- It's cheaper to get repeat purchases
from current customers than it is to find new customers.
Returning customers spend more money, buy more often,
and can be counted on to sing your praises,
and refer their friends or family to your business.
If you wanna learn how to measure customer retention,
why it's important, and the best strategies
to keep customers coming back for more,
then just keep watching.
(upbeat music)
Hi everyone, my name is Michelle Bali.
If you're new to this channel,
make sure that you're subscribed.
We have tons of amazing content
to give you the knowledge that you need,
to start and grow a successful online business.
If you've yet to re-engage existing customers,
now is a really great time to start building a strategy.
So let's look at how to get started.
So what is customer retention?
Customer retention refers to your ability
to retain repeat customers,
and increase the lifetime profitability of each customer.
This is impacted by the amount
of existing customers that churn.
Which basically means they either closed a subscription,
canceled a contract,
or choose not to return to your online store.
A strong customer retention strategy
is about maintaining relationships.
It's also about creating value for your customers
by helping them achieve the goal that they had in mind
when they purchased your product or service.
So an example of a customer retention strategy
could be creating a customer loyalty program.
So stay tuned until the end of this video
where I'll take you through even more tactics
on how to retain repeat customers.
Acquisition, on the other hand,
are the steps that you take to gain new customers.
A good acquisition strategy is measurable and repeatable.
Customer acquisition is often visualized through a funnel.
So an example of an acquisition strategy,
could include Facebook ads, SEO, affiliate marketing.
In short, an acquisition strategy creates the customer base,
while their retention strategy
builds the ongoing relationships
that allow you to extract more value
from your existing customer base.
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So why is customer retention so important?
Well, it's gonna boil down to four main reasons.
Affordability, return on investment, loyalty and referrals.
As I mentioned before,
focusing on customer retention is super important.
Because it's gonna be
a lot cheaper (graphics whooshing)
to retain your customers,
than it is to find brand new customers.
So if it costs you $50 (bell dings)
to acquire a new customer,
it's only gonna cost you $10 (bell dings)
for a repeat purchase.
A rule of thumb is acquiring a new customer
is gonna be five to 25 times more expensive
than retaining an existing customer.
Now, logically this makes total sense.
You don't have to spend the time
and resources finding new customers,
you just have to keep the ones that you have satisfied.
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Increasing customer retention can have a big impact
on your bottom line.
Loyal customers spend more money than new customers
and that's because they understand the impact
and value that your products have had on their lives,
and they're happy to come back and spend more.
Customer retention also encourages customer acquisition.
It does this through referrals.
So, if you've been able to retain
a satisfied customer for years,
they're likely gonna tell their friends about you,
and you'll gain new customers that way.
So not only does your customer retention
save your business money,
but it makes your business money as well.
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What you sell has a huge impact
on how much you should be focusing on retention.
If you have high ticket items
that need to be bought frequently,
you are the one that has the most to gain
from a solid customer retention strategy.
In general, as you move right and up the matrix,
you are the businesses
that need to be focusing on retention.
But even if you do fall in the bottom left-hand category,
that doesn't mean that you should completely ignore
a retention strategy.
So for example, if you have a phone case business
that drops collectible designs every month,
that would require a strong retention strategy.
Now, every business will have its own unique story.
But practically every business can benefit
from more loyal customers and repeat sales.
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Whether you focus on customer acquisition or retention,
will be dependent on where you're at
in your business journey.
If you're just starting out you're gonna wanna focus solely
on acquiring new customers, and building up your base.
Once you start getting traction,
spend most of your time trying
to get new customers in the door.
But don't neglect your current customers.
I would even argue that these are the customers
that you really wanna reward.
These are the people that saw value in a new business.
They're rooting for you, they wanna see you grow.
So make sure that the love is a two way street.
At this point, you should start
to introduce retention tactics like email marketing.
But we'll talk more in depth about retention strategies
at the end of this video.
If you're at the stage
where you're getting consistent sales,
split your time, 70 30
between nurturing existing customers and finding new ones.
You can try a loyalty program
or get serious with marketing automation.
Once you're established, it's a common problem
for stores to continually find ways to grow.
Focusing on acquisition may lead
to a lot of one-time purchases.
And if that's the case for you,
get serious about your retention strategy.
This will get customers to buy more often
which increases their lifetime value.
I recommend focusing on a 50 50 split,
between acquisition and retention.
If you're well-established, you should have tight processes
and automations in place.
Now would be the time where you wanna
focus heavily on retention.
Feel free to pause and take a screenshot of this diagram
if you need to.
If you're looking to optimize your business for growth,
Shopify is offering a free 14 day trial.
This does not require a credit card,
and it makes selling online so easy.
All you have to do is click the link
in the description box to get your store set up
in a matter of minutes and bring your brand to life.
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Here's some strategy ideas to boost your customer retention.
So first improve your customer support.
A solid customer support strategy includes attention
to the customer pre, mid and post sale.
I have my own small biz and last week,
I had a customer reach out (text pops)
to me and tell me that her product came damaged.
So what I did was I refunded her the full amount
within minutes of receiving the email.
And then I gave her 20% off her next order.
She left a positive review and placed another order.
So there's a funny thing about customer satisfaction.
If you make a mistake and you correct it,
satisfaction shoots way up, even higher than if you were
to have never made that mistake.
So an effectively resolved complaint can result
in a loyal repeat customer.
If you help customers avoid problems
and get the most out of your products,
you're going to be helping them,
and you'll be helping your bottom line.
Having a live chat available can turn a customer question
into a sale or a complaint into a resolution.
For this you can try Facebook Messenger live chat,
which is a free Shopify app.
