To acquire a customer is merely the beginning. In order to maximize your profits, you should be able to keep them on your side for an extended period of time. That’s what they call customer retention. Read our interview with Shopping Signals’ Ryan BeMiller and find out why it is one of the most underestimated eCommerce metrics.

Customer acquisition is one metric that every eCommerce business knows and cares about. With the internet and market full of content and tools to help you improve it, one can optimize it to their heart’s content. The same can’t be told about customer retention, the ability to keep your existing customers on your side. While often hailed as the most cost effective strategy, it doesn’t receive nearly as much love and attention as acquisition. Why is that?

We’re talking about this phenomenon to Ryan BeMiller. Ryan has been building and marketing websites for nearly 20 years. He’s the founder of ShoppingSignals.com where you can learn all about marketing and optimizing e-commerce websites. When Ryan’s not busy making websites better, or hanging with his wife and 2 girls, you may find him on Twitter at @shopsignals.

Ryan’s ShoppingSignals.com is a precious source of eCommerce insights

Polcode: It’s such a paradox – almost everyone has heard by now that it costs 5-7 times less to retain a customer than to acquire one. What’s more, according to Bain & Co, increasing retention by just 5% can boost sales by up to 95%. And yet, everyone is trying so hard to generate leads, and so little seems to be done to take care of retention. Why isn’t retention nearly as sexy as acquisition?

Ryan: This is a really good point, and I see this every day. I think customer retention isn’t as sexy as acquisition because it is seen as more difficult in some ways. What I mean by that is, there aren’t as many tools and tactics to help you improve retention. It takes more work, like personal communication, developing long term strategies, and implementing more complicated automated communication.

Customer lifetime value (LTV) is an important concept related to retention. What is the best way to explain it?

LTV is essentially an estimation of the net profit that you can attribute to the entire relationship with your average customer. When you think of LTV in relation to retention, there is an obvious direct correlation. The longer you retain your customers, the higher your LTV will go. And the higher your LTV goes, the more you can afford to attract each new customer.

Customer lifetime value (LTV), cost per acquisition (CPA) and profitability of each customer are all deeply connected.

Some products, such as clothes, are much easier to sell to the same person many times. With some others, like furniture, that’s not the case. Does this mean that retention is less important for them?

No, it is just as important for these types of merchants. Their relationship with their customers is not as automatic as that of a category like clothing, in which customers are more likely to repeat a purchase. So retention is more difficult, and requires longer periods of communication and promotion with customers. But just because it’s more difficult and has a longer cycle, doesn’t make it any less important.

What are the steps needed to craft a customer retention strategy for an eCommerce business?

a. I would start by understanding current metrics. You need to document where you are, so you can effectively measure any impact of your retention efforts. Measuring things like CLV, Purchase Frequency and Repeat Customer Rate is a good start.

b. You need to determine how much time and effort to devote to your retention strategy, just as you would budget time and dollars for email marketing, SEO and paid traffic. According to Sweet Tooth, the average ecommerce store devotes over 80% of their marketing budget to new customer acquisition, yet 40% of an eCommerce store’s revenue is created by 8% of its customers. In general, the older your store is (and the larger your customer base) the more you should be allocating to retention instead of acquisition.

c. Finally, define and implement your retention tactics. This is where you decide if you want to focus on email and social media retention strategies, or get creative with things like special gifts and incentives, or even implement customer accounts and loyalty programs. There are lots of options. It’s a matter of figuring out what makes the most sense for your customers.

According to Kissmetrics, each lost customer costs on average $243. When, and how often, should you reach out to your existing prospects to avoid such losses and keep them on board?

It totally depends on the situation. For example, if you sell perishable goods, or products that have a predictable lifespan, it would make a lot of sense to schedule specific communications at those times, to encourage repurchases or replacements. Or if you sell high-ticket, long-lasting items, a better strategy might be a monthly newsletter that informs, teaches and makes offers to the customer. There isn’t a one size fits all answer here. The key is to understand what timing makes sense for your customers.

Do you agree that retention efforts of many eCommerce businesses feel very robotic and spammy? E-mails that lack personalization, cliché we-want-your-feedback pop-ups and surveys. How can we spice it up?

Yes, I definitely agree. I think you can spice things up by being more personal. Make sure to do the easy stuff like using first names instead of generic “Dear Valued Customer” kinds of statements. Also be sure to inject your company’s personality into your communications. If you are a bunch of surfers, tell your customers about it and share some pics of you riding some gnarly tubes! Talk about the personal stuff on occasion. Build a real sense of connection with your customers. But don’t go overboard with it, and don’t talk too much about “what’s new” with your company. Most people don’t care.

What they do care about though, is themselves. So, if you can provide useful and helpful content, which is related to what you sell, and also offers real solutions to your customers’ problems, you’ll really build that trusting relationship, and stand out as an expert in your niche.

Do you think that loyalty programs can be an effective customer retention tool? What are the best practices to succeed with those?

They can certainly be effective. Best practice is to provide loyalty benefits that are actually meaningful, and to increase the rewards with frequency. For example, a one-dollar credit is hardly something to get excited about. But a 15, 20 or 30% discount isn’t too shabby. That’s meaningful. And, instead of a program that rewards the customer after their 10th purchase, try rewarding them after each purchase, but with an increased value for each additional purchase.

What are the best channels to use in a customer retention strategy? Is it email marketing after all?

Email marketing is great, and is generally the highest converting channel. That doesn’t mean you should completely ignore the others though. Again, do what makes sense for your customers.

What tools or software would you recommend for eCommerce businesses that want to improve their retention?

It depends on their size, platform and customers, so I can’t give any blanket recommendations. However here are a couple of specific, very popular tools that may be of value, based on your situation.

Klaviyo – This is a popular email marketing service that integrates with all of the biggest ecommerce platforms like Shopify, Woocommerce and Magento. It’s known for its very robust features and is perfect for sending personalized, product- and time-specific emails to your customers.

Sweet Tooth – This service allows you to put your customer retention program into high gear with features like Customer Account, Reward Points, Loyalty Programs and even VIP Tiers.

Can surveys help you craft a customer retention strategy? What questions should you ask?

Yes, they can be used to improve the customer’s experience both during and after the purchase. You can try general questions like “How satisfied were you with your overall purchase experience?” and “How likely are you to recommend our website to others?” Or, you can try more specific questions like “How does our site compare to our competitors’ in terms of ease of ordering process or navigation?” You can even try open ended questions like: “How would you recommend that we improve the purchasing process on our website?”

And what about content marketing and social media?

They matter. Social media can be a valuable tool for brand development in terms of recognition and staying top-of-mind, and in terms of interacting with customers. You can benefit greatly from both positive and negative social interactions with your customers. And regarding content marketing, in my opinion, it is an incredibly important component of your long term growth. Content marketing is a long game, but one that pays off. There is no better way to establish authority in your niche, build trust and community with your customers, and gain long term SEO success.

With the increase in popularity of data-based marketing solutions, it is marketing automation software that often bears the brunt of retention efforts. Are those advanced solutions for big businesses only?

Definitely not. Small and beginning eCommerce merchants have tools available to them as well, and they should be using them. For example, if Shopify is your platform of choice, there are tons of affordable apps available, which will allow you to improve your retention efforts.

Do you think that as making decisions based on data becomes more common, retention will overtake acquisition as the hottest topic among online marketers?

I really don’t. No matter what the numbers tell us, I think there is just something about getting new customers that is more appealing to our human nature. However, I do think that as more is known about the benefits of retention and retention tools, a larger percentage of our overall effort will be devoted to it.