Contact and Social

5 Proven Strategies To Improve Customer Retention

How important is customer retention?

Is it worth investing resources to improve customer retention?

Many businesses make the unfortunate mistake of placing all their focus on gaining new customers.

However, research and experience has shown time and time again, keeping an existing customer is far more profitable than seeking a completely new one.

For example, the research from Bain & Company found that increasing customer retention rates by just 5%, increased profits by 25% to 95%.

Furthermore, Invesp found that acquiring a new customer cost 7 times more than keeping an existing one.

And in reality, losing a customer actually costs your business double the losses.


Because of the opportunity cost of the lost customer (future potential revenue) PLUS the additional cost of acquiring a new one.

And the harsh reality is, the only way any business can ever grow is to hold onto their current customers AND bring in new ones at the same time.

The cumulative effect of this is called growth.

So how can you set yourself apart from your competitors and increase profits for yourself by improving customer retention?

Here are five proven strategies you can use in your business today:

Strategy 1. Improve Customer Retention With Win-Back Campaigns

Win-Back campaigns are marketing tools designed to get the customer to return to your business.

But why do customers leave your business in the first place?

Surprisingly, it usually isn’t because of a competitor or external circumstances.

Graph from Superoffice

68% of customers leave because they believe the business they purchase from doesn’t care about them.

So how can we win these customers back?

The first step is to implement a win-back campaign designed to solely to get customers to come back and purchase something from your business again (even at no net profit).

If you keep a CRM system and regularly send out emails, the most basic way is to set up an automatic sequence of emails to trigger if someone hasn’t purchased in the past 60 – 90 days.

The content of these Win-Back emails is very important as it could mean the difference between getting the customer back, or losing them all together.

Most eCommerce businesses send out a single email, simply offering a 10-20% discount coupon to try and entice the customers back.

This sort of works… to a lesser degree.

If you are truly sincere about winning this customer back, you will have to show it to them.

Offer massive discounts (30 – 50%+), gift packages or allow them to receive some sort of premium service (e.g. free shipping for 3 months).

Remember, it costs 7 times more to acquire a new customer, so it is a rational and prudent business move to spend at least this much to keep an old one.

For example, if you know it costs you $100 on average to acquire a new customer, you should spend $100 in promotions, gifts and premiums to keep an old one.

Strategy 2. Reward Loyalty To Keep Them Coming Back

Most eCommerce stores use pre-made loyalty plugins or apps to give customers points for each dollar spent which can be redeemed for discounts.

While this is better than having no loyalty program at all, if you want to stand out from the rest, we recommend offering tiered loyalty systems.

For example, you could offer silver, gold and platinum tiers for members depending on how much they have spent at your store. Each tier should provide some sort of significant benefit or perks of being one. Gold members may get three free shipping deals a month plus three 10% discount coupons. Whereas platinum members may get free shipping and a lifetime of 10% discounts for all items store-wide.

Additionally, make sure that any new members are officially welcomed to the family in your monthly email newsletter.

Announce that they have joined. And even better – get a testimonial from them and add it to the newsletter (but get their permission to publish their names first).

Recognition is a key part of effective loyalty programs and users must feel special (and be acknowledged by others) for belonging to a special “membership-only” group.

Strategy 3. Develop A Continuity Program (subscriptions and memberships) To Use The Lock-In Effect

Using a subscription model is perfect if you sell consumables in your store.

However, even non-consumable products can profit from continuity programs.

For example, Amazon uses their Amazon Prime membership to offer free and/or faster shipping for most of their products, as well as additional benefits for a small subscription fee.

This makes users want to use their perks at the Amazon stores to purchase more.

They’ve even built their own Kindle platform, formatting and device so users are forced to continue using Amazon services and products.

This is called the Lock-In Effect, and it is an extremely powerful way to keep customers returning.

It is important to note that using a subscription model means the customer MUST gain a significant advantage of continuing to shop at your store AND it must be painful for them to leave.

The loyalty program mentioned above (in Strategy 2) also uses the Lock-In Effect.

For example, if a user has racked up a large amount points on their loyalty account, it is painful for them to leave and give up these points. So they come back and purchase at your store…

But wait, now they’ve earned more points and if they earn just a little more, they will be promoted to the Platinum tier. So they buy again.

You can see how the Lock-In Effect works with this example.

In Amazon’s case with Amazon Prime, it is an ingenious way to kill off their competitors who own physical stores.

By offering free and fast shipping online, it eliminates the reason to leave the house to go shopping at a physical store (i.e. Amazon’s competitors). And since the user has already paid for the Prime service, it makes them purchase everything online from Amazon only – since it is convenient, price-competitive, and has free shipping.

In effect, Amazon has removed both the reason for shopping elsewhere AND made it beneficial for the customer to purchase only from their website.

You can use these kinds of methods and apply it to your own eCommerce business by offering a membership subscription that gives perks or completely new benefits that are not available otherwise.

Strategy 4. Thank Customers Sincerely For Their Patronage – It’s The Last Thing Your Competitors Would Do

Most businesses send an automated “thank you” email for purchasing at their store.

However, this completely lacks sincerity and customers know it.

If you really want to stand out from the crowd, try offering physical thank you letters and gifts to your customers. These gifts don’t have to be related to your business at all.

Some businesses send out cups or movie tickets (or even food) as gift packages. The idea is to send something great (even if unrelated to your core offering) and desirable for the customer.

Doing this may not be “free” like sending out an email, but it is far more effective.

Remember, ineffective “thank you” emails that fail to capture customer loyalty DOES cost you money.

This is because for every customer lost from sending ineffective emails, you have to replace them with the cost of acquiring a new customer.

So in reality, “free” emails are not free at all and can be more expensive than the offline methods of showing appreciation.

We also recommend sending out “welcome packages” to new customers along with their first purchase. These packages should contain a thank you letter and a series of useful gifts for the customer to use.

It is especially effective if your gifts inherently end up being used on a daily basis by the customer.

For example, if you send out gift cups, get your logo printed on them so the customer sees your brand every day and are reminded of your business.

Strategy 5. Provide Excellent Customer Service And Increase Your Customer Lifetime Value

The key to excellent customer service is quick responses to queries, full refunds when asked and providing high quality products to the customer.

Customers who receive great service are more likely to turn into “champions” for your business and tell their friends and family members about you, free of charge.

In essence, they are advocating and providing free advertising for your eCommerce store.

If you’d like to know more about improving customer service, we have written up an in-depth article here: How to Improve Customer Service in your eCommerce Business


In Conclusion

We hope we have shown you the importance of customer retention and provided some new ideas on how to go above and beyond expectations.

The key takeaway to remember is that acquiring new customers costs 7 times more than keeping an existing one!

This means you should be willing to spend the same amount of acquiring a new customer, to impress and make a massive impact on your existing customers.

If you apply these methods and keep continuous contact with your customers, you are bound to keep the majority of these people coming back.

And thus, you will grow and increase profitability in your eCommerce store.