When you run an ecommerce store, it’s easy to focus most on acquiring new customers. And plenty of online resources (like this one) tell you how to do just that. But have you considered the value your current customers bring to your business?
Once someone becomes a paying customer, you have the opportunity to keep them around for years to come—without spending many marketing dollars. And because repeat customers tend to spend more than first-time buyers, implementing customer retention strategies is a great way to boost revenue.
In this article, we’ll cover what customer retention is, why it’s important, and how you can make sure that online shoppers get lasting value from your products.
What Is Customer Retention?
Customer retention is the percentage of customers who buy products more than once during a specific period. Your retention rate shows how loyal your customers are and provides insights into your product quality, website design, and customer service approach.
By providing a better buying experience, you’ll help convince first-time shoppers to come back to your online store in the future. These returning customers bring more value to your business than one-time buyers, so it’s important to understand the factors impacting your retention rate.
How To Calculate Customer Retention Rate (CRR)
Calculating your customer retention rate (CRR) will help you understand customer loyalty, predict revenue, and develop strategies to retain existing customers. You can calculate CRR in two ways.
Method #1
This method shows you how many past customers have also made a purchase recently. Choose a period to measure, then plug your numbers into the formula below:
- I = Initial customers, or those who have made at least one purchase
- R = Repeat customers, or those who have made more than one purchase
Retention rate = (R / I) x 100
For example, let’s say 5,000 customers have made at least one purchase within the past 12 months. Of those, 1,500 have made at least two purchases.
(1,500 / 5,000) x 100 = 30%
Your retention rate for the past 12 months is 30%.
Method #2
This method works best if you offer a subscription service and want to see how many subscribers you retain during a period. First, choose a period to measure, then plug your numbers into the formula below:
- E = Total number of customers at the end of the period
- N = New customers acquired during the period
- S = Total number of customers at the start of the period
Retention rate = ((E – N) / S) x 100
For example, let's say your ecommerce store had 500 subscription customers at the beginning of the year. During the year, you acquired 80 new customers and lost 150, meaning that by the end of the year, you have 430 customers. Your variables are E = 430, N = 80, and S = 500.
Retention rate = ((430 – 80) / 500) x 100.
The formula shows that your retention rate is 70% for the past 12 months.
What Is a Good CRR?
Customer retention varies based on business size and industry. According to one ecommerce analytics platform’s research, the average ecommerce retention rate is 28.2%. This lines up with the estimates of most experts, who agree that ecommerce sites generally have a retention rate between 20% and 30%.
Why Does Customer Retention Matter?
Customer retention helps you grow your business faster with less effort. Rather than spending time and money on new customer acquisition, you attract an audience of loyal customers who continue making purchases regularly.
The benefits of customer retention include increased revenue and reach, decreased costs, and valuable marketing insights.
- Increased revenue. Because returning customers already trust your brand, they tend to spend 67% more than new customers.
- Greater brand reach and recognition. Loyal customers often talk about their favorite brands with others, both in person and online. These word-of-mouth recommendations can win you lots of new customers.
- Decreased marketing spend. Paying to acquire new customers can get costly, but keeping them around is relatively inexpensive.
- Data collection. Repeat customers provide valuable data and insights that can help you better understand your target market's preferences, behaviors, and buying patterns.
Using the customer retention strategies below, you’ll be able to reap these benefits and more.
14 Effective Customer Retention Strategies
These 14 strategies will help you create marketing initiatives and shopping experiences that increase customer retention.
1. Market to Your Ideal Customers
The best way to retain customers is to acquire the right ones. That’s because a customer is more eager to make a repeat purchase if their original purchase meets their expectations and needs.
For example, let’s say you sell workout clothing. Someone who’s not into fitness but needs a new pair of sweatpants will probably buy the pants and never come back to your store. On the other hand, someone who works out regularly will likely make many purchases once they realize that your products are comfortable and durable.