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Depending on the type of business that you run
and your margins, sending a small gift
to your best customers can be a really great way to surprise
and delight your customers.
It also reminds them to return to your store.
But giving an unexpected gift is going
to play to the law of reciprocity.
Which refers to our tendency to respond to a positive action
with another positive action.
So for me, after looking at my numbers
for my small business.
I saw that I did have a bit of leftover budget
and I wanted to use it to reward my top customers.
So I sent them one of our newest products.
And actually was not expecting reciprocity,
I just wanted to thank them for being with me
on the journey of launching my brand.
And I did see a surge in sales after this.
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In a world that runs over the internet,
a handwritten thank you note gives a personalized touch,
that goes a long way with customers.
This thoughtful attention to detail
is gonna help you stand out
in an ocean of automated receipts.
And it's also going to enrich the experience
of being a business owner.
It could potentially create a loyal customer for life.
So, customer service that turns numbers into faces,
is really a win-win for everyone.
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Emails give you the opportunity
to continue a relationship with your customers,
and is known as one of the highest converting tools.
So I've noticed that a lot of small business owners
worry about annoying their customers with emails.
You're not gonna annoy them as long
as each email is adding value.
And you're only starting out
with a couple of emails per month.
But it is true that overstaying your welcome
with too many low quality emails can lose some customers.
So here's some ideas for good quality emails.
Get started with follow-up emails.
Send personalized emails, checking up on your customers
and see how they're liking the product.
Thank them for supporting your small business
and sign off as a founder.
It's a win-win because customers will feel acknowledged
and you get valuable feedback on your products and service.
You can even ask them to leave a formal product review
to start building up your brand
and your products credibility.
If you have a product that's perishable
or needs to be refreshed over time,
knowing your products lifespan,
and sending well-timed emails,
can be the perfect way to re-engage customers.
Customers love these emails
because it reminds them to re-up before they run out.
So for example, Luxy hair extensions
last three to six months on average.
And knowing this Luxy could set up a series
of automated emails (mouse click)
to go after three and six months.
These emails would help educate a first-time buyer
about the benefits of keeping a fresh set.
And it will keep Luxy top of mind.
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Offer a discount or credit.
Generally, I would tell you to be wary of discounting.
You compete with yourself because customers start
to expect lower prices from you.
However, when discounts are sent to a first-time buyer,
I actually love it.
You can also discount to re-engage customers
that haven't purchased in a while.
So if you do have space to do this,
try giving your customers 20% off
and really think of it as an investment
in boosting your repeat customer rate.
You may also wanna experiment with offering credits
to your store like $10 towards any purchase.
The idea of a virtual gift card might be more enticing.
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A loyalty program is also a great way
to increase purchase frequency.
Because it's going to motivate customers
to purchase more often to earn those valuable rewards.
This creates two-way value,
your customers get more value each time they shop
and you get repeat business.
Most loyalty programs fall into one of four categories.
You've got points, tiers, social media, and paid programs.
Examples of wildly successful loyalty programs
are Starbucks rewards. (screen pops)
Sephora Beauty Insider rewards (screen pops)
and Toms one for one. (screen pops)
You can encourage customers to sign up,
by giving them an instant reward
when they create an account.
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How to measure customer retention.
Once you start employing these strategies,
you wanna track if they're actually working.
So here's how.
You can measure how healthy your customer retention is
with two metrics.
Returning customer rate and average order value.
If you have a Shopify store
you can find these metrics easily.
From your Shopify admin,
you're just going to go to analytics.
And then you're taken to a dashboard.
where you can see tons of useful metrics.
The key to improving your customer retention rate
is understanding your underlying metrics.
Knowing which numbers to focus on
and how to measure them,
will equip you with the knowledge you need
to craft a strategy that has a strong impact
on your store's profitability.
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With that in mind, let's look at repeat customer rate.
Measuring your repeat customer rate is the key way
of measuring how well your retention strategy is working.
If you have a Shopify account, (screen pops)
this calculation is already done for you,
But if not you can calculate this by taking the number
of customers with more than one purchase,
divided by the number of unique customers.
Make sure that you're only counting within the last year.
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Your average order value is a second metric
that you'll look at.
This metric refers to the average amount a customer is going
to spend per transaction.
You can find your average order value again
in your Shopify analytics.
But if you don't have Shopify
just divide your yearly revenue
by the number of orders your store has processed.
Increasing the average order value,
maximizes your retention strategy efforts.
So what I mean by this is,
let's say your average order value
is $20. (screen pops)
And let's say your email marketing retention strategy
costs you $17 per customer. (screen pops)
You're not really maximizing your time or money that way.
So, if you have a healthy average order value
more than $20 in that case, then this would be an indicator
that your marketing and retention strategy are paying off.
The last metric that I want to share
with you is customer value.
So customer value is the ultimate goal
of retention marketing.
Because it helps you understand
how much each customer is actually worth.
In order to calculate it, multiply purchase frequency
and average order value.
Now you have the tools to get you started
on creating loyal customers.
Remember, your current customer base is the best asset
that your store has.
They cost less and earn more,
because they already know your brand
and appreciate the true value of your product or service.
Crafting meaningful human connections
with your customers is the most enriching part
of owning a business.
So I hope that you use these tools not only
to increase your revenues,
but to build your relationships as well.
If you want everything
that you're gonna need to sell online,
I recommend that you try Shopify for free for 14 days.
Like I said, there is no credit card required.
All you have to do is set up your store
and pick a plan when you're ready.
If you found this video helpful,
make sure that you're giving it a big thumbs up
because that helps our community and our channel grow.
And also don't forget to subscribe.
I'm your host, Michelle Bali
Thank you so much for watching.
And I will see in the next one.
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