Oct 19, 2023
Kelli is the senior content strategist for Order Protection.
In a market where there’s an estimated 24 million eCommerce sites across the globe, you could say that competition is a little fierce.
A mere decade ago, this number was far smaller. But in 2020 alone, Shopify saw an increase of nearly 800 thousand new merchants, and the WooCommerce plugin is downloaded over 30,000 times a day. These eCommerce platforms have made setting up online stores easier and cheaper than ever before, and in the face of this level of growth and competition, brands have had to completely rethink their strategies in order to differentiate themselves in the market.
With competition increasing faster than the market can expand, eCommerce companies have found that the key to long-term success and sustainability is customer retention rather than acquisition. And what’s the best way to produce revenue-driving repeat customers? An incredible buyer experience.
And, as we’ve harped on in previous articles, an area of the customer experience that’s ripe with opportunity is the post-purchase experience. That isn’t to say that the pre-purchase experience isn’t important, but rather that there are parts of the post-purchase journey—such as shipping, personalized offers, loyalty programs, and returns—where many brands drop the ball, thus making it an easy place to set your brand apart from the competition to score some wins.
Shifting focus to improving your post-purchase strategy plus investing in customer insights to continuously improve can be the keys to fighting customer churn, increasing retention rates, and ultimately achieving growth. We’ll take a look at all of these areas in this article and provide actions your brand can take today to improve the customer experience in order to boost retention.
Why the eCommerce customer experience matters
Customer experience refers to every interaction a customer has with a brand, from browsing the website to receiving the product and beyond. It encompasses the overall impression a customer forms about a brand based on these interactions. It's no surprise that there is a strong correlation between customer experience and customer retention.
According to a study commissioned by Qualtrics, positive customer experiences directly increase purchasing and referrals. In fact, 94% of customers who rated their experience as "very good" were "very likely" to buy from that brand again. On the other hand, a negative experience can turn customers away forever.
Customer experience plays a significant role in building customer loyalty. Zendesk reports that 74% of customers claim to be loyal to a particular business, and the quality of service they receive strongly influences that loyalty. By investing in customer experience, eCommerce businesses can create emotional connections with customers and build long-lasting relationships while also getting a leg up on their competition.
The impact of customer experience on retention and the bottom line
A loyal customer base sets the stage for growth in any eCommerce business. High retention rates indicate product acceptance and contribute to increased sales, higher customer lifetime value (CLV), and a predictable revenue stream. When customers have positive experiences, they are more likely to make repeat purchases, try new products, and spend more. In fact, companies that offer great customer experiences can charge 16% more for their products and services, according to research from PwC.
But it's not just about the immediate impact. By focusing on customer experience and retention, businesses can elevate the overall quality of service in their industry. This builds customer expectations of what the industry should deliver, creating a positive cycle where businesses make better decisions about how to invest and improve.
Customer churn can be costly for businesses. Not only does it result in the loss of revenue from those customers, but it also requires resources to replace them. Acquiring new customers can cost up to 5 times more than retaining existing ones. Additionally, bad customer experiences can harm a company's reputation and make it harder to attract new customers.
But even more importantly, providing that great experience has a direct impact on customer loyalty and what will keep them coming back to make repeat purchases. Data from PwC found that 73% of consumers say a good experience is key in influencing their brand loyalties. And loyal customers? They'll help you bring in new shoppers, too, cutting down on those acquisition costs. Because not only are loyal customers five times more likely to purchase again, they're four times more likely to refer a friend to the company.
6 strategies to improve eCommerce customer experience and retention
To improve customer experience and retention in eCommerce, businesses can implement various strategies. Let's explore some effective approaches.
1. Personalization: Creating unique experiences
Personalization is a powerful tool for improving customer experience and retention. By tailoring experiences to individual customers, businesses can make them feel valued and appreciated. Personalization can include personalized product recommendations, customized offers, and personalized customer service.
