to keep its customers engaged and satisfied. Customer retention is determined by factors such as customer satisfaction & experience, product innovation, price, customer service, and marketing efforts.

What do successful retention strategies have in common?

1. Offer engaging content

One of the best ways to keep customers engaged is by regularly providing them with fresh, engaging content. This could include blog posts, articles, images, infographics, videos and more. If you can keep your customers engaged, they’re more likely to stick around and continue buying from you.

2. Have the best loyalty programs

Loyalty programs (memberships, subscriptions and more) are a wonderful way to build customer loyalty and keep customers coming back for more. Depending on which loyalty platform your brand uses, you can increase repeat purchases, user acquisition rate, referral rates and push revenue to higher numbers.

3. Create a personal connection

One of the best ways to retain customers is by creating a personal connection with them. This could involve responding to customer queries and feedback promptly, and sending personalized emails to customers. By establishing a personal connection with your customers, you’ll make them feel appreciated and more likely to stick around. Leveraging customer data such as past transactions and frequency of purchase can provide great insights for personalization

Let’s see how leading D2C brands have nailed customer retention via different strategies 

Membership programs

In order to keep its customers coming back, Amazon introduced Prime in 2005 as a way to reward customers for their loyalty. Prime is a membership program that offers free two-day shipping on eligible items, free streaming of movies and TV shows, and other exclusive benefits.  Since its launch, Prime has been a huge success for Amazon, with over 100 million members worldwide. 

Why Prime Works 

There are several reasons why Prime has been so successful. 

  1. Prime is a great value for the money. Membership costs $119 per year, which works out to just $10.75 per month. 
  2. Prime offers a lot of benefits that appeal to consumers. Free shipping is a big draw, as is the free streaming of movies and TV shows. Exclusive deals during their ‘SALE’ periods is a major highlight.
  3. Prime is convenient. It’s easy to sign up for and easy to use. 
  4. Prime is reliable. Amazon always delivers on its promise of free two-day shipping, easy returns and its customer service is excellent. 

The Bottom Line 

Amazon Prime is a hugely successful membership program that offers great value for the money and lots of benefits that appeal to consumers. Prime members are more likely to shop on Amazon than non-members. They also spend more money when they shop on Amazon. This increased spending helps Amazon to grow its business and become even more dominant in the online retail market. 

Personalized discounts

Casper, a startup that sells mattresses online has mastered the art of enticing customers with personalizing discounts. 

The company found that customers were more likely to buy a second mattress if they received a discount for their first purchase. To take advantage of this, Casper created a customized discount programme for returning customers. 

This programme offered returning customers different discounts depending on how often they had previously purchased a mattress from the company. 

There are several reasons why personalized discounts work so well for customer retention. 

  1. They make customers feel appreciated and special. 
  2. They show that the company is interested in its customers and is willing to go the extra mile to keep them happy. 
  3. Personalized discounts create a sense of loyalty among customers, who are more likely to return in the future.

Bottomline

The results were impressive – Casper’s customer retention increased by 25%. 

Subscriptions

Pixi Beauty sells beauty products, including skincare, cosmetics, and hair care items. The company has had success in the past with its subscription programs, which are designed to keep customers engaged and coming back for more.

One of Pixi’s most successful subscription programs is its “Glow Worthy” program. This program offers subscribers a box of exclusive Pixi Glow products every other month. The boxes typically include full-sized and travel-sized products, as well as a few bonus items.

The “Glow Worthy” program has been a huge success for Pixi Beauty. In fact, it was so successful that the company decided to expand it. Now, in addition to receiving a box of exclusive Glow products every other month, subscribers also receive a free full-sized product every quarter.

Pixi’s other subscription programs are also doing well. The “BeautyFIX” program, for example, sends subscribers a box of seven full-sized beauty products every month. And the “MaskGenius” program sends subscribers a box of four masks (plus one bonus mask) every month.

So why have Pixi’s subscription programs been such a success? There are several reasons.

