This is a post by Alexandra Sheehan and Francesca Nicasio
Editor’s note: This post has been updated to add some tips and best practices that retailers can apply during and after the COVID-19 pandemic.
Customer acquisition can sometimes be the shiny new toy that gets all the attention. But old reliable retention is where the money’s at: Depending on which data you cite, customer acquisition is anywhere from five to 25 times more expensive than retention.
The question is, how can you cash in on all that customer retention has to offer? To answer that, let’s first understand what customer retention is and why it’s important.
What is customer retention?
Customer retention refers to a business’s ability to attract and maintain repeat customers. You measure using your customer retention rate, which is the rate at which your business is able to retain those existing shoppers.
In retail, customer retention can help you understand not only how positive the customer experience is but also how you’re able to meet customers’ expectations. It goes beyond simply customer loyalty — retailers have to be able to fulfill the demands of returning customers too.
The importance of customer retention in the retail sector
Customer retention is often far more effective and profitable than customer acquisition. One report on customer loyalty from Stitch Labs found that returning customers account for almost a quarter of retailers’ revenue — and they make up less than 12% of the total customer base. Plus, repeat customers spend 15% more in a single order and 120% over the course of a year.
But customer retention is more than just profitable. It also helps you gauge the health of your customer relationships. Not to mention, loyal customers can turn into brand advocates, doing a lot of the heavy lifting for customer acquisition for you. Word-of-mouth is the most influential factor in a purchase decision for nearly three-quarters of consumers.
So, how can you drive customer retention in your retail business?
7 customer retention strategies to implement in your retail biz
Customer retention starts with the very first interaction a consumer has with your brand, even if it’s not at a point-of-purchase.
Customer retention starts with the very first interaction a consumer has with your brand, even if it’s not at a point-of-purchase.
1. Have a customer loyalty program
One way to drive customer retention is to get to know your shoppers and provide relevant value through a customer loyalty program. These programs provide deeper insights into your customers and also helps you stay top of mind.
When executed properly, loyalty programs increase customer lifetime value. Plus, basket size inevitably increases, as 66% of consumers who belong to loyalty programs will modify spending to maximize rewards. And they’ll return for future purchases to gain or redeem their rewards.
Outdoor gear and apparel retailer REI has an exceptional customer loyalty program. Customers actually pay to be in it, but that’s because it provides tons of value: 10% dividend back on all full-priced purchases, access to members-only deals, and an invitation to members-only REI Garage Sales — where used/returned gear is resold at steep discounts.
Those customer loyalty program perks combined drive repeat purchases. From my own experience, I’ll almost always pay more to purchase a product from REI and get a dividend (plus enjoy their no-questions-asked return policy, which is another customer retention tool) than to purchase it cheaper elsewhere.
Plus, REI does a great job at reminding its customers of their loyalty program perks. In a recent email promoting a new product, the brand reminded me that I have a yet-to-be-redeemed special discount as a member. And it’s a decent amount of savings: More than $45 off in a single purchase. Even though I’m not in the market for a new tent, I’ll be checking out their site and store so I can take advantage of that 20%-off discount.
Having a variety of perks for the members of york loyalty program can also inspire repeat purchases and retention. Go beyond the usual discounts and allow your customers to redeem other perks, such as free products and exclusive experiences.
Consider the loyalty program of Our Bralette Club (OBC), a size inclusive lingerie brand. While OBC’s rewards program has the usual perks like member discounts, it also lets its loyal customers redeem cool product rewards like tote bags, lingerie accessories, and cosmetics.
OBC also rewards different behaviors (i.e., not just purchases). Members also earn points when referring their friends and talking up the brand on social media. We love this approach because it helps develop customer relationships that go beyond purchases. Plus, having a variety of rewards keeps the program more exciting, which helps with customer retention.
Our Bralette Club uses Marsello, a loyalty and marketing automation tool that makes it easy to create engaging loyalty programs that keep customers coming back. With Marsello, you can set up a custom loyalty program that automatically rewards loyalty points for spend, referrals, product reviews, social media engagement and more.
2. Be proactive with customer support
Your retail employees are an integral part of your customer retention initiatives. They’re the human extension of your brand and a pillar of the relationship you have with your customers. As we know, strong relationships mean more repeat purchases.
Warm and welcoming greetings, educated associates, and thoughtful gestures (they watched my bike for me while I was shopping so it wouldn’t get stolen), have turned me into a returning customer and a brand advocate.
As you can see, when it comes to staff, it’s important for them to be more than just available. They need to be proactive in the service they provide to customers if you want to drive loyalty and repeat purchases. In fact, almost 90% of consumers will shop with your competitors after receiving poor customer service, according to data by RightNow.
Brands that are proactive with customer support thrive, even during times of diversity. We saw this happening amidst the COVID-19 pandemic. Retailers such as Trader Joe’s and Sprouts were proactive with ensuring the safety and staff of their customers. These stores were some of the first to sanitize carts and baskets for each customer and would implement physical distancing in-store.
Such actions sent the message that they’re looking for their customers and staff, and this made customers feel safer about shopping at their stores.
3. Take a stand
It’s becoming more common for brands to take stands on issues. There are a number of benefits to this approach, one major one being customer retention. First, 64% of consumers base their relationships with brands on shared values. And when brands are truly committed to those causes, they can build meaningful relationships with customers that turns into lifelong sales.
