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Customer Retention Strategies: How Do You Increase Customer Loyalty?

Customer retention strategies are vital to eCommerce business growth nowadays.

Not only does retaining your customer base cost five to 25 times less than focusing on acquisition, repeat customers also buy three to ten times more than first-time buyers.

The question is, how do you achieve high customer retention rates for your online store?

In this article, we examine seven quality strategies to retain your customers so that you can continue to create a sustainable and profitable online retail business.

Seven customer retention strategies

Incorporating transparency
Prioritising customer service
Customer loyalty programme
Efficient checkout process
Building close customer relationships
Perfecting the customer experience
Corporate social responsibility

1. Transparency helps build customer retention rates

Did you know that 94% of customers are more likely to be loyal to an eCommerce brand that offers complete transparency? And that they’re more likely to try more products?

A transparent retail business is one that can be trusted easily.

Which then leads to a strong and positive relationship and increases customer loyalty.

Transparency means that you are open and honest about your brand and what it does, whether this is positive or negative. It involves the sharing of key information and being the first to admit fault when you may be in the wrong.

And, in the age of the empowered customer, an overwhelming number of shoppers think that it’s more important than ever for businesses to become transparent.

The Social Media and the Evolution of Transparency report found that 89% of respondents are willing to give transparent brands a second chance after a negative experience.

What’s more, it also found that 85% shoppers are willing to stick with such a company through a crisis, while a lack of transparency leads 86% to take their business elsewhere.

So, how exactly do you build the foundations for transparency in online retail?

One of the first steps to take is clarifying your value proposition. Why do your customers choose to do business with you? Whatever it is that earned their trust must always be at the forefront of your business.

You’ll want to communicate your value proposition clearly to your customers and then make sure that your customer experience supports it at all times.

Another strategy that’s important to incorporate when it comes to transparency in online retail is providing as much product information as possible.

Go beyond simply listing the materials in your product. Talk about where it was made and how it was made. Discuss the modes of transport involved in the delivery of your products.

If your business supports ethical and sustainable working conditions, say so.

Transparency in eCommerce is not a passing trend. It’s being driven by every side, from customer demand to supplier and manufacturer partnerships and legal requirements.

When retail brands are open and honest with all stakeholders, they develop four qualities:

  • Integrity
  • Sustainability
  • Trust
  • Loyalty

Ultimately, these factors contribute to customer retention rates and your bottom line.

2. Prioritizing customer service

Customer service is the backbone to customer retention.

In fact, it’s imperative for good business.

Approximately 77% of online shoppers say that valuing their time is the single more important thing a retail company can do in order to deliver exceptional customer service.

Further research has also found that eight out of ten customers are happy to pay more for products if they receive world-class customer service.

How do you ensure that your customer service is up to scratch?

First of all, aim to provide and monitor multiple channels for customers to contact you.

For example:

  • Email
  • Phone
  • Twitter
  • Live chat

By offering as many contact points as possible, you give your customers the choice to reach out using their preferred method and therefore improve their experience with your brand.

Next, you’ll need to make sure that your team is well-versed in how to respond to customers, deal with queries and resolve complaints.

So, what customer service skills should you focus on developing?

Consistency, empathy and patience

Inevitably, some of your customers will be angry and upset, while others will have many questions for your team. You need to know how to empathize with each shopper and respond consistently and efficiently to each query.

Adaptability 

Each customer that you deal with is different – your team needs to be confident in handling sudden changes in mood and look at complaints as an opportunity for learning and evolving the business accordingly.

Clarity in communication

The very last thing you want to do is to confuse your customers. This will only upset them further. Use positive and simple language to convey your message and ensure that each customer understands the result of the conversation and is satisfied.

Product and company knowledge

It may seem obvious, but the more knowledge your customer service team has of your company and products, the more efficiently issues can be dealt with and resolved. Stay informed but also don’t be afraid to say that you don’t know the answer – be honest.

Diligence

Shoppers greatly appreciate a customer service employee that keeps an eye on the problem right through until the very end. In fact, representatives who can quickly turn a negative experience into a positive one often influences customers to leave good reviews.

Ultimately, the most important element to remember when it comes to developing strong customer service is that your frontline employees need to be engaged in their work.

After all, highly engaged representatives create great experiences for your customers.

Consider having an anonymous suggestion box and embark in regular staff engagement surveys and feedback so that you can continue to improve your eCommerce business.