According to research from McKinsey, 71% of customers hope that brands understand their needs and expectations, and will deliver through personalized interactions. And when that doesn’t happen, 76% reported frustration. And it’s not just a matter of attracting first-time buyers through personalized efforts—one report found that 56% of consumers will become repeat buyers after a personalized purchasing experience. Fast-growing brands are seeing the benefits of this reflecting in their revenue, driving 40% more of their revenue from personalization than their slower-growing competitors.
One well-known example of personalization in action is Amazon. The eCommerce giant uses data to provide customers with a unique homepage and tailored product recommendations. This personalized approach has helped Amazon build a loyal customer base and maintain its position as a market leader.
The benefits of personalization as a customer retention strategy in eCommerce include:
Increased customer loyalty and repeat purchases due to personalized product recommendations and content.
Better understanding of customers' needs, allowing businesses to offer more personalized experiences.
Improved engagement with customers through personalized emails, notifications, and messages.
Enhanced brand reputation as customers feel valued and understood.
2. Loyalty programs: Rewarding and retaining customers
Implementing a loyalty program can incentivize customers to make repeat purchases and improve retention. Loyalty programs often offer points or discounts for every purchase, which can be redeemed for free products, discounts on future purchases, or other exclusive benefits. Such programs foster a sense of commitment between customers and the business.
For example, Sephora's Beauty Insider program rewards customers with special discounts, free gifts, and early access to new products. This program not only encourages repeat purchases but also creates a sense of community among Sephora's customers.
The impact of loyalty programs on customer retention in eCommerce includes:
Increased customer loyalty and repeat purchases due to rewards and incentives.
Higher customer lifetime value, as loyal customers tend to spend more over time.
Opportunities for cross-selling and upselling products or services.
Positive word-of-mouth and referrals from satisfied customers.
3. Excellent customer service: Building trust and satisfaction
Good customer service is crucial for customer retention in eCommerce. Providing excellent customer service helps build trust and satisfaction, which leads to positive experiences and encourages customers to return. It's important to invest in knowledgeable, responsive, and friendly customer service staff.
Proactive customer support is also becoming more common among eCommerce brands. Rather than waiting for customers to reach out for support, proactive strategies use research and customer data to anticipate when and where customers may run into issues. Asking for customer feedback at every stage of the journey helps identify where shoppers may have hang-ups, and tracking ticket metrics can show trends or issues that can inform CS teams how they can provide more effective support.
Other strategies for improving customer service include:
Offering an intuitive user experience on the website or mobile app.
Utilizing automated customer service tools to streamline processes.
Allowing customers to track their orders and providing timely updates.
Engaging with customers on social media platforms to address their concerns.
Implementing user feedback systems to gather insights for improvement.
Good customer service benefits customer retention by:
Building strong relationships with customers based on trust and satisfaction.
Generating positive reviews and word-of-mouth recommendations.
Reducing customer churn and associated costs.
Enhancing brand reputation and credibility.
4. Omnichannel experience: Seamless interactions across channels
An omnichannel experience ensures customers have a seamless shopping experience across multiple channels, such as online and offline stores, mobile apps, and social media. By providing a consistent experience regardless of the channel, businesses can improve customer satisfaction and retention.
Companies like Nike, Best Buy, and Sephora excel in delivering omnichannel experiences. Nike's app offers personalized product recommendations and allows customers to schedule in-store appointments. Best Buy (and countless others as a result of the pandemic) allows customers to shop online and pick up their purchases in-store, while Sephora combines online and in-store offerings to create a customized shopping experience.
The benefits of an omnichannel experience for customer retention in eCommerce include:
Convenience for customers, allowing them to access products and services through their preferred channels.
Increased engagement and satisfaction due to personalized and consistent experiences.
Improved brand visibility and reach through positive reviews and recommendations.
Setting higher industry standards for customer experience.
5. Data-driven decision making: Leveraging insights for improvement
Data plays a crucial role in understanding customer behavior and improving customer experience. By analyzing customer data, eCommerce businesses can gain valuable insights into customer preferences, buying patterns, and needs. These insights can be used to tailor experiences, target marketing campaigns, and make data-driven decisions.
