The pandemic has created a lot of new potential customers and online retailers have been doing their best to try and get the largest share of this new audience they possibly can. This amplifies a general trend we see that marketers are naturally focused on customer acquisition, and tracking metrics like conversion rate, revenue per channel and average order value closely.
This is understandable – it would be an exceptional business who could grow revenue without growing its customer base. But it means that retailers aren’t always paying close attention to a large source of revenue: existing customers.
Having a good retention marketing strategy works a little bit like compound interest. If you can keep customers coming back with timely, relevant messages, then you incrementally increase your average customer lifetime value (CLV)
We analyzed data from over 20bn customer touchpoints to find insights on customer retention, and the impact it has on retail performance. Read the report here.
But what can retailers do to get started?
Set the right goals
There are a variety of components to retention marketing so it’s important to focus on the ones that are most important to your business. If you have a wide range of products, then your goal could be to increase the number of items purchased, or to increase the frequency that customers purchase.
If you sell a few types of durable product, that might be harder to achieve compared to consumable or perishable products. In that case, you might want to look at increasing your average order value, either with complementary products or services, or upsells and cross-sells.
Whatever makes sense for your business, choosing one initial goal will help you focus your marketing efforts and create the right strategy for you.
Get the right metrics in place
With your goal decided, you will need to measure it effectively. Deciding what metric best represents your goal and then calculating what it currently is will help you set a baseline benchmark that you can aim to improve.
For retention marketing, the main metrics you’ll want to look at are:
We wrote more about some of these metrics here. While you may want to focus on one primary metric, it’s worth measuring all of them and taking temperature readings over time, so you can measure your overall performance.
Segment your customer base and compare segments
In trying to find insights into your customers, you should segment them into groups and compare these metrics across different segments. For example, you may find that people whose first purchase is a particular product seem to buy more frequently than other groups. Is there a good reason for that, and should you try and create more first-time buyers of that product?
Similarly, you may want to group your most loyal customers, those that haven’t bought for the last year, and those in the middle, and see if any behavior links them. Beyond that, you’ll want to come up with different strategies for all groups.
Review your marketing communications, both broadcast and automated
With those insights in mind, take a look at what you’re already sending to your groups both as broadcast newsletters, and automated triggered workflows. Which ones are leading to the greatest customer engagement in terms of clicks and purchases? Does anything unite them?
You should look at all of your communications with your goal and metrics in mind, and think about how you could improve your existing communications, add in new ones, or segment the messages you send better.
Build these elements into a strategy. Easy right? Not quite. But with these parts at your disposal, it’ll be a lot easier to analyse your retention strategy. The clues are in your customer data, so bringing that together and analyzing it is essential.
To find out more about how retention has an impact on your revenue, take a look at our guide here.
If you want to know how we approach this, take a look at our Methodology page, and book a demo to find out more.