Your ability to retain customers—not just draw them in—sets you apart from competitors and allows you to scale your e-commerce business.
With an average customer retention rate of 28.2% for ecommerce brands, there’s a clear gap — and an opportunity to leverage retention tactics to stay ahead of the rest.
Most businesses struggle to keep customers coming back. So those who crack the code can set themselves apart and ensure their brand not only survives but thrives.
With that in mind, we’ll cover everything you need to know about client retention and strategies you can use to maximize the value of existing customers.
What is customer retention?
Customer retention is the ability of your business to ensure that once a customer makes a purchase, they don’t just disappear but return to buy again.
Effective retention means you’re not just focusing on attracting new buyers but also nurturing your relationships with existing ones. This is crucial since keeping a customer is generally more cost-effective than acquiring a new one.
That’s why twice as many businesses want to increase their investments in client retention than in customer acquisition.
Customer retention rate formula
The formula to calculate your customer retention rate (CRR) is:
CRR = ((E – N) / S) x 100.
Where:
- S is the number of shoppers you have at the beginning of the period.
- E is how many buyers you have at the end of the period.
- N is the number of new customers you acquired during the period.
For instance, let’s say you run an ecommerce store that sells sports apparel. When the month begins, you have 200 customers. During the month, you gain 50 new customers who are interested in your latest spring collection. However, you end the month with 220 customers, as some may have decided not to buy again.
In this case, we can use the formula above to calculate your CRR for the month:
CRR = ((E – N) / S) x 100.
Where:
- S = 200
- E = 220
- N = 50
Plugging these numbers into the formula, we get:
CRR= ((220 – 50) / 200) x 100
CRR = (170 / 200) x 100
CRR = 0.85 x 100
CRR = 85%
This means your retention rate for that month is 85%.
In addition to CRR, you may also want to focus on the following retention metrics:
Customer churn rate (CCR)
CCR is a key performance indicator (KPI) that shows the percentage of current customers your business has lost over a specific period of time, usually a month. To put this into practice, let’s say you start the month with 500 customers and end with 25 leaving your company.
The churn rate would be:
CCR = (Lost customers / total customers at the start of the period) x 100
CCR = (25 / 500) x 100
CCR = 5%
Repeat purchase rate (RPR)
RPR is a key metric that shows the proportion of customers who’ve bought more than one item within a specific timeframe, typically over a year. For example, let’s say you own an online bookstore. Over the course of a year, you sell to 800 customers. Of these, 200 return to your store and buy at least one more book.
Your repeat purchase rate would be:
RPR = (Number of repeat customers / total number of customers) x 100
RPR= (200 / 800) x 100
RPR = 25%
Purchase frequency (PF)
PF shows how often customers buy products within a given period, usually a year. Let’s imagine you run an online store that sells handbags. In a year, you sell 4,000 bags to 800 unique customers.
Your purchase frequency would be:
PF = Total number of purchases / unique customers
PF = 4,000 / 800
PF = 5
On average, each customer bought 5 handbags throughout the year.
Average order value (AOV)
AOV measures the average amount each customer spends on an order over a specific period, like a year. For instance, suppose you have an online dog food store. In one year, your shop generates $120,000 in revenue from 3,000 orders.
In that case, your AOV would be:
AOV = Total revenue / total number of orders
AOV = $120,000 / 3,000
AOV= $40
This means the average value of the dog food orders customers place in your store is $40.
Customer lifetime value (CLV)
CLV estimates the total revenue your business can reasonably expect from a single customer throughout your relationship with them.
The formula for calculating CLV is:
CLV = Customer value (CV) x average customer lifespan
Where:
CV = Average order value (AOV) x purchase frequency (PF)
So, let’s say you own an online electronics shop. From your data, you know:
- The AOV is $30.
- The PF is 8.
- The average customer lifespan is 3 years.
From this data, your customer lifetime value would be:
CLV = (AOV x PF) x average customer lifespan
CLV = (30 x 8) x 3
CLV = 240 x 3
CLV = 720
That means you can expect to earn $720 from the average customer throughout your relationship with them.
Monitor all of these metrics regularly to gain valuable insights into your customers’ behaviors. This will help you make data-driven decisions to improve retention and stay ahead of the curve.
Customer retention strategies
Effective customer retention strategies will drive long-term success for your business. Let’s look at 8 ways you can satisfy customer expectations and turn them into loyal shoppers or even brand ambassadors.