Key strategies for data-driven decision making in eCommerce include:
Analyzing customer behavior to identify trends and preferences.
Leveraging social media channels to collect customer insights.
Creating loyalty programs and personalized experiences based on data analysis.
Segmenting customers based on engagement levels for targeted marketing.
Measuring customer retention metrics to track success.
The benefits of data-driven decision making for customer retention in eCommerce include:
Improved product personalization and customer satisfaction.
More efficient marketing campaigns and targeted messaging.
Enhanced customer insights for better decision making.
Optimized pricing strategies based on sales trends.
Continuous improvement and innovation based on data analysis.
6. Additional strategies to enhance customer experience and retention
In addition to the main strategies mentioned above, there are a few more tactics that can further improve customer experience and retention in eCommerce.
Offer shipping protection.
Providing customers with shipping protection can alleviate concerns and improve the overall experience. Customers value peace of mind when it comes to the delivery of their purchases. Not only is shipping protection a smart move for improving your customer experience strategy, but it also protects your brand. According to research from UPS, 72% of small and midsize businesses say that shipping issues like theft, loss, and damage have negatively impacted their customer reviews in the past few years. Shipping protection covers customers for the most common shipping issues, elevating their experience and reducing the likelihood that they’ll leave a negative review of your brand.
With porch piracy on the rise, negative experiences causing customers to abandon brands or leave negative reviews, and the costs of replacing products cutting into brand profits and growth, eCommerce businesses literally cannot afford to not offer this service. And because in-house programs are expensive to manage and tough to scale, the best option is to work with a reputable shipping protection provider.
Not only can providers absorb the costs of providing shipping protection or insurance, but they also help minimize the legal risks associated with providing your own insurance. Providers like Order Protection also step in and help with providing the actual customer support for cases involving shipping issues, saving your CS teams additional time and costs that can be directed elsewhere.
Leverage special events like Black Friday and Cyber Monday (BFCM).
BFCM is a game-changer. As competition soars, eCommerce brands face higher consumer expectations. Shoppers not only seek the best deals but also demand a seamless and enjoyable shopping journey. A study by Adobe revealed that in 2022, BFCM online sales hit $9.12 billion, and the total sales during this period exceeded $10 billion. This presents both opportunities and challenges for eCommerce brands.
The experience customers have during these peak shopping periods can directly impact whether or not they shop again with a brand. Ensuring a smooth and positive experience during these times can foster loyalty and encourage repeat business.
Measuring customer retention and loyalty
To ensure the effectiveness of customer experience strategies and make data-driven decisions, it's essential to measure customer retention and loyalty. By tracking relevant metrics, businesses can assess the success of their retention strategies and identify areas for improvement. Some key metrics to consider include:
Customer retention rate: The percentage of customers who make repeat purchases after their initial purchase.
Repeat purchase rate: The percentage of customers who make a second purchase after their first purchase.
Customer lifetime value (CLV): The predicted net profit attributed to the entire future relationship with a customer.
Churn rate: The percentage of customers who stop doing business with a company over a specific period.
Net Promoter Score (NPS): A measure of customer loyalty and likelihood to recommend a brand.
By regularly monitoring these metrics and making data-driven decisions, your brand can continuously improve customer retention and loyalty.
Customer experience is a crucial factor in eCommerce customer retention and loyalty. By investing in customer experience strategies such as personalization, loyalty programs, excellent customer service, omnichannel experiences, and data-driven decision making, businesses can improve customer satisfaction and build long-lasting relationships. Retaining existing customers leads to increased sales, higher customer lifetime value, and a positive impact on the bottom line. Furthermore, providing outstanding customer experiences generates positive reviews, enhances reputation, and drives customer referrals. By prioritizing customer experience and continuously improving it, your eCommerce brand can achieve long-term growth and success.