What Is Customer Retention?

Customer retention measures a business’s ability to keep its existing customers over time and encourage repeat purchases. With a focus on improving customer retention, ecommerce companies can build long-lasting relationships, foster brand loyalty, and stand out from the competition. 

If you’re wondering how to increase customer retention, you’re in the right place. This article will explore the importance of customer retention, metrics to measure your retention, and strategies to keep customers coming back for years to come. 

Acquisition, Retention, and Loyalty: What’s the Difference?

First, we need to understand the difference between three related (but distinct) terms: customer acquisition, customer retention, and customer loyalty. 

Customer acquisition is the process of attracting and converting new customers through marketing and sales strategies. When you’re focused on acquisition, your main goal is to expand your customer base and drive first-time sales.

As mentioned above, customer retention refers to a company’s efforts to keep customers engaged and returning for repeat purchases. While acquisition is all about reaching new buyers, customer retention requires a focus on the customer relationships you currently have.

Customer loyalty is a deep commitment customers have to a brand, which leads them to consistently choose it over competitors. Greater brand loyalty drives customer retention and contributes to sustained business growth.

Why Customer Retention Is Important

Customer retention is important because it helps ecommerce businesses cut costs, increase revenue, and build a strong reputation. 

• Lower acquisition costs. When you retain customers who already know and trust your brand, you reduce the need for costly acquisition efforts. 
• Higher revenue. Repeat customers are more likely to make additional purchases, creating valuable opportunities for cross-selling and upselling. 
• Better brand recognition. High customer retention strengthens your brand recognition, with satisfied customers naturally sharing their positive experiences and becoming advocates for your store and products. 
• New customers. Word-of-mouth promotion from loyal customers improves your reputation and helps attract new customers organically.

How Do You Measure Customer Retention?

To understand how your brand is currently performing when it comes to customer retention, you’ll need to dig into your data. Below, we’ll walk through several metrics you can use to measure customer retention.

Repeat Customer Rate (RCR)

Repeat customer rate (RCR) measures the percentage of customers who make more than one purchase from your store, showing how well your business is encouraging customers to return.

Repeat customer rate = (Return customers / Total customers) x 100

Customer Retention Rate (CRR)

Customer retention rate (CRR) reflects the percentage of customers your business retains over a specific period. This metric is most useful if you offer a subscription service. For example, a business that sells plants might measure the CRR for their plant-of-the-month subscription.

Start by choosing a period to measure, then use the following formula to calculate CRR:

Customer retention rate = ((Customers at the end of the period – New customers added during the period) / Customers at the start of the period) x 100

Customer Churn Rate (CCR)

Customer churn rate (CCR) measures the percentage of customers who stop buying from your business over a given timeframe. This metric is useful for identifying how many customers you’re losing. Like retention rate, it’s most helpful for ongoing services like subscriptions. 

Customer churn rate = ((Customers at the start of the period – Customers at the end of the period) / Customers at the start of the period) x 100 

Customer Lifetime Value (CLV)

Customer lifetime value (CLV) estimates the total revenue a business can expect from a single customer throughout their relationship with the company. It helps you understand the financial impact of retaining customers, showing how much value each customer segment brings. While metrics like RCR and CRR focus on frequency and percentages, CLV translates retention into monetary value.

Customer lifetime value = Average order value x Purchase frequency

Customer Satisfaction Score (CSAT)

Customer satisfaction score (CSAT) assesses how satisfied your customers are with specific interactions or overall experiences with your business. While this survey-based metric doesn’t directly measure retention, it provides valuable insights into how well you’re meeting customer expectations. 

Net Promoter Score (NPS)

Net promotor score (NPS) measures the likelihood that your customers will recommend your business to others. By dividing respondents into promoters, passives, and detractors, NPS gauges overall customer loyalty and brand advocacy. 

Factors Influencing Customer Retention

Because customer retention is influenced by many factors, it can sometimes be difficult to understand why shoppers aren’t sticking around. As a business owner or operator, it’s your responsibility to understand how your products, customer service, and other elements of the customer experience impact customer retention positively and negatively. 

