Bubble, a DTC skincare brand, increased revenue per customer by 171% and repeat purchase rate by a whopping 73% for customers using their loyalty program – all in just six months by tweaking their retention marketing strategy.
That’s the power of retention: you get to add new revenue at a fraction of the cost of acquisition. We run into countless examples of brands who have as little as 15% of their customers as repeat purchasers, but those returning customers spend as much as three times more than first-time shoppers. If there was ever a strong argument for going all-in on retention marketing, that was it.
What is Retention Marketing?
Retention marketing is a marketing strategy geared toward reactivating existing customers and encouraging them to make repeat purchases, ultimately increasing lifetime value (LTV). In a nutshell, it's the marketing tactic brands use to maintain customer loyalty and drive more repeat purchases.
Retention marketing directly affects the health of your business, as customer lifetime value, brand loyalty, and profitability are directly related to retention.
Why Retention Marketers Are the Unsung Heroes of Business Growth
The unsung heroes of the ecommerce world are the ones who focus on keeping existing customers happy and engaged. That’s right, we’re talking Retention Marketers.
They understand that it's far more cost-effective to retain a customer than to acquire a new one. And they know that happy customers are more likely to spend more, spread the word about your brand, and come back for more.
Here are just a few of the reasons why retention marketers are so important:
- They boost your bottom line. It's no secret that it costs more to acquire a new customer than it does to retain an existing one. Retention marketers help you save money by focusing on keeping your current customers coming back for more.
- They build customer loyalty. When you focus on providing your customers with a great experience, they're more likely to become loyal advocates for your brand. Loyal customers are more likely to spend more, forgive mistakes, and recommend your products or services to others.
- They give you valuable data. Retention marketers are experts at collecting and analyzing customer data. This data can be used to improve your products and services, personalize your marketing campaigns, and identify areas where you can improve your customer experience.
- They help you stay ahead of the competition. In today's competitive market, it's more important than ever to differentiate yourself from the competition. Retention marketers can help you do this by creating unique and personalized experiences for your customers.
If you're not already investing in retention marketing, you're missing out on a huge opportunity to grow your business. Here are a few tips for getting started:
- Identify your most valuable customers. Not all customers are created equal. Some customers are more profitable than others. Focus on identifying your most valuable customers and giving them the VIP treatment.
- Personalize your marketing. Don't just blast out the same marketing messages to everyone. Take the time to personalize your marketing campaigns to each individual customer.
- Make it easy for customers to do business with you. The easier you make it for customers to do business with you, the more likely they are to come back. Make sure your website is easy to navigate, your customer service is responsive, and your checkout process is simple.
- Get feedback from your customers. The best way to find out what your customers want is to ask them. Regularly solicit feedback from your customers and use it to improve your products, services, and customer experience.
By investing in retention marketing, you can build a loyal customer base that will help you grow your business for years to come. So don't neglect your existing customers. Give them the attention they deserve, and you'll be rewarded with a thriving business.
In addition to the benefits listed above, retention marketers also play a vital role in:
- Building brand trust: By consistently delivering positive experiences, retention marketers help to build trust and loyalty with customers. This, in turn, can lead to increased brand advocacy and positive word-of-mouth marketing.
- Improving customer lifetime value: By encouraging repeat purchases and upsells, retention marketers can help to increase the average amount that each customer spends over their lifetime. This can have a significant impact on a company's bottom line.
- Reducing churn: Churn is the rate at which customers stop doing business with a company. Retention marketers work to reduce churn by identifying and addressing the factors that lead customers to leave.
- Creating a positive company culture: A focus on customer retention can create a more positive and customer-centric culture within a company. This can lead to happier employees and better overall business performance.
Retention Marketing vs Acquisition Marketing
Think of retention and acquisition as the two sides of the same coin: one can’t exist without the other.
With acquisition marketing, your goal is to acquire new customers, whereas, with retention marketing, your goal is to retain those customers. In short, one attracts the customers to purchase, and the other impacts how long those customers will stay with you.
Whether you’re a start-up or an already established brand, it’s important to keep track of both metrics.
For example, Prima, a health and wellness brand, started measuring their retention rate early on. They understood customer purchasing behaviors, underlying reasons why customers continue making purchases with their brand, and overall customer satisfaction; however, Prima also needed to use acquisition marketing at that stage. Retention is only applicable when you have new customers coming in.
For most brands, it’s a delicate balance between the two. And as acquisition costs only rise, leaning into retention is becoming an even higher priority.
Benefits of Retention Marketing
Repeat customers are far less expensive to convert than new customers
An older but relevant study from Harvard Business Review suggests that acquiring a new customer is five to 25 times more expensive than retaining a customer. While the report is from 2014, the fundamentals remain the same.
With advertising costs only increasing in recent years, the cost of acquiring customers will keep getting more expensive.
Repeat customers require less product education
A repeat customer is your bottom-of-the-funnel audience. They already know how your product works and are familiar with its benefits. All you need to do is expand on what they already know and drive home the additional value of different products.
For example, if you have a new product launch and a customer already uses its complementary products, it’s much easier to inform them of the added benefits and position the product as a win-win for the customer.
Repeat customers already have built-in loyalty
There’s a difference between a repeat customer and a loyal customer. A repeat customer needs to actively choose to make a second purchase from you. On the other hand, it’s a no-brainer for a loyal customer.
The good news is, it’s much easier to improve the loyalty of a repeat customer than it is to win over the loyalty of a new customer. Once you get the customer to make the crucial second purchase, they’re more likely to keep returning because they’ve experienced your product. From the third purchase onwards, customers tend to yield a higher lifetime value because they make more frequent orders.
