What is Retention Marketing in E-Commerce? Examples, Tactics of Increasing Retention in eCommerce [2024]

According to a study by Bain & Company along with Harvard Business School, businesses can skyrocket their profitability by 55% with just a 5% increase in customer retention. This staggering statistic underscores the pivotal role of retention marketing in E-Commerce. 

In an era where acquiring new customers is both challenging and costly, nurturing and retaining existing ones emerges as a strategic imperative. This is where retention marketing comes into the picture. 

But what is retention marketing? How is it beneficial for E-commerce businesses? Moreover, are there any real-life examples of retention marketing in Ecommerce? This detailed blog post will help you understand retention marketing in E-Commerce in detail. Let's explore! 

Retention Marketing: What Is It?

Retention marketing is a strategic approach that centres on engaging existing customers to foster repeated purchases and cultivate brand loyalty. It ensures the initial attraction of customers and their prolonged engagement and allegiance, solidifying the foundation of a thriving business. 

This entails reactivating past customers and encouraging them to make additional purchases, thereby boosting their lifetime value (LTV). Retention marketing is pivotal for sustaining a healthy business, directly influencing customer loyalty and profitability metrics. From personalised follow-ups to exclusive offers, retention marketing strategies are diverse and tailored to nurture enduring customer relationships.

Retention marketing and acquisition marketing are often confused and used interchangeably. However, they are quite different. Consider retention marketing as the counterpart to acquisition marketing, forming a symbiotic relationship where one complements the other. 

While acquisition marketing draws in new customers, retention marketing extends their stay, making it an indispensable facet of overall marketing strategy. 

Importance of Retention Marketing in E-Commerce

Customer retention strategies play a pivotal role in the success of any thriving e-commerce enterprise. These encompass a suite of methodologies designed to actively engage existing clientele, fostering recurrent transactions and nurturing enduring customer loyalty. The following elucidates the pivotal reasons substantiating the significance of retention marketing within the realm of e-commerce:

1. Enhanced Customer Lifetime Value

The sustained retention of established customers markedly augments their lifetime value to the enterprise. The probability of repeat purchases over an extended period significantly escalates, thereby contributing substantively to the overall business revenue.

2. Mitigation of Customer Acquisition Costs

The acquisition of new customers often entails substantial financial investments, rendering it economically judicious to prioritise the retention of existing clientele. A noteworthy 82% of enterprises acknowledge the cost-effectiveness of retention as opposed to acquisition. By channelling resources into retention marketing endeavours, businesses can curtail the perpetual need for securing a stream of new customers.

3. Building Customer Loyalty

Retention marketing endeavours are instrumental in curating a favourable customer experience and establishing enduring relationships with clients—a cornerstone for sustained prosperity in the fiercely competitive online marketplace.

4. Revenue Maximisation

The primary objective of retention marketing is to motivate recurrent customers to engage in more frequent transactions with augmented order values. This practice serves to optimise the lifetime value of customers, propelling sales on a quasi-automated trajectory. According to data from Gorgias, despite constituting only 21% of the average brand's customer base, repeat customers contribute a substantial 44% to the brand's revenue due to their heightened frequency of purchases and elevated spending per transaction.

5. Competitive Edge

In the contemporary e-commerce landscape, characterised by an abundance of consumer choices, a high retention rate serves as a testament to a dedicated customer base and the allure of products. This, in turn, presents a distinctive competitive advantage to the enterprise.

Top 10 Retention Marketing Metrics in E-Commerce 

‍

Retention marketing in eCommerce is a dynamic landscape, and success hinges on understanding and optimising key metrics. These metrics provide valuable insights into customer behaviour, satisfaction, and overall business health. Here are the top 10 retention marketing metrics crucial for eCommerce success. 

1. Customer Retention Rate 

Customer Retention Rate measures the percentage of customers a business retains over a specific period. It's calculated by dividing the number of customers at the end of a period by the total number of customers at the start and multiplying by 100. A higher CRR indicates a healthier, more loyal customer base.

2. Customer Churn Rate  

On the contrary, the Customer Churn Rate gauges the percentage of customers lost during a given period. Monitoring churn helps identify pain points and areas for improvement in customer experience. 

To calculate the customer churn rate, divide the number of lost customers by the total customers at the start and multiply by 100. A lower churn rate signifies better customer retention efforts.