  1. Pixi’s subscription programs are affordable. The “Glow Worthy” program, for example, costs just $10 per month (or $60 per year). And the “BeautyFIX” program costs just $24.95 per month (or $149.40 per year). This makes them an affordable way for customers to try out new Pixi products.
  1. Pixi’s subscription programs are convenient. Customers can sign up for them online and then receive their boxes by mail every other month or every month. This makes it easy for customers to try out new products without having to go to the store or search for them online.
  1. Pixi’s subscription programs are fun. The boxes always include a variety of different types of products, from skincare items to cosmetics to haircare items. This means that subscribers can try out new products every month and never get bored with what they’re using.
  1. Pixi’s subscription programs are personalized. Each subscriber receives a box that is tailored specifically to their needs and interests. This ensures that they always receive products that they will enjoy using.

Bottomline

The brand achieved 2x increased repeat purchase revenue within three months of implementing the loyalty program.

Cashbacks & loyalty programs 

Cashbacks & loyalty programs are a great way to keep customers coming back to your business. Allbirds, a shoe company, has succeeded in creating unique loyalty programs.

  1. Allbirds offered a rewards program called “One in Five.” This program rewarded customers for every fifth purchase with a $20 credit. This program was simple and easy to use, which made it popular with customers.
  1. Allbirds created a program called “Feet of the Future.” This program allowed customers to subscribe to receive a new pair of shoes every six months. This program was popular with customers because it allowed them to always have a new pair of shoes without having to remember to buy them.

Both of these loyalty programs were successful in keeping customers coming back to Allbirds. The rewards program encouraged customers to make more purchases, and the subscription program made sure customers had the latest fashion delivered to them. . As a result, Allbirds was able to increase its customer retention rate and grow its business.

And everything that’s hygiene – reviews, content & post sales service 

Warby Parker was founded in 2010 with a lofty goal: to offer designer eyewear at a fraction of the cost. Today, it is one of the most successful eyewear brands in the world.

What’s their secret? Great customer retention hygiene.

Engaging customers via reviews, great content, and post-sales service are all key factors in Warby Parker’s customer retention strategy. Let’s take a closer look at each of these tactics.

  1. Customer Reviews

One of the best ways to engage customers is by getting them involved in the product development process. Warby Parker does this by soliciting customer reviews on their website.

This not only gives customers a voice, but it also helps to validate the product. As Warby Parker co-founder Neil Blumenthal puts it, “The more people who try our glasses and like them, the more likely it is that someone who’s never heard of us will want to check us out.”

  1. Great Content

In order to keep customers engaged long-term, you need to provide them with valuable content that interests them. Warby Parker does this by publishing blog posts on topics such as fashion, lifestyle, and social consciousness.

Their content is not only interesting, but it also aligns with their brand values. For example, one of their recent blog posts discusses how ‘How to Read a Contact Lens Prescription’  discusses medical details about lenses while their fashion blog ‘Best frames for different face shapes’ provides fashion guides. This type of content helps to strengthen the connection between Warby Parker and their customers.

  1. Post-Sale Service

Another important factor in retaining customers is providing excellent post-sale service. Warby Parker does this by offering free home try-ons and shipping both ways. They also have a no questions asked return policy.

All of these measures help to ensure that customers are happy with their purchase, which builds trust and strengthens the relationship between Warby Parker and the customer.

With customer retention, your brand can grow sustainably from day 1

E-commerce brands need to start retention marketing as soon as possible in order to keep customers coming back for more. According to a study by Custora, e-commerce brands see a 60% higher customer lifetime value (CLTV) when they start using retention marketing tactics early on.

There are a few key reasons why customer retention is so important:

-Customer Retention Is Cheaper Than Customer Acquisition

The cost of acquiring new customers can be up to five times more than retaining existing ones.

-Happy Customers Promote Your Brand

Satisfied customers are more likely to become brand advocates and promote your product or service.

-Customer Retention brings in Valuable Feedback

Understanding customer feedback is a great starting point for building retention strategies. Building a database of feedback from  customers can help you improve your customer experience.

Acquisition is important; retention, even more

Retention marketing is just as important for brands as acquisition marketing. Without a focus on keeping customers, all of the effort put into acquiring them can be for naught. Focusing on retention can help brands improve customer lifetime value, increase profits, and create more satisfied customers. By using retention marketing strategies, e-commerce brands can ensure that they are doing everything possible to keep their customers happy and coming back for more.

If you are a part of an e-commerce brand that is looking for ways to improve customer retention, we’ll help you identify the strategies. But in our next post!


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