Quality of Products 

You probably won’t be surprised to learn that the quality of your products plays an enormous role in customer retention. People can sometimes forgive a lackluster customer experience if the product provides the value they were expecting (though we recommend creating a great customer experience, to be safe!). 

Simply put, high-quality products create a sense of reliability, demonstrating that your brand consistently delivers value. When customers receive products that meet or exceed their expectations, they’re more likely to return for future purchases. On the other hand, poor-quality products or services can lead to disappointment, frustration, and a loss of trust.

Trust and Reliability

While product quality is essential, we can’t neglect the other factors that shape retention rates. For starters, it’s essential to cultivate a sense of trust and reliability, reassuring customers that they can depend on you for consistent and positive experiences. 

Establishing trust is especially important for newer, smaller businesses, as online shoppers may wonder if your offer is legitimate or their payment details will be secure. But even large, established brands can benefit from incorporating trust-building elements into their sites.

When shoppers trust your brand, they feel confident that their orders will be processed securely, their personal information will be protected, and they will receive the products as promised. 

Customer Experience 

The customer experience encompasses every touchpoint a customer has with your brand, from browsing your website to receiving their order. 

A seamless, user-friendly shopping experience, quick load times, and easy checkout processes make online shopping more enjoyable and encourage customers to return. Personalized interactions, such as tailored product recommendations and responsive customer service, also improve the overall experience by making customers feel valued. 

On the other hand, poor user experiences—such as confusing navigation, slow shipping, or lack of communication—can lead to dissatisfaction and prompt customers to shop elsewhere. 

Engagement and Communication

Regular communication helps maintain an ongoing relationship with your audience, so consider using email, social media, or personalized messages to keep customers in the loop. Engaging with customers through meaningful content, like helpful blog posts or interactive social media posts, is also useful for creating a sense of community and loyalty.

And of course, we can’t forget customer service. Responsive customer service—whether through chat, email, or phone support—addresses issues promptly and demonstrates your commitment to buyer satisfaction.

5 Strategies To Improve Customer Retention

Now that we’ve discussed the factors that influence retention, let’s take a deeper dive into ways businesses can increase it. Here are five effective customer retention strategies.

1. Personalize Your Marketing

Customers stay more engaged with businesses that provide personalized communication, offers, and ads. Read on to learn why personalization works and how you can incorporate it into your retention strategy.

Why it works: Personalization shows customers they’re valued and understood, building a stronger emotional connection with your brand. By tailoring the shopping experience to an individual’s preferences, past purchases, and browsing behavior, you create a more exciting and relevant experience. 

With personalized recommendations, discounts, or content, you increase the likelihood of repeat purchases, as customers are exposed to products that directly align with their interests. 

Ideas for getting started:

• Use data from customer browsing history and previous purchases to recommend products on the homepage, in email newsletters, or at checkout.
• Set up automated emails with personalized offers based on past buying behavior (think birthday discounts or special promotions).
• Implement dynamic website content that changes based on customer profiles, showing items they’re most likely to be interested in.

2. Start a Loyalty Program

Sometimes, all it takes is a few extra perks to engage customers and convince them to make that next purchase. 

Why it works: Loyalty programs drive retention by giving customers a reason to keep coming back. These programs incentivize customers to return by offering them tangible rewards, such as discounts, points, or exclusive perks. As customers accumulate rewards, they feel more invested in the brand and are more likely to make repeat purchases. This not only boosts sales but also strengthens the emotional connection between the customer and your brand, creating a cycle of positive reinforcement. As an additional bonus, loyalty programs allow you to collect data that helps you understand your ideal customer better.

Ideas for getting started:

• Offer a points-based system where customers earn rewards for each purchase, which can later be redeemed for discounts or products.
• Create tiered loyalty levels that offer increasing benefits, such as free shipping, early access to sales, or exclusive products.
• Promote the program across all touchpoints, including your website, social media, and through email campaigns.
• Send personalized rewards or birthday gifts as part of the loyalty program to surprise customers with thoughtful gestures.
• Encourage customers to refer friends by offering both the referrer and the referred customer a reward.

