It is common knowledge that your business only gains profit when your customer lifetime value exceeds customer acquisition cost. You may have to spend much effort raising customer awareness, advertising your products, and convincing customers to visit your store. And you can hardly earn a profit after your customer’s first purchase. You may have to keep them returning at least 4 to 10 times to reach the break-even point.
None business can grow without keeping customers returning. Return customers are those who generate profitability.
So how can you convince your shopper to return to your store for more?
In today’s article, we will discuss some practical strategies to help you effectively retain your existing customers.
- What is a returning customer?
- Why is keeping customers returning so important?
- 6 ways to keep more customers returning to your store
What is a returning customer?
Before diving into details, let’s review how you can define a return customer.
A return customer is someone who has bought your products or services and interacted with your business once before coming back for repurchasing (at least one more time).
When a customer returns several times and continues to buy from your store again and again, he or she is considered as a repeat customer.
A repeat customer becomes your loyal customer if he or she thinks about your products or services first whenever he or she needs something. A loyal customer is willing to recommend your offerings to others. He or she is also not easily impacted by product pricing or availability.
Converting potential leads into first-time customers, then keeping them returning, and building customer loyalty is the mutual goal of every business.
Why is keeping customers returning so important?
For any business, attracting new customers is essential to generate revenue and profit. However, keeping existing customers coming back is even more critical for sustainable profitability.
We would like to list down some reasons why every company should invest valuable resources to get existing customers to come back more and more.
Retaining customers is less expensive than acquiring new ones
Research has proven that the costs to acquire a new customer can be five times higher than those used to keep an existing one. Furthermore, it can cost up to 16 times more to get your new customers to spend as much as your current one.
To attract and convert new customers, you probably invest much on displaying ads, building and nurturing media sites, implementing email campaigns, SEO, etc. Furthermore, in this competitive marketplace, customer acquisition cost rapidly increases across channels.
Even when you have converted new prospects successfully, depending on the industry you’re operating in, you may have to wait for weeks, months, or even years to generate profit.
Returning customers spend more than new ones
Repeat business allows you to generate more revenue. Existing customers, who are familiar with you and trust you, will be willing to purchase not only more frequently but also more expensive items. On average, customers spend three times more from their second purchase than the first one.
When you market your products or service to a potential customer, you only have a 5-20% chance of convincing them to purchase. By contrast, you get 60-70% of selling to your repeat customers.
Reported in a study by RJMetrics, only 32% of customers that come back after the first order. 53% of the second purchases will make the third order. From the sixth time, the probability that customers get back is more than 70%.
Repeat customers are willing to promote your business
If you put effort into making your customers happy and keeping them stick with you, you can build a strong referral system.
Once customers trust and love your brand, they are more willing to refer your products or services to their families, friends, colleagues, etc.
Repeat customers who purchase frequently have a 75% chance of recommending your business compared to first-time buyers.
Word-of-mouth is a highly effective marketing approach for any business. According to the State of Inbound 2018 conducted by HubSpot, over 50% of analyzed sales teams confirmed that word-of-mouth is the best source for new business.
Besides direct referrals, your existing customers are also your advocates who actively promote your business online. They are willing to leave positive reviews on social media, forums, websites, etc. These social proofs will effectively influence others’ purchase decisions.
6 ways to keep more customers returning to your store
Repeat customers are the best asset of your business. Focusing on satisfying these customers can be a powerful strategy to boost your revenue.
In the below section, we will discuss six most effective approaches to earn repeat business.
Leverage a reward points system
Integrating a reward points system is the most popular and practical way to keep your customers visiting your store again and again.
Your buyers should be rewarded when performing multiple actions such as repurchasing, rating and reviewing, subscribing, sharing on social media platforms, referring to their friends, etc.
Customers, then, can redeem points as discounts for their next purchases.
An automatic system of earning and spending points can effectively engage and encourage your shoppers to repeat purchasing.
With advanced features, you can easily set up flexible earning and spending rates for each product or customer group, manage and allow your customers to track their transactions, customize point labels to excite your buyers and more.
When you design a reward points program, keep in mind that your program needs to be transparent. You should communicate with your buyers clearly to make sure that all participants are aware of any rules and conditions.
Users should be able to manage their balances as well as earning and spending activities right from their store accounts. Any updates should automatically be sent to customer emails.