Identify and market to your target audience by creating an ideal buyer profile based on data from your current customers. Look for things that your most loyal customers have in common, such as age, income, gender, or lifestyle. Customize your ads, email and SMS messages, and other marketing campaigns to appeal to those who fit the profile.
2. Offer Fast, Empathetic Customer Support
Bad purchase and delivery experiences are a major obstacle to customer retention. Late packages, unwieldy checkout flows, confusing subscription cancellation processes, and other issues can cause people to abandon your brand.
Of course, mistakes happen, and they’re not always under your control. But if you offer fast, empathetic support to customers who bring up concerns, they’ll see that you care about them.
As you develop your support processes, try to strike a good balance between human support and automation. One-third of consumers report that human interaction is important to their loyalty. So while AI chatbots can come in handy in some situations, make sure to prioritize human support for more complex issues or questions.
3. Emphasize Shared Values
People prefer supporting organizations that share their values. When you show that you care about more than just making money, consumers will be more willing to support your business.
Do you prioritize sustainability? Support a specific social cause? Donate part of your proceeds to charity? Make sure to share that information. Try these ideas to help customers connect with your values:
- Explain your values on the “About Us” page on your website
- Share information about charitable donations or sustainability initiatives on social media
- Include package inserts explaining your use of sustainable packaging materials
4. Frequently Ask for Feedback
Not sure why you’re seeing a low retention rate? One of the easiest ways to find out is to ask for customer feedback.
Send out a short survey asking customers about their experiences with your products, shipping and returns, and customer service. This will allow you to identify pain points in your customer experience—pain points that may be driving people away. If you proactively solve issues before they escalate, you’ll retain more loyal customers.
And remember, needs and preferences change over time, so collect feedback frequently.
5. Provide Fast, Affordable Shipping
Shipping plays a big role in consumers’ perceptions of an ecommerce business. Delays, damage, and incorrect orders can hurt customer retention rates (55% of people will stop buying from a company after several bad experiences), while smooth deliveries improve retention.
The following tips will help you improve your delivery experience:
- Optimize order fulfillment. Train warehouse workers to pick, pack, and ship customer orders as quickly as possible.
- Avoid delays. Work individually with carriers to identify the root causes of shipping delays and solve them.
- Provide visibility. Provide tracking numbers so customers can track the progress of their shipments.
In addition to these strategies, consider offering shipping insurance to protect customers from porch piracy. When packages are stolen after delivery, shipping carriers don’t take responsibility—which leaves customers frustrated and your business in a tricky situation.
By adding a package protection app like Norton Shopping Guarantee with Package Protection by EasyPost to your store, you’ll ensure that package theft doesn’t hurt your customer retention rate.
6. Make the Returns Process Easy
Though it may seem counterintuitive, having a hassle-free returns process actually boosts revenue in the long run. That’s because accepting returns—without making customers jump through hoops—builds lasting trust and loyalty.
Make sure that your returns process is easy to understand and doesn’t take too much time. Include clear instructions for packaging and shipping returns, and provide customers with digital or physical shipping labels.
7. Personalize the Customer Experience
A personalized customer experience keeps people engaged, helping them get excited about your products and stay involved with your brand. Data shows that consumers consciously recognize the value of personalization.
To get started, try sending customized emails or texts that include product recommendations based on a customer’s past purchases. You can also show personalized recommendations, discounts, and offers on your website.
8. Start a Loyalty Program
By incentivizing people to continue shopping from your brand, you’ll see greater customer retention. Loyalty programs offer exclusive benefits to customers who choose to sign up. These benefits can be as simple or elaborate as you want, allowing you to work within a limited budget if necessary.
Consider these ideas as you create your loyalty program:
- Points-based system. Reward customers with points for each purchase, which they can later redeem for discounts, free products, or exclusive offers.
- VIP access. Give loyalty members exclusive access to new products, sales, events, or experiences.
- Birthday rewards. Make a customer’s special day even more special by sending a personalized birthday offer or gift.