3. Repeat Purchase 

Repeat Purchase reflects the percentage of customers who make more than one purchase. This metric indicates the effectiveness of retention strategies in encouraging customers to return for additional transactions.

4. Customer Lifetime Value (CLV)

CLV gauges the total value a customer brings to your business throughout their entire relationship. Calculated by considering purchase history, CLV illuminates the long-term impact of your retention efforts, guiding strategic decisions. 

A rising CLV indicates successful retention strategies, emphasising the enduring value of cultivating strong customer relationships for sustained business prosperity in the competitive landscape of ecommerce.

5. Existing Customer Growth Rate 

This metric measures the rate at which your existing customer base is expanding. A positive growth rate signifies that your retention efforts are not only maintaining but actively growing your customer community.

6. Product Return  

Product Return measures the percentage of products sold that customers subsequently return. While not exclusively a retention metric, high return rates may indicate dissatisfaction or issues that could impact customer loyalty.

7. Loyal Customer Rate 

Loyal Customer Rate gauges the proportion of customers who consistently choose your brand over competitors. It reflects the success of retention strategies in fostering brand loyalty. Building and retaining loyal customers is a hallmark of successful retention strategies.

8. Net Promoter Score (NPS)  

NPS assesses customer satisfaction and loyalty by asking a simple question: "How likely is it that you would recommend our product/service to a friend or colleague?" Responses help categorise customers as promoters, passives, or detractors, providing insight into overall brand advocacy.

A customer satisfaction metric gauges the likelihood of customers recommending your brand. A high NPS indicates satisfied customers who are likely to promote your business.

9. Time Between Purchases 

Time Between Purchases measures the average duration between a customer's consecutive purchases. A shorter time frame indicates higher engagement and a more active customer base.

10. Purchase Frequency 

Purchase Frequency evaluates how often customers make purchases. Higher purchase frequency signifies a more engaged and loyal customer base. Increasing this metric through targeted retention initiatives boosts overall revenue and customer loyalty.

Top 5 Retention Marketing Channels in E-Commerce

Effective retention marketing hinges on strategically chosen channels that nurture and engage customers. Here are the top five channels paramount for success in retention marketing in Ecommerce:

1. Email Marketing 

Email marketing remains a powerhouse in retention strategies. Personalised newsletters, exclusive offers, and targeted campaigns keep customers informed and engaged. It's a direct line of communication to nurture relationships, share valuable content, and encourage repeat purchases.

2. Social Media Retargeting Ads 

Social media platforms provide an ideal space for retargeting ads. By leveraging user data, retargeting ensures that customers see relevant products, promotions, or reminders on the platforms they frequent. This reinforces brand presence and entices them back to your ecommerce store.

3. Customer Service Experience 

Exceptional customer service is a retention magnet. Resolving issues promptly, offering personalised assistance, and ensuring a seamless shopping experience build trust and loyalty. Satisfied customers are more likely to return and recommend your brand.

4. Mobile Push Notifications 

In an era dominated by mobile devices, push notifications are invaluable. Timely alerts about discounts, abandoned carts, or new arrivals keep your brand on the customer's radar, fostering a sense of urgency and engagement.

5. Members-Only Communication 

Creating an exclusive channel for members enhances their sense of belonging. Special offers, early access to sales, and personalised content make customers feel valued, increasing the likelihood of continued loyalty and repeat purchases.

A strategic blend of these channels forms a robust retention marketing plan in ecommerce. Each channel plays a distinct role in nurturing customer relationships, ensuring that your brand remains not just a one-time transaction but a preferred choice over the long term.

Examples of Retention Marketing in E-Commerce 

Retention marketing is a pivotal strategy to engage existing customers and foster repeat transactions. Below listed are some real-life examples of big brands and the growth they gained through retention marketing.

1. Amazon

Amazon has distinguished itself with an exceptional customer retention rate, boasting over 90% retention after the first year and an impressive 98% after two years for Amazon Prime subscribers in the United States. The success of Amazon's retention initiatives hinges on the meticulous tailoring of the new user experience, personalised engagement for returning customers, instilling a sense of urgency, and proactive acquisition of customer information before departure.

2. Etsy

Etsy's commitment to transparent shop policies and proactive customer issue resolution significantly contributes to customer satisfaction and repeat business. With a commendable customer retention rate of 40.1%, approximately 40.1% of its customer base consistently makes purchases on the platform over an extended period. 

