How to Improve a Low eCommerce Retention Rate

How to Improve a Low eCommerce Retention Rate
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“Send more emails” is not a good strategy for improving a weak retention rate in eCommerce. Follow this strategy and diagnostic framework instead.

One of the most savage truths around the rebranding of email & SMS agencies as “retention marketing agencies” is that most just don’t truly understand how to improve retention.

And while sending more emails when your product is good can improve returning customer revenue, if it’s already starting off from a low baseline, it’s likely that your investment in your agency is not providing you with incremental gains.

I’ll let you in on a secret if you’re a CPG brand in eCommerce: If your repurchase rate is below 15% within the customer's first 3 months then hounding your customers with more discount codes is highly unlikely to move the needle in getting customers to that crucial second sale.

The more probable reason is that the customer doesn’t get value from your product.

When you’re faced with this data, you need to ask yourself these difficult questions:

  1. Why are customers not receiving value from the product?
  2. Am I attracting the right type of customers with the most relevant messaging? (i.e. is there an expectation VS reality gap in how you’re selling your product)

… And once you’ve mined the insights, everything needs to change accordingly.

The messaging in your acquisition funnels.

Your post-purchase communications.

And if necessary, the formulation of your product.

Burying your head in the sand and resorting to discounting isn’t going to resolve fundamental issues in your business - it can actually exacerbate the symptoms and make it harder to course correct.

Retention Rule Number 1: The Customer MUST Extract Value From Your Product

All the 'tactics' out there on social media about retention miss one critical thing:

If the customer doesn't use your product, they won't be buying it again.

You can study cohorts and create clusters of offers forever but until you actually know HOW & WHY the customer extracts value from your product, you won't be able to craft an impactful strategy.

What are some of the ways you can gather this data & build product stickiness through habit formation?

✅ Pre-Signup forms: find out their primary interest from the very first interaction in exchange for the standard incentive

How to Improve a Low eCommerce Retention Rate - Pre-Signup forms -- New Subscriber Pop-up Magnet Monster
An example of a pre-signup form for eCommerce brands

✅ Post-purchase surveys: what is the main feature or outcome they expect to receive from your product? Build this into the post-purchase journey to align expectations and results.

✅ Qualitative research upon delivery: did the customer achieve the intended outcome? If not, why? Feed this information back to product development AND the acquisition team so they can tailor their strategies accordingly.

How to Improve a Low eCommerce Retention Rate - Qualitative research - Magnet Monster
An example of a qualitative research email for DTC brands

✅ Setting the customer a challenge: works great for FMCG brands.

A solid example is waterdrop®'s 'Drink More Water' challenge.

How to Improve a Low eCommerce Retention Rate - Setting the customer a challenge - Magnet Monster
An example of setting the customer a challenge

You're building positive habits into the customer's routine and holding them accountable.

✅ Encourage social sharing & transformation stories: this is overlooked but extremely effective.

This isn't a standard review request - it's about encouraging transformation stories and highlighting customer success and sharing wins together.

Tommi Skin puts results at the forefront of their site offering incredible social proof that is empathetic and community-led. You can do the same.

Build habits first & retention comes as a bi-product of results.

DON'T MISS: 3 damaging retention soundbites + what to do instead

Retention Rule Number 2: Unlock Retention by Throwing Down a Challenge To Your Customers

Set your customers a challenge if you want to improve retention.

This is one of my favourite strategies to deploy that can really spike email engagement and condition customers to receive value from the channel from day 1.

Most people think customers don't purchase again because they don't enjoy the product, have satisfied a need or the offer isn't good enough.

But what if they don't actually use it?

The key to retention is ensuring a great product experience.

But people are busy and have a lot going on in their lives, so even if they do purchase something, a lot of people just don't use your products in the way you think.

One of the ways to overcome this is to set customers a challenge to make the post-purchase experience interactive.

If you're selling pre-workout supplements, set a 1-month PR challenge on the bench press.

If it's mattresses, set a 30-day, 8 hours sleep per night challenge.

