What is retention in e-commerce?
Retention in e-commerce refers to a brand’s ability to retain customers and prevent them from churning, defecting to a competitor brand, or becoming inactive.
Retention is an important metric for any online business as it can help them understand how successful their marketing strategies are, how valuable their products are to customers, and how loyal their customers are.
How to measure retention in e-commerce
Retention is usually measured by the customer retention rate, which is the percentage of people who make repeat purchases from an e-commerce store.
Platforms like WooCommerce and Shopify have plugins that automatically display your customer retention rate.
However, if you need to work it out for yourself, the calculation is as follows:
[(A-B)/C] x 100
A = the total number of customers you ended up with.
B = the number of new customers you won.
C = the total number of customers you started with.
Subtract the number of customers you won during the period from the number you ended the period with. Divide that by the total number of customers you started with, then multiply by 100 to get your retention percentage.
For example, an online clothing store wants to calculate its retention rate for Q1 of the year.
In January, they had 100 customers (C).
At the end of March, they had 110 customers (A).
Between January and March, they won 30 new customers (B).
[(110-30)/100] x 100 = 80
Between January and March, this clothing store maintained an 80% retention rate. Not bad at all.
e-Commerce retention rate vs churn rate
Both retention rate and churn rate are powerful statistics for helping businesses understand what they’re doing right (and wrong) with customer loyalty and engagement.
Retention rate focuses on the percentage of customers a business has retained during a certain time period.
Higher retention rates are an indication that your customers are happy with the products or services being offered, happy with the brand and its values, and are likely to continue shopping with the company.
On the other hand, a low retention rate could indicate that customers aren’t happy with what they’re getting and may be looking elsewhere for better options.
Churn rate details the percentage of customers that a business has lost within a certain time period.
A high churn rate shows your customers are leaving quickly after signing up, which could mean that there’s something wrong with the product or service being offered or that there’s not enough value being provided to keep them around.
Conversely, a low churn rate could indicate that customers are finding value in what’s being offered and sticking around for longer periods of time.
Four tips for improving customer retention
Here are some tips for improving your e-commerce customer retention rate:
Offer incentives:Offering incentives can help encourage customers to return to your brand. This could be in the form of a discount code for their next purchase or a loyalty program where customers earn points for every purchase they make.
Optimize your website’s UX:Customers should be able to find what they’re looking for on your website easily and without friction. Make sure it’s well organized and that all the information they need is readily accessible, and that the checkout experience is as frictionless as possible.
Provide excellent customer service:Providing excellent customer service is essential for keeping customers coming back. Respond quickly and politely to any inquiries, and make sure any issues are resolved quickly and efficiently.
Follow up with customers after their purchase:Following up with customers after their purchase can help create a sense of loyalty and encourage them to come back again in the future. You could do this by sending out thank you emails, using dynamic display or social media ads as part of a retargeting strategy, or by offering special discounts or promotions.
Driving retention with Emarsys
Emarsys helps leading brands like Nike, Babbel, and adidas Runtastic to connect their sales, product, and customer data, to create and deliver the personalized omnichannel customer experiences that increase retention.