Moreover, the fact that over 80% of Etsy's customers are repeat purchasers underscores a notable degree of customer loyalty and sustained retention.

3. Walmart

Walmart has consistently maintained a high customer retention rate with the substantial growth in its e-commerce sales (97% year-over-year). The company's deliberate focus on customer retention is exemplified in its strategy of absorbing price increases in groceries, prioritising customer loyalty even at the expense of trading margins. This underscores a strategic alignment with the overarching goal of sustaining customer engagement and loyalty.

4. Alibaba

Alibaba's dominance in customer engagement and expenditure is a direct outcome of its customer-centric strategy. Over the 12 months ending in September 2022, more than 124 million active Chinese consumers exhibited substantial spending of nearly US$1,400 per capita on Alibaba's twin retail platforms, Taobao and Tmall. 

Furthermore, the premium loyalty program, 88VIP, boasting over 25 million members, demonstrated an annual per capita spending of at least US$7,800. These figures bear testament to the substantial growth in customer spending and engagement within Alibaba's ecosystem, validating the efficacy of its customer-centric approach.

5. eBay 

eBay employs a customer retention marketing strategy centred on delivering exemplary customer service, precise product listings, streamlined shipping processes, and prompt responsiveness to inquiries. Demonstrating an impressive 83.33% customer retention rate, eBay underscores its ability to cultivate and maintain customer loyalty effectively. 

The research underscores the economic prudence of customer retention, as the costs associated with retaining existing customers are notably lower than acquiring new ones. eBay's overarching marketing strategy is strategically geared towards augmenting the gross merchandise volume and net revenues derived from the eBay marketplace.

Top 7 Customer Retention Marketing Strategies in E-Commerce in 2024

Below listed are the top seven cutting-edge customer retention marketing strategies to bolster customer loyalty in 2024. 

1. Initiate Loyalty Programs

‍Implementing tiered loyalty programs entices customers to stay engaged. Exclusive discounts, early access to sales, or personalised perks based on their purchase history can significantly boost retention rates.

2. Employ Upselling and Cross-Selling Methods

‍Strategically recommend complementary products to enhance the value of each purchase. This increases average order value and showcases a deep understanding of customer preferences.

3. Analyse Customer Feedback

‍Regularly analyse customer feedback, monitor market trends, and adapt to changing preferences. Continuous improvement is key to staying relevant and meeting evolving customer expectations.

4. Personalise Your Marketing Efforts

‍Leverage data analytics to tailor marketing messages. Personalised recommendations, targeted promotions, and customised content resonate with customers, making them feel valued and understood.

5. Post-Purchase Engagement

‍Extend engagement beyond the purchase by providing valuable content, updates, and post-purchase support. A well-nurtured post-purchase relationship enhances customer satisfaction.

6. Create a Community and Become a Lifestyle

‍Foster a sense of belonging by building a community around your brand. Position your E-Commerce platform not just as a transactional entity but as a lifestyle choice, creating a deeper connection with customers. Community building is one of the best customer retention marketing strategies in 2024.

7. Make Communication Easy for Customer Support

‍Streamline communication channels for customer support, ensuring accessibility and responsiveness. A seamless support experience contributes to customer retention.

Conclusion 

In the dynamic landscape of Ecommerce, Retention Marketing emerges as the strategic cornerstone for sustained success. By leveraging personalised experiences, targeted communication, and data-driven insights, e-commerce entities can fortify enduring bonds with their clientele.

The Ecommerce landscape continues to evolve, understanding and harnessing the power of retention marketing. It's not just a strategy but a necessity for businesses aspiring to survive and thrive in the fiercely competitive online marketplace. If you're looking forward to boosting your custom retention stats using conversational AI, we suggest you check out App0. 

App0 is a no-code, AI-driven messaging platform that revolutionises customer retention. App0 adapts to customer behaviour, boosting repeat revenue effortlessly. Powered by machine learning and large language models, it seamlessly integrates into your product—no coding headaches.

With App0, transform shoppers into loyal customers:

• Boost retention and repeat revenue.
• Provide instant, cost-effective customer support.
• Deliver an exemplary, personalised customer experience.
• Scale your business effortlessly with an AI concierge.
• Easily integrate into your tech stack.

Let App0 redefine your eCommerce success. Request a Demo now!

Retention Marketing: FAQs