1. Target customers with personalized communications
Personalizing the messages you send customers shows that you see them as individuals with unique needs and preferences, not just numbers on a spreadsheet. This approach makes them feel valued and understood, which promotes a deeper connection with your brand.
In fact, 53% of businesses have seen a boost in customer loyalty and retention by using personalization strategies, according to Mastercard’s 2023 Retail TouchPoints Report.
In addition, emails with personalized bodies have higher open (30.26%) and click-through rates (2.7%) and lower bounce rates (2.41%) than non-personalized emails (26.55%, 2.1%, and 3.62%, respectively).
To see personalization in action, check out Spotify. The music streaming service uses algorithms to analyze each individual’s listening habits and preferences and even the time of day they listen to certain types of music.
Based on this data, Spotify creates personalized playlists for each user. These include Discover Weekly, which introduces listeners to new songs and artists they’re likely to enjoy, and Daily Mix, which matches their current mood and preferences.
Spotify creates a personalized Discover Weekly playlist for each user.
With such a level of personalization, users consistently discover music that resonates with them, which enhances their listening experience.
One of the best ways to achieve this kind of personalization is by using AI-driven product recommendations to customize your store’s shopping experience and email campaigns.
2. Create a gamification element through VIP programs
Gamification introduces fun, competition, and rewards into the customer experience. People naturally want to achieve, have status, and be recognized. So, you can leverage these human desires with gamification to boost customer engagement.
Duolingo, a popular language-learning platform, uses gamification to engage and retain its customers.
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Duolingo’s weekly report shows users how many points they’ve earned.
It incorporates various game-design elements, such as:
- Points (XP): Users earn points for completing lessons, which contributes to a sense of achievement.
- Levels: Each language course is divided into levels that customers unlock as they progress.
- Streaks: The platform encourages users to maintain daily lesson streaks and rewards those who use the app daily.
- Leaderboards: Users can compete with friends or other learners worldwide, adding a competitive element.
To effectively use gamification to retain customers, develop a VIP program that rewards shoppers for various actions, such as purchasing products, referring friends, or engaging with your brand on social media.
According to Mastercard’s 2023 Retail TouchPoints Report, 45% of retailers used VIP perks to retain customers in 2023.
Rewards can range from points, badges, and levels to exclusive offers and early access to new products. The goal is to make the earning process clear and the rewards desirable and attainable so customers can participate actively and regularly.
3. Set up a customer loyalty program
Customer loyalty programs reward buyers for their repeated purchases. This not only incentivizes them to buy more but also creates a deeper connection with your brand, as shoppers see tangible rewards for their loyalty.
According to Antavo’s 2024 Global Customer Loyalty Report, 90% of businesses with loyalty programs reported a positive ROI, generating 4.8X more revenue on average than what it costs to run the program.
A superb example of a successful loyalty program is Sephora’s Beauty Insider. It rewards members with points for every purchase, which they can exchange for free products, exclusive gifts, and access to special events.
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Sephora’s Beauty Insider program rewards loyal members for making purchases.
The brand groups its program into different levels, with higher tiers offering more exclusive benefits, which encourages customers to continue shopping to reach these levels.
4. Use referral marketing
Referral marketing taps into your existing customer base to gain new buyers through word of mouth. It leverages the trust and social proof that satisfied customers generate. This makes their friends, family, and followers more inclined to try your products.
According to a 2023 report by Roundel, 40% of Gen Z shoppers trust their friends and family the most when it comes to getting product or purchase recommendations. You can leverage this peer influence to build trust with new customers and grow your bottom line.
MeUndies is a classic example of a brand that effectively uses referral marketing to retain existing customers and acquire new ones. Its program is designed to benefit both the person referring and the one being referred.
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The MeUndies referral program rewards both the referrer and the referred.
When an existing user refers a friend, the friend receives 20% off their first purchase. After the referred friend completes an order totaling $12 or more, the user who made the referral gets $20 in store credits they can redeem for MeUndies merchandise.
To effectively use referral marketing, implement a program that rewards both the referrer and the referred, as MeUndies does. This could mean offering discounts, free products, or special access to new products as incentives.
5. Create automated win-back campaigns
Win-back campaigns help you follow up on customers who’ve drifted away from your business. They use automated messages to reach out to buyers who haven’t bought anything or interacted with your brand in a while, reminding them of what they’re missing and incentivizing their return.
To use automated win-back campaigns, segment your inactive customers based on their last interaction with your business and engagement level. Then, offer them personalized incentives, such as discounts, exclusive access, or updates about products they showed interest in.
