Retention Marketing

Craft exclusive experiences to encourage patronage

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What is retention marketing?

Retention marketing is a key area of focus for successful eCommerce businesses. It’s the process of encouraging repeat purchase from existing customers, rather than solely concentrating on acquiring new ones. It’s an important part in any business’s overall success. Retention marketing combines a number of channels including email, SMS, and social media to encourage customers to return to a website and make a repeat purchase.

Benefits of retention marketing

By retaining existing customers, you’re able to create a strong group of loyal customers. These customers are said to be responsible for about 41% of a store’s total revenue. Why is this important? Because acquiring new customers costs 5 times more than it does to retain existing customers. Loyal customers are also more likely to spend more money. They know and trust your brand, and are more willing to try new products, or purchase multiple products in one go.

If you have poor return customer rates and are focussing the majority of your time and budget on attracting new customers, it’s time to switch up your marketing strategy. According to Forbes, an increase in customer retention by just 5% can lead to an increase in revenue by 25% (and even as much as 95%). The numbers speak for themselves — retention marketing is smarter marketing. But how can you do it well?

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REP.’s retention marketing services

At REP., our core focus is retention marketing. By retaining customers, we’re able to create a steady stream of revenue, increase brand credibility, and ensure a strong ROI. We increase customer retention in a number of ways, including through key marketing automations, campaigns, and loyalty programs.

email and SMS campaigns

Sending regular email and SMS campaigns also helps to keep customers engaged with your brand. However, sending these campaigns to your entire database every time can result in a poor email health score. When sending email and SMS campaigns, we consider the audience and craft highly segmented audiences so that customers receive the content they want. If customers are continuously sent emails that don’t interest them, they’re more likely to ignore, or unsubscribe. Whereas customers who are continuously engaged with the content they’re receiving are more likely to make repeat purchases.

loyalty marketing

Loyalty programs are another great way to keep customers coming back to make repeat purchases. There’s a number of ways you can create a loyalty program — from a basic points-based program, through to a fully branded, tiered program. At REP., we can tailor a loyalty program to your brand’s needs and goals, using platforms such as Smile and Loyalty Lion. We’re able to intertwine loyalty messaging throughout your email automations and campaigns to ensure program interaction stays consistent.

Subscriptions

For brands who have replenishable products (such as skincare, cleaning products, and consumables), we have ample opportunities to retain customers. We can do this through specific email automations built around the time it takes to finish the product — encouraging the customer to purchase the product again, as well as cross-selling other items they may like. With subscription services such as Loop and Recharge, regular customers can easily repurchase their favourite products without any hassle.

How to Calculate Customer Retention

To discover what your eCommerce store’s customer retention rate is, you can check out calculators like this one from CleverTap. Or, you can calculate it using the following formula:

CRR = E − N / S × 100
E = total customers at the end of the period
N = total new customers acquired during this period
S = total customers you began the period with

Customer retention rates differ by industry. However, online retailers as a whole have an average retention rate of 28.2% (according to research by Metrilo). If you fall below this average, or want to further increase your current customer retention rates, get in touch with REP.

Calculate Customer Retention Rate

What is Customer Lifetime Value?

Customer lifetime value (CLV) is the total amount of money the average customer is estimated to be worth to your store throughout their journey.

How to calculate customer lifetime value:

CLV = Customer Value × Average Customer Lifespan

Before you can calculate CLV, you’ll need to work out Customer Value. This can be done by calculating the average purchase value × the average purchase frequency. Next, work out Average Customer Lifespan by calculating the average number of years a customer stays active, divided by the total number of customers.

So, why is CLV important? Simply put, having a higher CLV is a marker of how sustainable your business model is. If you have a low Customer Lifetime Value, it probably means that customers aren’t coming back to make repeat purchases. Having a high CLV is a great indicator that customers are making more than one purchase. Plus, with customer acquisition costs totalling about 5× more than customer retention, having a high CLV is more cost effective.

Frequently asked questions

What are examples of retention strategies?

A few effective ways to retain customers include:
- Marketing automations
- Loyalty programs
- Referral programs
- Incentivising secondary purchases

What are the stages of customer retention?

Onboarding, engagement, loyalty, and advocacy.

How to calculate customer retention

To calculate customer retention rate, you’ll first need to work out the following:

1. The number of customers you had at the beginning of the period (S)
2. The number of customers you had at the end of the chosen time period (E)
3. The number of new customers you gained during that time period (N)

From here, you can do the maths: [(E-N)/S] x 100