If the points earned have an expiration date, then your customers should be informed via email or SMS before their points are expired.
If well-managed, a reward points system can be an effective method to build long-term relationships between your business and your beloved customers. However, any complication and frustration can exert negative impacts on your customer trust and loyalty.
Incentivize loyal customers
Besides the reward points system, a Loyalty Program system that builds effective promotional programs for repeat customers is also a must-have tool for every online store.
In the eCommerce space, shoppers tend to browse on the Internet to look for their desired items. Once they find then purchase that item, they are not likely to return if you do not give them a reason.
The greatest way to capture these customers is to incentivize their visits. You should give them instant benefits whenever they visit your store. You can offer discounts by issuing a promo code for their next purchase or give you a chance to buy one, get one free if they come back.
After very first interactions, you should show appreciation when your customers purchase from your store more frequently by giving them exclusive benefits.
A comprehensive loyalty program allows you to assign customers to specific customer groups (VIP, Big, Superfan) based on their purchase history (the number of orders, total order value, average order amount). Each customer group receives special discounts and benefits.
This personalized loyalty program can fit individuals and customer groups and motivate your customers to shop more frequently on your site.
Another great way to surprise your valued customers and make them interested in future purchases is to offer personalized experience whenever they visit your store. A study by Harvard Business Review indicated that a simplifying and personalized purchasing journey is the savviest way to gain repeat business from your customers.
These days, each customer has different preferences when shopping. You need to create and deliver products and services with distinct variations to fulfill their specific needs.
Beyond product colors or variants, you have to provide your customers with local shipping and payment methods to ensure that your shoppers can purchase without any difficulty.
In addition, you can apply technology to record and analyze your customer purchasing data and past behaviors to offer them customized recommendations or deals. For example, you can offer a returning customer a supplementary to what they bought previously.
Finally the service delivered should be tailored. A personalized greeting, thank-you note, and a birthday message can show how much you appreciate your valued clients.
Enhance customer service
A service that exceeds your customer expectation can leave a long-lasting impression. Though shoppers might not buy something at that time, they are more willing to come back later. When buyers are delighted and satisfied, they are more likely to share with others.
Whether you have a brick and mortar store or not, you have to train your front-line staff on the importance of customer service and implement strategies to satisfy your customers once they visit your store.
Most people consider a fast, friendly, efficient customer service as a standard. You should integrate a live chat or help desk system to handle customer inquiries promptly. You should also allow your customer to reach you via multiple channels such as websites, email, or social media. A quick and efficient support system can turn an unhappy client into a loyal one.
To fully understand your customers, you should distribute quick surveys or feedback forms to gather detailed information about why your customers choose you, why they return, what they like or dislike about your business, etc. These insights can help you enhance the overall shopping experience.
Engage with customers
Actually, in this fast-moving world, most people find it boring to shop online. There is no direct interaction. Buyers cannot physically inspect what they are buying.
It is essential to strengthen the connection between your business and your customers by engaging them via multiple channels.
First, you have to present a personality on social media platforms. You can use your social accounts to encourage your customers to like, share, review their shopping experience. You can run some mini-games, giveaways, or notify your customers about the latest updates or deals. You can share some helpful content like a how-to article or video.
Besides social media, another great way to communicate with your customers is to send them follow-up emails. For example, after a customer completes an order, you may send him or her a thank you email. After a week, you can keep up with an email asking for their experience. Later on, you can send an email to recommend the customer a complimentary product to his or her initial purchase.
It is critical that every message you delivered has to add value to your customers. If you do not plan and implement carefully, you will risk losing your customers instead of keeping them.
Be socially responsible
Another approach to retain your customers is to show them your corporate social responsibility. The majority of consumers are trying to be responsible citizens. They look forward to the same from businesses.
The Sustainability Imperative Report by Nielsen indicated that 66% of global consumers are willing to pay more for brands that are known for socially responsible commitment. Consumers value products made from natural or organic ingredients, companies that are using environmentally friendly technologies, firms that are sharing difficulty with the community.
Goodwill creates repeat business because buyers know that their money is not going to one individual pocket, but it can genuinely contribute to a better society.
In this highly competitive market, many businesses struggle to attract new customers and keep existing ones coming back. To generate a satisfied and loyal customer base, you have to build and nurture relationships over time.
We hope that this article has brought you some ideas to implement customer retention strategies.