There is a common notion in the world of business that it’s easier to sell existing customers than it is to acquire new ones. Given that customers are already familiar with your brand, products and processes, it’s easy to understand why this might be the case.

According to a study by Marketing Metrics, the likelihood of converting an existing customer is between 60% and 70%, whereas converting new customers is only between 5% and 20%, which is frankly on the higher-end for many e-commerce companies. Assuming you have multiple products to sell or some sort of product that can be purchased multiple times, it would be wise to examine opportunities you might have in reconnecting with and ‘re-selling’ to your existing customers.

retention strategy converting customers

This practice of upselling additional products to existing customers is often referred to as Retention Marketing. Part of a good Retention Marketing Strategy is also encouraging existing customers to refer your products or services to other potential customers, thereby acting as little ‘marketing machines’ for your business. So how does one lay the groundwork for a good Retention Marketing strategy?

There are tons of specific tactics, tips and tools to help with improving Customer Retention, but we like to keep things simple and build a strategy on four basic principles associated with Customer Retention:

  1. You have to understand your customer.
  2. They have to have a great experience with your company.
  3. They need to be encouraged to make repeat purchases.
  4. They need to be encouraged to make referrals.

In this article, we’ll look at each of these four principles and suggest a few practical ways you can start building a Customer Retention strategy for your business:

retention strategy understanding customer

Before you can begin to try up-selling customers or generating referrals, it’s critical that you understand your customers to the greatest extent possible. You need to analyze your customers’ demographics, buying behaviors, support needs, interactions with your marketing and more. We’ve found that the best means of gaining this understanding is to use what we call a ‘Customer Hub‘ to build a profile of your customers by sourcing data from every platform they might interact with, such as your ecommerce store, email marketing, downloadable content and more. The Customer Hub is simply a tool, such as a CRM or marketing automation platform, that can pull data from other third-party systems and build unique customer profiles.

Once those profiles are created, you can start to identify patterns across these profiles and form unique groups of customers or what’s commonly referred to as segments. These segments are customers with shared characteristics, such as customers who’ve spent more than $1,000 or customers who only purchase via mobile devices. Once you start building these segments, you can then begin tailoring all of your retention marketing efforts to the unique differences from segment to segment rather than ‘blasting’ the same message to all of your customers.

One platform that we’re particularly fond of, that can serve as a Customer Hub and help build these types of segments, is a tool called Sauce. Sauce is an app that plugs right into any Shopify store (more supported shopping carts to come), as well as many other platforms used when interacting with customers, and pulls in multiple data points to help build customer profiles. Once those profiles are created, Sauce have various ‘data mining’ features that allow you to easily create the type of segments we’ve described. After spending some time playing with different segments, you’re on your way to more deeply understanding your customers.

retention strategy customer experience

Your brand is not the visual identity of your company. It’s not your name, your tagline or your logo. Your brand is the experience you provide to your customers. An experience that extends beyond just the sales process or their interaction with the product. It’s an experience that starts with the very first interaction they have with your company all the way through receiving the product and beyond. The experience is a culmination of every ‘touch point’ your customer has with your company, meaning your brand is simply a sum of all those interactions.

When looking at this collection of interactions, or customer experience, what then makes for an experience that you could label as ‘good’? It’s a conversation that could be argued with many points of view. Our point of view is that a good experience comes down to three things:

  1. Using narrative as a means of engaging and educating customers.
  2. Finding the human elements within your product and putting that at the center of your narrative.
  3. Maintaining consistency in this narrative across every interaction.

If you’re able to do these three things, chances are you’re on your way to creating a great experience for your customers, and in turn, developing a world-class brand.

The interaction we most commonly see e-commerce companies overlooking in their customer experience is support. The level of customer service and efficiency of that service is often the make-or-break determiner as to whether a customer will purchase again or refer your product to a friend. We highly encourage companies to consider creating a robust ‘support program’ that includes multiple support channels (i.e. live chat, phone and email) as well as strong documentation. One platform that we like for managing your support program is Help Scout. Help Scout allows you to manage communication with your customers across multiple channels in simple, aggregated views for each customer. These profiles can then be synced with customer buying history directly within your ecommerce store to help create a richer understanding of your customers and their unique needs.

retention strategy ecouraging repeat purchases

Once we’ve established a better understanding of our customers and have paid attention to the brand we’re building based on the experience we’re providing, it’s time to sell! The funny thing is, customers are quite forgetful when it comes to brands they love and products they might want. In our ‘attention economy’ it’s not enough to assume customers just take the time to come back and ‘check in’ on your latest offering. It’s critical that we proactively reach out to those customers and encourage them to check out new products and make repeat purchases.

When it comes to this encouragement, we like to think of it in two parts: channels and incentives. Channels are simply the means by which you’re reaching out to your existing customers. The most popular, and often most effective, is email marketing. Email marketing allows for a one-to-one connection with customers, meaning you have the opportunity to better personalize your messaging. If you’ve taken the recommended steps above and have created unique customer segments, then you should be able to fairly easily tune your offering based on the customer you’re emailing. Platforms such as Klaviyo, make this sort of personalized email marketing simple and effective.

The second aspect of encouraging repeat purchases are the incentives you put in place. Customers who aren’t actively in the buying process might need a bit more motivating to make a purchase decision. The primary go-to for motivating customers includes discounts and promo codes. Although effective, they very quickly erode your hard-earned margin. Platforms such as Smile.io, allow you to create ‘loyalty programs’ that reward customers for making repeat purchases without having to give an immediate discount on products. Instead, customers receive loyalty points that can then later be redeemed for product upgrades, discounts or freebies. The difference here is that those reward points would then apply to another future purchase, meaning even more repeat sales.

retention strategy encouraging referrals

In addition to encouraging existing customers to make repeat purchases, we also want to encourage them to refer products they love to their friends. Similar to repeat purchases, we consider both the channels and incentives that go along with referral marketing. Often the incentives can work similarly to repeat purchases: discount codes, loyalty points and even cash payouts. Platforms such as Smile.io make setting up and managing referral programs with cash payouts painless.

As compared to encouraging repeat purchases, we’ll want to look at how the channels might differ with referral marketing. The major difference is that we find one-to-many platforms more effective in referral marketing than the one-to-one platforms associated with upselling. We want to find ways where referral messaging can reach the largest audience possible. This is where social media can become a powerful tool. Finding ways to encourage your customers to share their experience with your product to their social media followings instantly gives you exposure to hundreds or thousands of other potential customers. Here we look at tools such as Yotpo and AddThis to help make customer reviews and social sharing as easy as possible for customers. Paired with a referral incentive, you can start building your own little army of ‘marketing machines’.

In the end, you’ll want to remember that Retention Marketing is driven primarily by one thing: cultivating a relationship with your customers. Just as in any relationship, the better you understand the other person (i.e. customer) and the more ways that you have to engage with them, the stronger that relationship will become over time. Employ these four principles as it pertains to your customer relationships and you’ll be on your way to building a solid Customer Retention strategy.