Retention Marketing Strategies
Email marketing is a great way to maintain your relationship with customers. You get to show up in their inboxes and deliver ongoing value long after they’ve visited your store.
Here are some examples of emails that you can send:
- Follow up emails
- Reminder emails
- Customer feedback emails
- Abandoned cart emails
- Discount or offers
- New product launch
- Informative and educative emails
- Community building and engagement
No matter the type of email you’re sending, the TLDR on email marketing (and SMS) advice is to always personalize. Using your post-purchase customer behavior data to understand patterns, needs, and timing of how to engage your customers segments is crucial! If you want to dive deeper, we have a full 2-part guide on how you can start personalizing super fast with RFM analysis.
Retention is a two-way street – a customer is only going to repurchase when the value of what they’re receiving is greater than the amount they’re spending’. And that goes beyond just your products.
A loyalty program is a way to incentivize and honor your loyal customers by giving them rewards or points in return for their purchases. It’s the easiest (and most affordable) way to show appreciation for their loyalty and incentivize them to purchase more frequently.
You can create a loyalty program based on points, and tiers, or even create a paid program. Even better, give customers an instant reward to encourage more signups.
Subscription programs are the ultimate retention driver, giving you an almost guaranteed monthly recurring revenue (MRR). With subscriptions, customers get used to using your products regularly, establishing a stronger affinity towards your brand. Plus, you get predictable recurring revenue.
Retention Marketing Examples
1. Bodily: Understanding Customer Behavior to Increase Retention Rate
Bodily is a women’s healthcare brand with a focus on pregnancy and postpartum products. Because the brand has a relatively niche audience, targeting women’s complete pregnancy and postpartum cycle, it became extremely important for them to retain existing customers. The scope of an existing customer purchasing products for all their needs was extremely high in Bodily’s case.
As a result, the brand decided to focus on understanding more about customer purchasing behaviors to ensure that they were reaching out to existing customers at exactly the right time. What initially began as an exercise of surveying customers and asking questions related to specific products and timelines for repurchase, turned into a driving force that equipped them with data they needed to create cohorts based on product-centric repurchasing behaviors, analyze market baskets more effectively, and create better product purchasing journeys.
2. HomeWorx: 25% increase in Retention Rate with Loyalty Programs
HomeWorx is a home fragrance brand that launched its DTC channel in 2020. Because it’s a niche brand, it had to retain customers in order to grow.
The brand launched Club HomeWorx, a point-based loyalty program to get recurring orders and encourage referrals. As a result, it saw a 25% increase in retention rate. In fact, the average revenue per customer increased by 373% for customers using the loyalty program.
How to Improve Retention Marketing
If you’re seeing a drop in retention lately or your retention rate isn’t as high as you’d like it to be, consider these five questions to understand where you need to improve:
Why do customers leave my site without purchasing?
The fact that a customer has bought from you earlier and revisited your site implies that your product was useful for them. Why, then, are they leaving without purchasing the second time?
It’s important to dig deeper and identify the underlying issue. Some common issues are:
- The customer found a cheaper product.
- Your website isn’t easy to navigate.
- The UX isn’t customer friendly.
- There isn’t enough social proof on your website.
- There’s no chat support on the website.
What is the site experience like for new customers?
Retention starts the moment a customer lands on your website – no matter if it's a new or existing customer.
It’s crucial to make your website enticing enough for new customers to go through with the purchase. That means having your best sellers on the front page along with social proof like customer testimonials and star ratings.
Make sure the experience is clear and distraction-free too. If a visitor doesn’t already know your brand and the first thing they’re greeted with is a large pop-up for an e-book, it’s going to interrupt their experience.
You can also give upfront discounts to incentivize the visitor to make their first purchase and collect their emails for future communication like this example from Cup of Nostalgia.
What is the site experience like for returning customers?
As much as pop-ups can be disruptive for first-time visitors, they can work well for returning customers. The experience for returning customers should be crafted differently to make sure it speaks directly to them, instead of spouting a generalized message. You can suggest personalized product recommendations based on their browsing history or have a pop-up of “start where you left off”.
Here are some examples of pop-ups: new product arrivals, upsell and cross-sell, and surveys.
How accessible are my key products that I want to sell (how many clicks to convert?)
Ideally, it shouldn’t take more than three clicks for a visitor to get to your bestseller or the product you want them to purchase, and it should be easy for customers to add products to the cart in one click.
Optimize your website by having a featured section on the homepage, recommendations below product pages, and upsell and cross-sell opportunities at the cart stage.
Am I building a brand experience from the first touchpoint to post-purchase communications?
Your brand experience plays a huge role in dictating whether or not a customer will come back to make future purchases.
The initial touchpoint starts when the customer first hears about your brand: this might be via social media, google search, website, or referral. This is why it’s important to show up on your most popular channels and create a branded experience across platforms.
Next, are you sending a post-purchase follow-up email? How promptly and how well do you respond to customers if they face any problems?
How much value are you adding to your customers via communications like emails and SMS?
Personalize & Improve Retention Marketing with Peel
Once you start applying these strategies, measuring and tracking the underlying metrics becomes the key to improving your retention rate. Understanding metrics like repeat purchase rate and average order value will help you craft a retention strategy with a strong impact on your business profitability.
If you want to track these metrics precisely and increase your customer retention rate, start with Peel’s free 7-day trial here.
From Cohort Analysis that helps you keep and eye on key retention indicators like Repurchase Rate and LTV to subscription metrics like Rate of One-Time to Subscriber and so much more, you’ll get the full picture of how your marketing and sales efforts translate to driving repeat purchases and retaining customers over time.