- Anniversary rewards. Recognize and reward customers for their loyalty milestones, such as the anniversary of their first purchase.
9. Incentivize Referrals
Incentivizing referrals is an effective way to keep customers engaged with your brand. Simply encourage customers to share your store with their friends, offering a discount or gift in return.
Starting a referral program doesn’t just help you retain customers—it also helps you acquire them. Remember when we talked about marketing to your ideal customer? With 84% of people saying that word-of-mouth recommendations are the most trustworthy type of “advertising,”
referrals are the perfect way to reach those best-fit buyers.
10. Engage With Customers To Build a Strong Community
People crave a sense of community—they want to belong to something bigger than themselves. Building an engaging community satisfies consumers’ needs to belong while also gathering your most loyal customers into one place.
Experts estimate that a solid community can generate a 6% lift in in revenue, and one study found that engagement leaders are more likely to report that customer retention rates have increased from previous years.
How can you begin building your community? Social media is a great place to start! Post frequently on your pages, including fun content like giveaways and behind-the-scenes looks at your products and business. Even more importantly, engage with your followers, responding to tagged posts and featuring their product-related posts on your story.
11. Offer Subscriptions
Over 10% of consumers have subscriptions for household goods, personal care items, food, or clothing. If your product lineup includes things people need frequently—tea or coffee, clothes, snacks, skincare, and more—consider offering a subscription. Not only will this give customers a chance to get hooked on your products, but automatic shipments keep revenue streaming in.
While subscriptions can be a great retention tool, you need to approach them the right way. A poorly designed subscription process can lose customers permanently.
On the other hand, when customers have full control over their subscriptions, they’ll view your business more favorably, so make sure it’s easy to skip a shipment or pause or cancel their subscription.
12. Surprise and Delight Customers
Little gestures of appreciation go a long way, so find ways to surprise and delight your customers. This could mean adding handwritten thank you notes to packages, including free gifts or samples, or emailing a discount code for their next purchase.
13. Communicate With Customers
You know how the saying goes: out of sight, out of mind. Keep your business on customers’ minds by communicating frequently via email and text.
Unlike social media, which bases your brand’s visibility on complex algorithms, email and SMS communication is visible to all customers. If you send an email or text, they’re sure to see it.
In addition to keeping your store on the radar, emails and texts can direct customers to your store and drive sales. Research has identified several factors that increase email clickthrough rates:
- Price discounts or promotions (85% of consumers report that this increases the likelihood they’ll click)
- Products that grab the viewer’s interest (49%)
- Positive ratings and reviews (46%)
14. Provide a Buy Now, Pay Later Option
By including flexible payment methods on your store, you make it more convenient for consumers to shop. Buy now, pay later (BNPL) is one of the most popular flexible payment options, allowing people to access products they need without paying the entire cost upfront.
BNPL is rising in popularity. In 2024, experts forecast that 93.3 million U.S. consumers will use this payment method. It’s especially well-used during the holiday season; about 14% of U.S. online shoppers made a BNPL purchase in December 2023.
Don’t wait until customers begin the checkout process to flaunt your flexible payment options. Instead, include the logo of your BNPL method, along with other accepted payment types, on product pages so shoppers know they’re available.
Retain More Ecommerce Customers With a Shopping Guarantee and Package Protection
And there you have it! With these 14 customer retention strategies, you’ll be able to identify your ideal buyers, make the online shopping experience as seamless as possible, and smooth over any issues that occur. The result? Customers that come back to your store again and again.
We recommend kicking things off with Norton Shopping Guarantee with Package Protection by EasyPost. Free for Shopify store owners, the app helps you provide a purchase and delivery experience that keeps customers coming back.
It builds trust with shoppers from the get-go, helping them see that your brand is verified by a trusted third party. The shopping guarantee and package protection benefits sweeten the deal, protecting consumers from lost, damaged, or stolen packages and identity theft.
Learn more and install the app here.