3. Act on Customer Feedback

What are your customers’ major pain points and concerns? What do they enjoy about your products and website? If you’re unsure about customer preferences, it’s time to collect feedback. 

Why it works: Think of feedback as a free instruction manual called “How to boost customer retention.” Collecting customer feedback provides direct insights into what’s working and what isn’t, allowing you to fine-tune your offerings. For example, after reviewing customer feedback, you might learn that you need to stock more colors of a popular product, make your navigation menu less confusing, or give customers more opportunities to save on shipping. 

Hearing from your customers brings other benefits too. For starters, responding to feedback, whether it’s positive or negative, shows shoppers that their voices are heard, building trust and fostering good feelings. Additionally, listening to feedback also helps you address issues before they escalate. 

Ideas for getting started:

• Send post-purchase surveys to gather insights on customer satisfaction and identify areas for improvement. You might ask about their experience with the product, delivery, and customer service. Use one or two open-ended questions, or simply provide a rating scale. 
• Create easy-to-use channels for customers to provide feedback, such as website forms, social media polls, or email responses.
• Act on feedback by implementing changes or improvements based on customer suggestions. And don’t forget to inform customers of these changes so they know their voices are heard!
• Regularly monitor customer reviews on product pages and social media to address concerns and thank customers for positive comments.

4. Offer Proactive Customer Support

In a perfect world, every ecommerce transaction would go off without a hitch. But in the real world, shoppers sometimes run into technical issues, encounter delivery mishaps, or don’t receive the right product. 

To smooth things over and retain these customers, you’ll need a great customer service strategy.

Why it works: Proactive support helps build loyalty by preventing frustration and dissatisfaction. Customers who receive timely assistance—whether it’s an order update, a product recommendation, or a solution to an issue they weren’t even aware of—feel well cared for. When customers reach out about problems, your team should respond quickly to avoid frustration.

Ideas for getting started:

• Send order status updates, such as shipping notifications or alerts about delays, so customers are always informed.
• Provide self-service options, like an updated FAQ section or knowledge base, that can solve common problems before customers need to contact support.
• Reach out to customers after a purchase to make sure they’re satisfied and offer help if needed. This is particularly useful if you sell a complicated product that might be difficult to set up.

5. Provide Smooth Shipping and Easy Returns

Shipping might be an afterthought for some merchants, but for customers, it’s an integral part of the online shopping experience. 

Why it works: Today’s consumers expect fast, reliable shipping and hassle-free returns. When people know they can easily return items and that shipping will be quick and efficient, they’re more likely to make repeat purchases. A positive shipping and returns experience removes friction from the shopping journey, making it easier for customers to shop with confidence. 

Ideas for getting started:

• Give customers the option to insure their packages against loss, damage, and theft. 
• Offer free or affordable shipping options, with clear delivery timeframes that align with customer expectations.
• Provide order tracking information so customers can monitor their shipments and stay informed about delivery progress.
• Implement a simple return policy that allows customers to easily return or exchange items within a reasonable time frame.
• Make the return process user-friendly by providing prepaid shipping labels.
• Clearly communicate shipping and return policies on your website, at checkout, and in post-purchase emails.

Provide Shipping Insurance To Increase Customer Retention

Even a single shipping issue can cause customers to swear off your brand forever—unless you address the issue promptly. Norton Shopping Guarantee with Package Protection by EasyPost gives brands a simple, hassle-free way to deal with package loss, theft, or damage.

When you add Norton Shopping Guarantee to your Shopify or WooCommerce store for free, customers have the option to add shipping insurance to their purchase for a small percentage of the total cost. If something goes wrong during delivery, our team resolves the issue and provides reimbursement. The result? A satisfied customer who’s willing to purchase from your store again. 

Learn how Norton Shopping Guarantee helps merchants enhance customer retention and increase your conversion rate.