One of the most alarming stats eCommerce businesses should watch out for is a declining customer retention rate.
In this article, we’ll discuss the core factors that we noticed for this, and a few low hanging fruits to keep this problem at bay.
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What do we mean by Retention?
In eCommerce, retention is a term that is very vaguely used for anything to do with marketing minus acquisition and so, we at LyftCurve also stick to a very broad definition for it. When we talk about retention, we mean anything related to the repeat revenue for the business.
In my conversations with eCommerce businesses of different sized and industries, these are the most common challenges I hear of:
Their repurchase rates are going down year-over-year
Their New vs Repeat Revenue ratio is getting weaker with time
Their Journey/Automation Conversions are going down every month
There are the most common misconceptions and technical issues that might cause this downward trend in your retention rate.
1. Your Product isn’t the one for Retention
If the product you sell lasts almost a lifetime or is a good one-time purchase, you’re looking at the wrong problem to solve. Your aim must be to optimize for Average Order Value (AOV), making the most out of the first sale itself.
Once you have this solved for your hero product, plan and release complimentary products that support your hero, at the same time optimize for frequency of purchase.
A few examples of this would be:
If your hero revolves around hair color, start selling shampoos and conditioners that compliment it
If you’re into Mattresses, start selling cushions, sheets, and so on
2. Your Automation is Broken or Outdated
8 out of 10 brands I talk to say their retention automations are sorted, 7 out of which are just talking about having one abandoned cart, and one repurchase flow in place. If your brand shows up only at these 2 specific times, how can you expect them to have your name at the back of their mind whenever they need what you sell?
Set up automations keeping all user needs in mind:
Some need it as a reminder because they’re too busy
Some need a better offer to persuade
Some need a bit more trust to take the big step
“Marketing Automation is a one time thing, set it up and sit back for the rest of your life” - No one ever.
Keep a monthly check on not just the journey/automation performance, but dive deep into each node. You never know what message or creative has turned less relevant to your audience when, unless you have your data right.
3. Your Fulfilment is Faulty
While it is true product quality has a lot to do with retention, but a lot of it also depends on the following:
How clear were the order delivery communications?
How long did it take to deliver?
How easy was it for people to return the product?
Think of it this way, you bought a Sunscreen from a brand A, liked it, but it was delivered in 10 days. They find a new brand, say brand B, with a similar sounding formulation, and guaranteeing a delivery within 3 days, where would you buy it the next time from?
4. You are not Attracting the Right Audience
From all my conversations with eCommerce store owners and marketers, I’m pretty certain there is at least one, if not all of these are missing in your acquisition planning:
Checking for which offer/product/category drives the highest retention
Which hooks brought the best customers for your brand
What message tonality your loyal customers resonate to the most
This is the tip of the iceberg, the exact analysis that fits differs from brand to brand. Also, changing from a value driven messaging to discount driven and vice versa also brings a change in retention behavior, so account for it as well.
5. You’ve recently started Selling at Another Channel
If you’re selling through channels like Amazon, Nykaa or even brick-and-mortar stores, don’t be surprised to see a dip in your DTC retention.
Majority of customers are driven by 2 factors: Price and Shipping times. Also, if you’re specifically a makeup brand, no screen or website can show as accurate a colour as a tester in a brick and mortar store. So, you need to figure out what’s so special about your DTC that people would prefer to come back there and not purchase from the other channels that they most commonly use and trust.
6. Your Customer Service is not Satisfactory
The most organic way to collect detailed insights on what might be impacting your retention is studying customer complaints. Time to resolve tickets, number of shipping complaints, product reviews and most common issues with customers are the lowest hanging fruits you can find.
Automating some of the most common complaints through bots is the most underrated add-on to customer service.
7. Your Expectations ≠ Customer’s Expectations
A very common expectation I’ve heard from store owners is that they don’t want to discount repeat purchases. They feel like it’s a loss for them in some way.
For Example, if you are a Beauty and Personal Care brand, and a person needs to use it 2-3 times to see visible results, you can’t expect them to buy it at full price before even getting halfway there. Your consumer will stay price driven till they have enough reason to be glued to your brand.
Also it’s not a loss because the amount you spend on bringing one repeat purchase is way less than the Customer Acquisition Cost (CAC) you’d have to spend for a new one.
Conclusion : Retention is a Tough Nut to Crack
I just mentioned a few problems that might point towards any team of your eCommerce business that might impact retention. So, pinpointing the exact issue might be tough. However, if you get deep into data and have a team believing in data-led growth, you will eventually hit the bullseye.
Here’s a quick start to your journey to solving for retention - go back to your customer support tickets and read all issues raised. Also, talk to all types of customers - Happy, Loyal, Lost, Potential Loyalists and understand why they sit at that segment.