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8 Customer Retention Strategies for Shopify Stores [2024]

Last updated on

April 15, 2024

Customer retention is crucial in e-commerce as it helps businesses to retain their existing customers and increase their lifetime value. Repeat customers are more profitable than new ones, and retaining them can lead to increased revenue and reduced marketing costs.

According to this research, the probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is only 5-20%. A Harvard Business School report shows that improving retention rates by a mere 5% can increase your profits by 25% to around 95%, improving your bottom line. 

Shopify provides various tools and features to help businesses improve customer retention. By leveraging these features and our 8 Shopify customer retention strategies, businesses can build strong customer relationships and encourage them to make repeat purchases on the platform.

Let`s get to the basics first!

Why is Customer Retention Vital for your E-commerce Business?

Retaining existing customers is much easier and less expensive than acquiring new ones. Satisfied customers are more likely to make repeat purchases, spend more money, and refer others to the business.

They also tend to leave positive reviews and feedback, which can help attract new customers and build trust and credibility for the business. 41% of an e-commerce store's revenue is generated by only 8% of its customers, who are repeat buyers. This report states repeat customers spend 67% more on orders than new customers.

On the other hand, losing customers can harm a business, leading to decreased revenue, negative reviews, and a damaged reputation.

Therefore, e-commerce businesses should prioritize customer retention to improve customer loyalty, reduce customer churn, and ultimately drive long-term success.

What are Some Common KPIs for Measuring Customer Retention?

For e-commerce businesses, measuring customer retention is critical to driving long-term success. The most common KPIs used to measure customer retention include repeat purchase rate, purchase frequency, AOV, and customer lifetime value.

Repeat purchase rate

The repeat purchase rate refers to the percentage of customers who have made more than one purchase from the business. Customers who are satisfied with the goods or services are more inclined to make subsequent purchases, as shown by a high repeat purchase rate.

To calculate repeat purchases, use the following formula:

Repeat purchase rate = (the number of consumers who have made repeat purchases / total number of customers during a given time frame, such as a month or a year) x 100

Businesses can use this to spot consumer behaviour patterns, assess retention efforts' effectiveness, and fine-tune marketing initiatives to increase client retention. By monitoring this data, you may learn more about the customer preferences and wants and take proactive measures to enhance the customer experience.

Purchase frequency

Purchase frequency refers to the rate at which customers purchase from a particular business over a given period. It is a crucial metric for e-commerce businesses to track because it directly impacts the revenue and profitability of the business.

Increasing purchase frequency can help businesses generate more revenue and profits without acquiring new customers. For example, if a store had 100 orders from 50 unique customers monthly, the purchase frequency would be 2 (100 divided by 50).

You can calculate the purchase frequency using the following equation:

= Number of orders/number of unique customers

Average order value

The average order value is the amount of money a customer spends in your store on each transaction. It is a vital sign of the general well-being and effectiveness of an e-commerce company.

For instance, the AOV would be $20 ($10,000 divided by 500) if a store earned a monthly income of $10,000 from 500 orders.

You can learn more about client behavior and spot development possibilities by watching AOV. For instance, you can assess which goods or services are responsible for higher transaction values and modify their marketing plans to promote those goods better. You can also offer bundle discounts or cross-selling comparable products to increase the average order value.

AOV = total revenue earned/number of orders

Customer lifetime value

Customer Lifetime Value (CLV) is a metric that calculates the total revenue a customer is expected to generate for a business throughout their lifetime. In other words, CLV represents the total value of a customer to a business.

To calculate CLV, Shopify store owners can use a variety of formulas depending on their business model and data availability. One standard formula is:

= Purchase frequency x AOV x average customer lifespan (in years)

For example, if a store's AOV is $50, the average number of purchases per customer per year is 2, and the average customer lifespan is 3 years, the CLV would be $300 ($50 x 2 x 3).

By tracking CLV, Shopify store owners can gain insights into which customers are most valuable to their business and focus their marketing and retention strategies accordingly. They can also identify opportunities to increase CLV by offering personalized recommendations, loyalty programs, or targeted promotions.

Overall, CLV is an important metric that can help Shopify store owners make data-driven decisions that lead to better customer experiences and increased revenue over the long term.

8 Strategies to Improve Customer Retention

Providing Excellent Customer Service and Support

Providing excellent customer service and support is crucial for retaining customers. According to a Forrester study, 53% of consumers will likely abandon their carts if they can't find quick responses to their questions.

To help store owners offer high-quality customer support, Shopify offers several features and tools, such as live chat, email, and phone support.

Additionally, you can use Shopify's Order Timeline feature to update customers on their orders' status and provide them with relevant information and instructions. Sometimes customers have many common questions related to payments, shipping, products, or services, which need to be resolved quickly.

In these situations, FAQ apps can create a section/page and answer basic questions immediately. 

Creating a Loyalty Program

Creating a loyalty program effectively improves customer retention and builds a loyal customer base on Shopify. A loyalty program rewards customers for their loyalty and encourages them to make repeat purchases and refer their friends and family to your online store.

To create a successful loyalty program, it is important to consider your target audience and their preferences. You should also set clear and achievable goals for your loyalty program, such as increasing customer retention rate or boosting average order value. Additionally, you should communicate the benefits and rules of your loyalty program to your customers and make it easy for them to track and redeem their rewards.

One effective strategy for creating a successful loyalty program is to offer tiered rewards based on customer loyalty. For example, you can provide different rewards and incentives to customers based on their loyalty levels, such as bronze, silver, gold, and platinum. This encourages customers to make repeat purchases and reach higher loyalty levels while offering exclusive rewards and benefits to your most loyal customers.

