What Is the Need for Customer Retention Marketing in E-Commerce Brands?

Dec 13,2022 by Dr. Taniya Sarkar
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As the name suggests, customer retention marketing aims to create loyal customers who return time and again to a store or to a website. There has been a major shift in focus that recognizes the importance of marketing to your existing customer base, rather than constantly trying to grow it in order to reach more people.

There is also a stronger emphasis that has been placed on the profitability of the pre-existing database as a result of this shift in focus. Despite the fact that this new strategy has proven to be extremely beneficial for a brand, it should never be the sole focus of the marketing power of a brand at any given time. In order for a retention marketing strategy to be successful, it needs to work in conjunction with the existing strategies of both traditional and digital acquisition marketing that exist today.

It is not as difficult as it may seem to adopt a retention marketing strategy, which is why you should not give up. If you are doing the heavy lifting yourself, for example, then you have already done most of the work. The majority of businesses have a wealth of behavioural data from their existing customers that can be used to generate more revenue by enlisting the help of a retention automation solution to turn that data into revenue.

Keeping a close eye on customer retention is essential

Back in the day, most e-commerce retailers focused their marketing efforts solely on tried-and-true methods for acquiring new customers at the time. For decades, they kept on following the same procedure – and the motto remained the same: more ads + more customers = more sales.

There were only a few key channels that marketing teams heavily focused on in the 80s and 90s when it came to attracting audiences that worked well. At the time, retention was nothing more than an afterthought. With the turn of the century, however, a massive explosion of channels took place:

As there were more channels available to consumers, there were also more choices for them. As a result, it became (and is today) much easier than ever before for brand loyalists to not only jump from one channel to another but also switch to a new brand without missing a beat. Thus, it became increasingly important for businesses to focus on keeping loyal, repeat customers among those one-time buyers. The marketing industry is also beginning to realize that the cost of acquisition is simply not economical or worthwhile and is actually holding them back from maximizing their marketing efforts.

They are starting to focus on their existing database with a renewed focus on retention in their pursuit of value over volume. As a result, e-commerce marketing is becoming an essential part of any business’s marketing strategy.

In B2C marketing, keeping existing customers happy and buying can easily be considered one of the most profound, meaningful journeys a marketer could undertake – it’s difficult, but it pays off in the long run.

By converting a one-time buyer into a repeat buyer you are able to increase your profits and increase your brand’s appeal to customers, and as a result, your brand is more likely to be recommended to others.

Clear Picture of Customer Retention Marketing

The main purpose of retention marketing is to create loyal and engaged customers who return to a store or a website repeatedly in order to make repeat purchases.

Compared to that acquisition-first mentality so many brands had just a few decades ago, it is an atrophied muscle for many marketing organizations that are trying to market their products. It is important to acknowledge the fact that making such a major shift requires you to make a commitment to better understand and market to your existing customer base instead of just concentrating on growing it.

When it comes to attracting new customers, the cost is nearly 7 times higher than it is to retain existing customers. There is no question that you have already spent countless hours, dollars, and energy nurturing existing customers, so keeping them around makes all the sense in the world to you.

As a result of refocusing on retention, you will also see previously unseen benefits on the bottom line. The chances of a one-time customer coming back to the store are 27%. But there are higher than 50% chances of a second- or third-time customer coming back to the store.

The Harvard Business School conducted a study that showed that if you increase customer retention rates by only 5% over a period of time, you can increase profits by up to 95%. One more study by Gartner estimated that only 20% of the customer base of a company will be able to drive 80% of its future revenue.

There is no doubt that marketers need to pay more attention to retention, but it should never replace acquisition in any way. Only complement it. The most successful retention marketing strategies are the ones that work in tandem with traditional and digital acquisition marketing strategies that are already working and that can be executed brilliantly.

Having a retention marketing strategy in place does not have to be a daunting task as you may think it is. The good news is that you’ve probably already done much of the hard work. Almost all businesses have a huge amount of behavioural data on their existing customers that they can take advantage of in many different ways. 

Measuring Retention: Does it work?

There are a number of high-level retention metrics that can be used, including:

  • The percentage of repeat customers that contribute to the sales of a business
  • Rate of active customers repurchasing products
  • Value of a customer over their lifetime

Other derivative metrics that may be considered include the following:

  • Differences in behaviour/engagement between existing (or long-term) database members (or long-term buyers) and new buyers – such as the likelihood of purchasing, perhaps, or even the average order value
  • Known contacts behave differently than anonymous visitors when it comes to app sessions, email engagements, social engagements, and website interactions

Customer retention marketing: Secret Unfolded

It is important to realize that loyalty is a luxury, and re-engagement is a remedy for it. There is no doubt that customer loyalty is crucial to the success of any retention marketing strategy, but re-engaging inactive or one-time buyers is the most effective way to help them reach that point.

Re-engagement campaigns

An important aspect of re-engagement campaigns is that they’re all about reinvigorating that spark that once existed when a customer made a purchase. You don’t want to dwell on the problem of buyers defecting or unsubscribing – 25%-50% of customers become inactive, and brands lose an average of 25% of their mailing list each year to inactive customers.

Fortunately, there are several options available to you when it comes to defecting or inactive contacts. There are a few things you can do:

  • The standard win-back campaigns will help you reactivate inactive customers and defecting customers. Campaigns aimed at bringing back customers and reactivating subscribers are a great way to remind customers how much they value doing business with you. Using social media channels, you can also reach out to inactive contacts who are not active on your website.
  • Provide customers with replenishment offers in order to engage them. You can make it easier for customers to come back to your store by reminding them to reorder products they previously bought.
  • Remove them from your list entirely or delete their email address from your list entirely. It is not ideal to choose this option.
  • The best way to make sure they aren’t included on the main list is to include them only in sporadic or infrequent emails.
  • To confirm that they have opted in and are interested in the emails, test variations of re-engagement emails with variations on the subject line (e.g., “We miss you!”). There is no better option when it comes to executing strategic plans than this one.

Perks of loyal customers

A loyal customer is also more likely to share the experience they have had with their social network, in addition to purchasing more. There has been a trend over the last few years for the Harvard Business School to coin the term “word of mouse”, as social media has a much greater reach than traditional word of mouth. It will be well worth it in more ways than one to follow up with these follow-up communications in the future. With the heightened use of social media channels in the retail space, the value of referrals in the realm of e-commerce is amplified by the fact that referrals are extremely beneficial in the e-commerce retail sector.

Read More: Top 7 Online Reputation Management (ORM) Tools for E-commerce Companies

Take Away

Due to the emergence of behavioural data, marketing organizations are now more than ever able to build a solid retention marketing strategy from a pre-existing base of behavioural data with which they can create a more personalized customer experience in the future.

If you are looking to reap the rewards of having more engaged customers, it is important that you subtly shift your focus. It is well known that long-term, loyal customers are well worth the time and effort it takes to acquire them, and their benefits will greatly exceed the cost of acquiring new ones, as we all know.

Brands risk losing valuable data, deals, and money if they do not develop a strategy to maintain lasting relationships with customers, which is essential to the success of their e-commerce marketing campaign.

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