3. Create a customer loyalty program 

Customer loyalty programs cultivate a sense of belonging and encourage customers to become brand advocates that engage in repeat purchasing again and again.

Such tactics are seen as an important customer relationship management tool.

In fact, 84% of customers are more likely to stay true to a brand that offers a loyalty program, while 66% suggest earning rewards influences their spending behavior.

So, what constitutes as a customer loyalty program?

In short, such a program is a marketing tactic that recognizes and rewards customers who buy and engage with a brand on a regular basis. The program may give customers free merchandise, rewards, discounts or early access to new products.

Here are some types of loyalty program available to you:

Points-based system

As one of the most popular loyalty schemes, the points-based system is where customers earn points when purchasing which then translates into some form of reward.

For example, purchase discounts, coupons, gifts or special treatment.

This method is best for businesses that encourage frequent and short-term purchasing.

Tier system 

A tier system involves customers being offered small rewards for being a part of the customer loyalty program. It encourages repeat purchasing by increasing the value of the rewards the more loyal the customer becomes.

In comparison to a points-based system, shoppers can gain both short-term and long-term value from this marketing tactic.

Charging a fee in exchange for VIP benefits

A less common loyalty program is to charge a one-time (or annual) fee to collect points for their purchases in exchange for extra benefits.

It's most applicable for businesses that thrive on regular, repeat purchases.

Partnering with a related company to provide all-inclusive offers 

A great way to inspire loyalty from your customers is to partner up with a related company that is relevant and interesting to your customer base.

Understanding their lifestyle, purchasing behavior, needs and pain points is likely to go some way in determining the type of company that may be a good fit for your audience.

When it comes to offering rewards to increase brand loyalty and sky rocket your customer retention rates, what you decide to offer is really up to you. Try to think outside the box and go one step further than your competitors.

For example, clothing and outdoor gear retailer The North Face offers its customers a variety of ways to develop their loyalty:

  • Collecting points in the traditional way (with every purchase)
  • Checking in at certain activity-based locations
  • Downloading The North Face mobile app

To redeem rewards, customers can use their points to go towards unique travel experiences (e.g. a hiking adventure in Mexico) – showing that The North Face really understands its target demographic.

Regardless of which loyalty program you decide upon, there is significant evidence that they all help to build and maintain customer retention rates for retail businesses.

4. Design an efficient checkout process to retain your customers

The simpler you design your online store and checkout process, the more likely it is that customers will return after their first purchase with your eCommerce business.

You should offer both a guest checkout function and an account function so that you don’t experience missed sales opportunities but do encourage your loyal customers to sign up and save their delivery and payment details, in order to make their return much smoother.

This is especially true if the bulk of your customer base shops on mobile, where filling out forms and navigating multiple windows can prove to be a painful and negative experience.

As such, it’s good practice to aim for a one-page checkout as the more steps and pages that you add, the more complicated and time-consuming it becomes – which can put customers off from returning.

A lot of the time, one of the best indicators of a returning customer is account creation, so how do you convince shoppers to sign up?

One trick to persuading customers to go for it is to present them with the opportunity to quickly create an account after the first order has been placed.

That way, all the account details have already been filled out and the customer has had a positive experience with your brand, which lends itself well to creating an account.

5. Build close customer relationships 

An important aspect of increasing customer retention rates is developing strong relationships with your customers.

After all, the better the relationship, the more trust you create and the more positive emotions your customer experiences – all leading to repeat purchasing and advocacy.

So, how do you build close ties with your customers?

For starters, think about what you can do to make their first experience with your brand a knock-out one. Include a handwritten thank you note with their order and make sure they’re kept up to date with the status of delivery at all times.

A few days or a week after their purchase, you might send out a follow-up email checking that everything’s okay with their purchase. The key here is to not ask for anything in return.

You could even include a discount for their next purchase, encouraging repeat sales.

Another tip is to try and establish a regular rapport with your customers.

Some examples include:

  • A monthly newsletter that links through to relevant blog articles and product releases. The more targeted you can make these, the better chance you have of increasing customer retention rates

  • A presence on a variety of social media channels with engaging and visual content, competitions, user-generated content and product giveaways

  • Deepening your knowledge of your target audience by completing more market research, quizzing your customer service team or sales team

  • Listen to what your customers are saying in online reviews and act on their feedback

6. Perfecting the customer experience to retain customers

Did you know that “delivering a great customer experience” has become a top strategic objective?