Another effective way is to use loyalty program apps for your Shopify store. These apps can help you set up affiliate or referral programs, automate customer rewards, or customize your referral program. 

This encourages customer engagement and loyalty and generates positive word-of-mouth and social proof for your online store.

Offering Personalized Recommendations and Discounts

Personalization leads to better results for customers and better performance. Businesses that excel at personalization generate 40% more revenue than businesses that don't. By offering personalized recommendations and discounts based on customer's act and what they like, you can increase customer satisfaction and get them to buy from you again.

In addition to personalized product suggestions, you can also give them customized discounts based on their preferences.

For example, you can give discounts to customers who have abandoned their carts or have made a certain number of purchases. Customers who have reached a certain level of loyalty in your loyalty program can also get special discounts and deals.

You can use Selleasy to display automatic product recommendations in multiple languages to reach your target audience properly. 

Using Social Media and Email Marketing to Stay Connected

Social media and email marketing are other effective strategies for improving retention. You can build relationships, promote your brand, and encourage repeat purchases by engaging with customers through social media and email.

To use social media effectively, you should identify the platforms where your target audience is most active and create a strong presence. You can also use social media to showcase user-generated content, run contests and giveaways, and offer exclusive promotions and discounts to your followers.

Email marketing, on the other hand, lets you send personalized and targeted messages to your customers, such as welcome emails, abandoned cart reminders, thank you emails, and promotional offers. To make your email marketing campaigns more effective, segment your email list based on customer behavior and preferences and use engaging subject lines and content. Also, include clear calls to action and offers relevant to your customers.

You can use social media and email marketing apps to implement this effectively. These apps allow you to create and automate email campaigns, integrate with social media platforms, and track customer engagement and behavior.

Utilizing the Subscription Service to Retain Customers

By offering clients the option to subscribe to your products or services, you can provide a convenient and personalized experience that encourages repeat purchases. Subscription services allow customers to sign up for regular deliveries of their favorite products, saving them time and effort and creating a sense of loyalty to your brand.

Moreover, by offering exclusive benefits and discounts to subscribers, you can incentivize customers to remain loyal and continue their subscriptions. This not only helps to increase customer retention but also provides a predictable revenue stream for your business.

Encouraging Customer Feedback and Reviews

Customer feedback provides valuable insights into the customer experience and helps identify areas for improvement. Additionally, customer reviews can serve as social proof and influence purchasing decisions for potential customers.

To encourage customer feedback and reviews, you can use various strategies such as offering incentives or rewards, following up with customers after their purchase and making it easy for customers to leave reviews on your website or social media platforms.

Creating Return Policy for Easy Returns

A well-crafted return policy can increase customer confidence and satisfaction, reduce the likelihood of negative reviews, and encourage repeat purchases. When creating a return policy, it is important to consider factors such as the return window, acceptable conditions for returns, and the process for initiating a return.

You should also clearly communicate any shipping costs, restocking fees, or other conditions that may apply to returns. Creating a clear and easy return policy can improve customer satisfaction and loyalty and drive more sales to your Shopify store.

Providing a Seamless Mobile Experience

Providing a seamless mobile experience is crucial for improving customer retention, as more and more customers use mobile devices to browse and shop online. By utilizing these customer retention apps for Shopify, such as Retention Rocket or Smile.io, you can analyze customer behavior and preferences and offer personalized recommendations and rewards optimized for mobile devices.

These apps allow you to track customer engagement and activity on your mobile site, such as product views, add-to-cart behavior, and checkout behavior. Use this data to optimize your mobile site for improved conversion rates and customer satisfaction.

A seamless mobile experience can improve customer engagement and loyalty, reduce cart abandonment rates, and drive more revenue for your online store. Analytics and data-driven insights are key to achieving these goals and staying competitive in today's mobile-driven e-commerce

Wrapping up

You can use various effective strategies to build strong customer relationships, encourage repeat purchases, and increase revenue for your store. It's essential to constantly analyze customer behavior and preferences, track performance metrics, and adjust your strategies accordingly to stay competitive and meet the evolving needs of your customers.

You can achieve long-term success and growth by implementing these customer retention strategies for your Shopify store.

FAQs

What is the difference between customer retention and customer acquisition?

Customer retention refers to retaining existing customers and encouraging repeat purchases. This involves building strong customer relationships, offering personalized experiences, and providing excellent customer service.

On the other hand, customer acquisition refers to acquiring new customers and expanding your customer base. This involves reaching out to new audiences, increasing brand awareness, and offering incentives and promotions to attract new customers.

While both strategies are indispensable, customer retention is generally more cost-effective and provides higher ROI, as it is easier to sell to existing customers than to acquire new ones. However, a balanced approach that combines both strategies can help businesses achieve long-term growth and success.

What is a Good Customer Retention Rate for E-commerce?

According to various sources, a reasonable customer retention rate for e-commerce is around 25-30%. This means that 25-30% of customers return to make another purchase. However, the average returning customer rate on Shopify is 28.2%.

It's important to note that this can vary by industry, with cosmetics having a returning customer rate of 25.9% and apparel having a rate of 26%.

A high repeat purchase rate is desirable, and according to Shopify, it should be between 20-40% depending on the industry niche. The repeat purchase rate is the percentage of customers who have made more than one purchase from your store over a period.

Written by
CP Saravana Kumar
Co-founder
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