United By Blue is a prime example of a brand that has built a loyal following thanks to its mission to promote sustainability. What’s more, the retailer practices what it preaches: They sponsor the annual Blue Friday clean-up the day after Thanksgiving. They have a strong following of brand advocates and repeat customers.
4. Create a community
We’ve discussed before about you can build a community using your retail store. Community builds and nurtures authentic relationships and drives customer loyalty. Creating a community around your brand or store helps customer retention in a couple of ways:
- Gives customers a reason to return to your store. Hosting in-store community events encourages repeat visits and, eventually, transactions. The more a customer visits your store, the more likely they are to make purchases.
- Builds trust. Consumer trust leads to sales: 62% of consumers consider brand trust to have a great influence on their buying decisions. Creating a community, a safe space, establishes trust and a lasting relationship with your customers.
The Working Artist is a community space first, retail shopping experience second. Founded by two artists, they rent space to other creators who can put their works for sale in the gallery/store. Regular events — workshops, paint ’n‘ sip, yoga — keep The Working Artist’s community pulse beating and customers returning.
Branded online communities are also on the rise, and they’re perfect when you can’t drive too much traffic in-store. If you have a highly engaged customer base, consider setting up an online community (like a Facebook group) where your customers can interact with each other.
One brand that’s doing this well is the fitness company Peloton. The brand has a private group for its members, and the community serves as a platform where Peloton bike owners can share stories, ask questions, and get to know each other.
5. Implement personalization (tech helps, but this doesn’t have to be fancy!)
Today’s technology, both online and in person, is making personalization more accessible to retailers of all kinds. Many POS systems will track customers’ purchase history and sync with a loyalty program, so you can identify trends or feed the data to a tool that will identify trends for you. Accenture found that 65% of consumers will purchase from a brand that knows their buying history.
Personalization doesn’t have to be fancy. At Anthropologie, for example, they’ll write your name on the door of the fitting room. It’s a small effort, and all you need to do to implement this in your own store is by adding a chalkboard, dry erase board, mirror or other reusable writing surface to your fitting rooms. It’d be a smart move, especially considering that more than half of consumers will shop with a retailer that recognizes their name, also according to Accenture.
Another non-fancy way to personalize the shopping experience? Spend one-on-one time with a customer in need and make the effort to find the best product for them.
Case in point: I was recently shopping at Sunglass Hut, where an associate took the time to find out what I needed and what my preferences were. She walked me through the different brands they had, and she hand-picked pairs of sunglasses that best fit the shape of my head. She even brought out an eyewear tray so we could easily compare different products.
6. Nurture relationships through post-purchase communications
Treating your customers as humans rather than sales numbers is extremely important for customer retention. A recurring theme in this article, strong brand-customer relationships drives loyalty and repeat purchases. One way to build on those relationships is through post-purchase communications.
Rather than taking a customer’s money and setting your sights on the next sale, use post-purchase communications to keep the conversation going, provide value, and demonstrate appreciation for their loyalty. This will make customers want to return to your store rather than a competitor’s.
As we’ve noted, personalization is extremely effective, so incorporate a personal touch in these tactics. Implement a POS that can track customers’ email addresses and purchase history, so you can make smart, relevant product recommendations and increase conversion rates.
Some ideas include:
- Give customers a coupon for their next purchase
- Request customer feedback on their recent purchase
Overstock sends an automated email to customers after their purchase soliciting feedback. The survey process is simple and makes customers feel valued and heard — which means they’re more likely to drive return purchases.
Pro tip: Make sure you respond to and use the feedback you receive. If customers complain and you don’t respond, you may damage your brand.
- Invite shoppers to join or give them an update on their status in your customer loyalty program
- Provide personalized recommendations for products and content based on previous purchases
- Send product education content to help customers get the most of their purchase
- Email receipts that contain one or a combination of the above
7. Tailor your messaging to each shopper’s journey
As you already know, staying top of mind is essential for improving your customer retention. You need to be in your customers’ radar, and in order to that, regular communication is key.
That said, regularly communicating with shoppers doesn’t mean blasting your entire list with the same message. In order for your customer communication efforts to be effective, you need to refine and personalize your messages.
A good way to implement this is to tailor your messages to each customer’s shopping journey.
Think about it: first-time buyers have a very different brand perception from those who’ve been buying from your for a year. Meanwhile, shoppers who haven’t visited your website or store are on a different retail journey.
You need to treat these segments differently and reach out to them in the most relevant way.
The jewelry retailer Au Revoir Les Filles does a great job here. Au Revoir Les Filles has different email flows based on where customers are in their shopping journeys. New customers get different messages from top spenders and those who haven’t shopped with the brand for a while also get a different set of emails.
Have you checked out Marsello? It’s a loyalty and marketing automation tool that makes it easy to create personalized campaigns. With Marsello, you can send targeted communications based on each customer’s behavior, purchase history, and brand interactions, so messages will resonate more with shoppers.
Regardless of which tactic(s) you try, automation will help you save time and stay top-of-mind with your customers. Trial-and-error is key: Look at your data and see what’s working and what’s not. From there, you can establish theories to test with new strategies and tactics.