It’s well known that managing the entire experience of your customers is the best way to increase your retention rates. Creating value throughout the entire lifecycle of a customer is critical to hold on to them and establishing a loyal relationship.

In contrast, a negative customer experience at any point in the customer lifecycle can ruin your relationship and may result in the customer cutting ties with your brand completely.

Therefore, it’s crucial that you monitor every touchpoint.

Pay the most attention to key touch points but do ensure that you have a full overview of the customer experience as a whole, starting from how the customer finds your online store to the after-sales experience.

But how do you really achieve a consistently excellent customer experience?

One of the first steps to take is to create a clear customer experience vision that you can communicate within your retail company. The aim of this is to drive the behavior of your employees and organisation.

You’ll also need vast knowledge about your target audience. The more insight you have about your customers, the more effective you can make their experience.

Creating customer personas based on real data also helps your customer service teams to connect and empathize with the situations that your target audience faces.

Another important aspect to perfecting the customer experience is to create an emotional connection with your customer base.

Why are emotions key?

According to a report by the Journal of Consumer Research, more than 50% of an experience is based on an emotion, as emotions shape the attitudes that drive decisions.

Most customers become loyal due to the emotional attachment that they have made, and they remember these emotions each time they use a product or visit your online store.

In fact, a recent study has found that businesses that optimize for emotional connections outperform their competitors by as much as 85% in sales growth.

And that’s not all.

A report by Harvard Business Review has found emotionally engaged customers are:

  • Three times as likely to buy from your brand again
  • Less likely to shop around at your competitors
  • Much less price sensitive
  • Three times more likely to recommend your brand

Of course, perfecting the customer experience extends far beyond emotions. If you don't process and deliver your orders in a timely fashion then you're not going to win customers back.

That's why streamlining the order fulfillment process is crucial to retaining customers.

One of the most effective ways in which you can improve the efficiency and accuracy of your order fulfillment process is through implementing an inventory and order management system

Such a solution eliminates the risk of human error, improves your order picking accuracy exponentially and greatly reduces order defects and errors.

On top of this, automation boosts the efficiency of your order fulfillment process, meaning that you can dispatch your packages on time, every time, with the ability to prioritize your orders by destination, order date, delivery method, courier, inventory location and more.

Which all leads to highly satisfied customers who have a much better chance of repeat purchasing due their initial positive shopping experience with your business.

7. Corporate social responsibility influences repeat sales

As we discussed in the previous section, one of the best ways to establish loyalty and create an excellent customer experience is to create an emotional connection with your audience.

And what better way to tug at the heart strings of your customers than to align your brand with an important issue that both you and your customers care deeply about?

Social responsibility is a huge priority for shoppers everywhere.

In fact, 87% of customers are much more likely to buy from brands that stand up for something that they care about.

Multiple other studies have found a solid link between corporate social responsibility (CSR) and customer retention rates.

For example:

One study has found that perceived corporate social responsibility can compensate for the absence of a strong brand or smaller advertising budget. Companies that do good are rewarded with positive customer attitudes and higher levels of customer retention.

Another report suggests that CSR policies increase customers’ perceived value towards a company and also heighten trust, commitment, satisfaction and loyalty.

In other words, the blend of repeat purchase behavior and emotional attachment to a brand helps to generate loyalty that is both robust and long-lasting.

One great use case of corporate social responsibility is by TOMS, a shoe brand.

The business operates on a one-for-one scheme, donating a pair of shoes to someone in need overseas for every sale made.

Today, TOMS donates to a huge variety of social initiatives, including water systems in third-world countries, sight-saving-surgeries and training for women giving birth.

The shoe brand empowers its customers to change someone’s life by making a purchase, which results in positive emotions and encourages repeat purchasing.

Other ways in which you could instill CSR for your brand include:

  • Donating a percentage of every sale made to a non-profit organisation
  • Reducing carbon footprint of each delivery
  • Improving labor policies
  • Volunteering in the community
  • Corporate policies that benefit the environment

Customer retention strategies will grow your business

Ultimately, customer retention strategies are crucial to create a consistent stream of sales and a loyal customer base. Such strategies boost your profitability as an eCommerce business and cut down the costs of having to acquire first-time customers.

Written by:

Nat Libby

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