Foolproof Customer Retention Strategies for Retailers and How to Implement Them

Foolproof Customer Retention Strategies for Retailers and How to Implement Them

Customer retention strategies for retail | Shopify Retail blogImproving sales and growing your business isn’t just about attracting new customers — retaining the customers that you have is just as important for any retail business. It’s vital to maintain a balance of attracting new customers and retaining the ones you already have.

Typically, newer businesses focus more effort on attracting customers (sometimes referred to as offense), while more established retailers will focus more on retaining their current customers (sometimes referred to as defense).

For more on figuring out what strategy is right for your business, check out our post on Acquisition vs. Retention: Should Your Ecommerce Business Play Offense or Defense?

Repeat customers validate that you’re doing something right. If your business has a large volume of one-and-done customers, there may be something about the buying process or product that isn’t wowing them — and that’s sending them elsewhere for future sales.

The Benefits of Customer Retention

Customer acquisition and retention | Shopify Retail blog

It may seem obvious that repeat customers are good for business — more sales are always good for business. But it’s more than that. In fact, the cost of keeping current customers is far less than the cost of finding new ones. Research and data firm Econsultancy points out that “attracting a new customer can cost five times as much as keeping an existing one.”

The value of these customers is more than just the saved cost of acquiring new ones. A Harvard Business School study states that, “increasing customer retention rates by 5% increases profits by 25% to 95%.”

The Harvard research also found that happy, repeat customers are more likely to refer their business to family and friends — helping drive future sales from new sources.

With these benefits in mind, let’s dive in and take a look at strategies to increase your retail business’ retention rates.

Customer Service

The customer is king — and they want to be treated as such. From research to purchase and even returns and exchanges, all stages of the buying cycle are a chance for your team to impress the customer with amazing customer service.

A Kissmetrics blog post aptly titled The Fastest Way to Lose Customers found that “71% of consumers have ended their relationship with a company due to poor customer service,” and that once these customers are lost, the average cost to replace each consumer is $243.

To boost your customer service satisfaction, ensure that all staff members (in-store and online) are trained for customer interactions. All employees should understand your business brand and embody your core values. Great customer service is holistic and includes in-store conversations and through online channels. Some examples of great customer service interactions could be:

  • Interacting in-store is a great time to get to know your customers, learn their names and preferences, help them make a selection, and make the effort to remember your loyal regulars so you can make them feel special next time they stop by.
  • Social media is the perfect place to have real, authentic interactions with your customers. You can answer questions, comment on posts that your business is mentioned in, and organize events for loyal customers.
  • Online chats and over the phone conversations are great opportunities to address customer questions and concerns, mitigate customer frustrations, and help customers find the information they’re looking for. Often if a customer is calling your service line, emailing, or logging into an online chat, it’s because something isn’t meeting their expectations. This is the perfect chance to go above and beyond to retain that customer — with friendly service, a prompt reply, and a solution that exceeds their expectations.
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The relationship with between your business and customers is just that — a relationship. For more on growing this relationship, check out 5 Ways to Take Customer Service to the Next Level.

Loyalty Programs

Another effective way to increase customer retention rates is with loyalty programs. You can build your own internally or use a loyalty program app like Smile.io.

In response to the question of why a retailer should create a loyalty app, Smile.io explains, “When you give your customers points, you are creating an obstacle to choosing another site. This obstacle is known as a switching cost. Your customer has to forgo the points they have earned, as well as future points to switch to a competitor. As humans, it is tough for us to leave money (or points) on the table.”

Essentially, loyalty programs that offer customers with points, merchandise, or other rewards incentivizes their purchasing behavior. This can be a powerful psychological strategy that helps ensure customers continue to choose you over your competitors.

There are tons of great loyalty programs to model yours after — in fact, Smile.io found that in the U.S. over half of the top 100 retailers have a program for their loyal customers. Some great examples are:

  • Starbucks: Customers collect “stars” based on how many purchases they’ve made to later redeem for different rewards.
  • Best Buy: Broken into 3 tiers based on how much you spend, the Best Buy Rewards program offers a variety of shipping and return perks, customer service, and the opportunity to exchange points for a gift certificate.
  • CVS: Customers and patients collect rewards based on purchases and fulfilled prescriptions to be redeemed for rewards, cashback, and personalized coupons.

Want a little more guidance on the best way to build your own loyalty program? Read our guide: Customer Loyalty Programs: Why Retailers Need Them (and How to Create One).

Personalization

Repeat customers want to see personalized results when they shop online. If your ecommerce store isn’t offering personalization, you could be missing out on increasing customer satisfaction rates and purchases. IBM defines personalization as “offering the right incentive, in the right amount, targeting the right behavior, in the right channel, at the right time. In essence, it means building a unique strategy and set of program rules for each customer, not a one-size-fits-all approach.”

Personalization saves customers time by saving their information in customer accounts, makes them feel unique by addressing their individual preferences, and increases your sales by presenting them with items they’re more likely to buy. On The Importance of Personalized Ecommerce & 4 Examples of How It’s Done, Invesp found of customers that “56% are more likely to return to a site that recommends products.”

Sephora offers personalized recommendations on both their ecommerce site, and via emails sent directly to customers:

Sephora personalization example | Shopify Retail blog

Personalization can also be used in-store. Having customers provide information when they check out is an opportunity to make a connection by recommending a product, or setting the customer up for a loyalty program, mailing list, or other customer account.

For more ideas and tips to create personalized experiences in your retail store, read 4 Ways to Personalize Your Customer’s Shopping Experience.

Special Offers

Offering your loyal customers special incentives is another way to keep them coming back. Used sparingly, special offers and promotions are a great way to temporarily boost sales, move inventory, and increase customer satisfaction. In the our blog 14 Ways to Use Offers, Coupons, Discounts and Deals to Drive Revenue and Customer Loyalty, we outline some of the most common of these discounts, such as the following:

  • percentage-based discounts
  • dollar-value discounts
  • free shipping
  • “free” gifts

Free gifts can be offered for a customer’s birthday, if a consumer spends over a certain threshold, or to reward how long a customer has been shopping with you.

Additionally, sending return discount codes after a customer signs up for your loyalty program or makes their first purchase is a great way to start what will hopefully be a long relationship. Discount codes are also an effective way to get customers to sign up for your mailing list and provide invaluable customer data through a customer account. This information can later be used for the personalization strategy mentioned above.

In Conclusion

In the world of retail marketing you hear a lot about gaining new customers, entering new markets, and increasing sales. Hopefully the strategies above have also convinced you to also invest time and resources towards retaining the customers you currently have.

Does your retail business have another strategy for keeping your loyal customers happy? We’d love to hear about it in the comments section.

Photo of Lauren Ufford

About the Author

Lauren Ufford is a writer and editor with expertise in retail, ecommerce, and tech. Originally from the West Coast, Lauren spends her free time exploring Toronto with her two comically large dogs.

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