For the best results, use a marketing automation tool to schedule and send these campaigns. You can also leverage features like Time Travel and Perfect Timing. These functionalities allow you to send emails at specific times when recipients are most likely to open them, which maximizes the chances of engagement.
Elysium Health successfully uses automated win-back campaigns to retain customers. The company sends a targeted email like this one to customers who haven’t bought their dietary supplements in a while:
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Elysium Health sends targeted emails with discounts to win back customers.
These emails often include a special offer, like a discount on their next purchase. This tactic re-engages shoppers whom the brand might otherwise have lost. And if they love the products they purchased using the discount, they may just become loyal customers.
6. Implement abandoned cart alerts
According to the Baymard Institute, the average shopping cart abandonment rate is a staggering 70.19%. This essentially means that the majority of customers who start the checkout process don’t complete their purchases.
With abandoned cart alerts, you can capture potential sales lost during the final stages of the buying process. These alerts should serve as gentle reminders that nudge customers to revisit their carts and finalize their purchases.
To achieve this, set up automated email workflows that trigger when customers leave your website with items still in their cart. Personalize these messages with the customer’s name, a list of the items they’ve left behind, and perhaps a special offer, like a discount or free shipping, to encourage them to complete the purchase.
Kizik, a footwear brand, uses abandoned cart alerts to encourage customers to return and complete their purchases.
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Kizik uses abandoned cart emails to encourage shoppers to finish checking out.
When customers leave items in their carts without checking out, Kizik sends a personalized email reminder that includes images and details of the products left behind.
7. Send exclusive promotional emails to repeat buyers
In this approach, you acknowledge and reward your most valuable customers with exclusive deals that incentivize them to buy more. This strengthens their brand loyalty, which is crucial for long-term retention.
For inspiration on how to use exclusive promotion emails to retain customers, look no further than Amazon Prime. Prime members receive emails that offer early access to Lightning Deals, exclusive discounts on various products and services, and information on Prime Day (a special shopping day with deals for Prime members only).
Amazon’s Prime program emails members with exclusive promotions, such as a free Grubhub+ membership.
As a result, Prime members typically feel appreciated and part of an exclusive club, which boosts customer satisfaction and encourages them to purchase more on Amazon.
8. Supplement your communications with SMS marketing
SMS offers a direct channel to your customers through their smartphones. In fact, surveyed marketers say it has higher customer engagement (60.5%) and open and click-through rates (53.5%) than other platforms.
Like emails, the best way to use SMS marketing for retention is personalization — whether it’s a reminder for a sale, upsell or cross-sell offers, or an update on loyalty points.
Domino’s Pizza effectively integrates SMS marketing into its retention program. Users who opt into SMS alerts receive timely promotions, such as discounts on their next order or updates on new menu items.
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Domino’s Pizza uses SMS to inform customers about deals.
How to prevent customer abandonment with negative lead scoring
Negative lead scoring is when you assign negative points to customers based on their lack of engagement with your brand. This could be anything from not opening promotional emails to failing to visit your website within a given timeframe.
By tracking these activities, or lack thereof, you can pinpoint customers who are losing interest and re-engage them effectively.
To do this, use a marketing automation platform to set rules that automatically assign negative points based on specific customer behaviors.
For instance, you could assign:
- -5 points if a customer doesn’t open an email with “Discount” in the subject line.
- -10 points if a customer hasn’t visited your website in a month.
- -30 points if a customer hasn’t made a purchase within a specified period.
Once a shopper reaches a certain threshold of negative points, you can trigger preventive actions, like a targeted re-engagement campaign, to regain their interest.
For example, let’s say a customer hasn’t opened any promotional emails with discounted offers in the last month (which is -5 points). They also haven’t visited your website in over 30 days (-10 points). As a result, their score drops by -15 and hits the negative threshold you chose.
Your system can automatically send them a personalized email with an exclusive discount on items they viewed but didn’t buy. This direct and customized approach can rekindle the customer’s interest and encourage them to revisit your website and possibly buy something.
Master customer retention to sustain your ecommerce growth
Client retention is the backbone of sustained growth and profitability. By nurturing existing customer relationships, you can enhance your CLV and build a brand with loyal customers.
To do this effectively, invest in a marketing automation platform like GetResponse MAX that empowers you to implement advanced customer retention strategies. We provide the tools you need to keep customers engaged, from automating win-back campaigns to personalizing communication across every touchpoint.