Furniture? Get your customers to upload a video and compete with others to see who can build it the fastest.

Hydration supplements? Get them to log their water for 30 days and tell you how they feel.

Skincare? Feature the customer's results after 30 days on your blog and reward them for sharing their stories.

There is also another critical reason to get creative here, and that's differentiation in DTC.

Amazon and other marketplaces have built a powerful moat around convenience and price online that are hard to beat.

But where they will always struggle, is on brand experience, and this is something you need to go BIG on to thrive in D2C in 2023 and beyond.

Retention Rule Number 3: You Need to Think Beyond Email to Increase Your Retention Rate

Want to increase your returning customer revenue?

This is the best way to approach strategy:

If you look in Google Analytics, you'll notice an evident trend: customers who return from owned channels (email, SMS, Whatsapp) have a higher conversion rate than other sources.

So, one of your primary goals should be to increase returning customer traffic from these sources by driving click-throughs in your messages.

The problem?

Incessant product promotions lead to disengagement and churn on those channels and reduce click rates.

The solution?

Give people a reason to return to your website BEYOND shopping for products.

How do you do this?

You have to invest in making your website a fortress for experience, not just shopping.

There are no shortcuts here, but some of the most obvious are:

✅ High-quality blog content: not just SEO-optimised content, but genuinely valuable articles & media for your consumers related to your positioning as a company.

Tutorials: product-related and lifestyle-focused (i.e. if you're a makeup brand, then don't just send people to YT for a look tutorial - embed the content on the website (like Duradry do here) and drive people there as well)

✅ Transactional updates: I have seen a lot of sales driven as a by-product of customers simply checking their order confirmation on the website and browsing again by virtue of being in your store. Shoutout to Wonderment here.

✅ Customer success stories: not just product reviews, but genuine customer experiences about how they're using your products, transformational stories, before & afters, etc. Customers love reading these as it makes their goals attainable. Shoutout to Refunnel for simplifying the user-generated content process across the board.

How to Improve a Low eCommerce Retention Rate -- Magnet MonsterHow to Improve a Low eCommerce Retention Rate | Customer Success Story - Magnet Monster
An example of a customer success story email in eCommerce

✅ Think outside the box: Feey.ch (a company that sells plants) have a plant doctor on their site you can contact at any time to get advice on caring for your plants. You can invest in similar playful ways to engage with customers. The more conversations you start, the more top-of-mind-awareness you'll generate, and eventually, sales as a byproduct.

DON'T MISS: Influencing customer retention is harder than you think - cohort analysis

How Should You Measure “Retention Rate”?

"Retention rate is a vanity metric for non-subscription businesses." - powerful statement from 🦾Valentin Kuznetcov I saw on LinkedIn a few months ago.

Is he right?

We all know most eCommerce businesses scream for cash flow and writher in pain when they don't get it.

...so if you're looking at retention over say, a 12-month window, then you may die before the customer comes back.

What does Valentin suggest instead?

Looking at cohort retention windows.

And I largely agree - your main point of leverage from a strategic perspective is in the first 90 days after somebody orders for most eCommerce businesses.

This is the area for optimisation in your strategy and testing.

The first 90 days after somebody orders are strategically most important for eCommerce brands

Does this mean you should ignore customers who don't make an order within this 90-day period?

No - of course you should attempt to retarget them and re-engage them.

But the main levers to pull that will make a significant difference come in the first 90 days for most businesses.

You will see this pattern over and over again when examining cohorts.

Concluding Thoughts: Retention Needs to be Multi-Faceted

Diagnosing and improving retention is complex and multi-faceted. You can’t just operate in a silo under the guise of “let’s send more emails”.

Hopefully this article goes some way to providing you with fresh ideas on how to improve your retention rate for your eCommerce store.

Need some further assistance? Download the Retention Diagnostic Kit here and leverage some of my favourite strategies for increasing customer retention.

Enjoyed this article on retention marketing? Follow me on Twitter or LinkedIn, and don't forget to join 5,000+ hungry D2C enthusiasts who lap up our weekly insider insights on eCommerce email marketing.

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