Customer Retention and Acquisition Strategies

Customer Retention Explained

• Customer retention involves retaining repeat customers and increasing the lifetime profitability of each one.
• Customer retention is affected by customer churn: customers stop using your business.
• A strong customer retention strategy maintains relationships and creates value for customers, helping them achieve their goals when purchasing your product or service.
• A customer loyalty program exemplifies a customer retention strategy.
• Acquisition involves the steps taken to gain new customers, which should be measurable and repeatable.
• Acquisition strategy examples: Facebook ads, SEO, and affiliate marketing.
• Acquisition strategies create a customer base, while retention strategies build ongoing relationships.

The Importance of Customer Retention

• Customer retention leads to affordability, return on investment, loyalty, and referrals.
• Retaining customers is more affordable than acquiring new ones.
• It costs $50 (example) to acquire a new customer versus $10 (example) for a repeat purchase.
• Acquiring a new customer can cost 5 to 25 times more than retaining an existing one.
• Loyal customers spend more money because they understand the value of your products.
• Customer retention encourages customer acquisition through referrals from satisfied customers.

Customer Retention Focus

• The types of products you sell affects how much you should focus on retention.
• Businesses with high ticket items that need to be bought frequently benefit the most from customer retention.
• Virtually every business can profit from more loyal customers and repeat sales.
• When starting out, focus solely on acquiring new customers, then shift focus to retention once you gain traction.
• Reward early customers.
• As you get consistent sales, split your time 70/30 between nurturing existing customers and finding new ones.
• Established stores often struggle to continue finding ways to grow.
• Acquisition may lead to a lot of one-time purchases.
• Strive for a 50/50 split between acquisition and retention once well-established.

Strategies to Boost Customer Retention

• Improve customer support pre-, mid-, and post-sale.
• Resolving a customer complaint effectively can lead to a loyal repeat customer.
• Customer satisfaction shoots up if you make a mistake and correct it effectively.
• Live chat availability can turn a customer question into a sale or a complaint into a resolution.

Customer Appreciation

• Sending a small gift to top customers is a great way to surprise and delight.
• Giving an unexpected gift aligns with the law of reciprocity: responding to a positive action with another.
• Handwritten thank you notes give a personalized touch and can create loyal customers for life.

Email Marketing

• Emails can continue a relationship with customers, making them one of the highest converting tools.
• Avoid annoying customers by ensuring each email adds value.

Suggested Emails:

• Follow-up emails
• Personalized emails checking up on customers' satisfaction.
• Ask customers to leave a formal product review.
• Send well-timed emails based on your product's lifespan to re-engage customers.
• Offer a discount or credit to re-engage customers who haven't purchased in a while.

Loyalty Programs

• Loyalty programs increase purchase frequency by motivating customers to earn rewards.
• Loyalty programs create two-way value: customers get more value, and stores get repeat business.
• Loyalty programs fall into four categories: points, tiers, social media, and paid programs.
• Encourage customers to sign up for loyalty programs by giving them an instant reward.

Measuring Customer Retention

• To measure customer retention, track returning customer rate and average order value.
• In Shopify, these metrics can be found in the analytics dashboard.
• Repeat customer rate measures how well your retention strategy is working.

Calculating Key Metrics

• To calculate repeat customer rate: (Number of customers with >1 purchase) / (Number of unique customers) only within the last year.
• Average order value is the average amount a customer spends per transaction.
• To calculate average order value: (Yearly revenue) / (Number of orders processed).
• Customer value is the ultimate goal of retention marketing, in order to understand how much each customer is worth.
• To calculate customer value: Purchase frequency x Average order value.