Updated: Feb 11
Customer retention is the key to creating a scalable D2C business. Customer acquisition is easy, but creating a loyal customer base full of repeat customers takes some planning. Repeat customers help you create a stable inflow of cash which you can use to improve and enhance your business activities. With a higher rate of customer retention, the marketing costs also dramatically decrease. Additionally, your loyal customers are more likely to recommend your services to their friends and family.
Having a solid customer retention strategy will help you stay ahead of the curve as only 18% of the new start-ups are focusing on customer retention. In addition to that, your repeat customers are more likely to leave honest feedback about your product and services. They will also be less sensitive about changes in your pricing model. So, a D2C company can unlock tremendous value just by focusing on its customer retention program
Here is a detailed guide to improving the customer retention rate of your D2C business.
1. Use data-driven insights to improve customer experience consistently
Before starting to implement solutions to improve customer retention rates, understanding the problems is critical. For this, you may use analytics to track your customer’s behavior on your website.
Analytics help businesses understand where exactly they are losing customers.
Analytics also help you drive and boost customer retention by giving insights into how your customers actually behave on your website. For a deep dive to understand user behavior, track user actions such as
- Product page clicks,
- Most common drop-off points
- AOV vs. average number of pages browsed
- Cart abandonment rate for various acquisition channels
Such insights can help you create a better user experience on the website, leading to better user retention.
Key Takeaway: Data from the eCommerce store is the first place to look for opportunities to improve customer retention. Depending on the nature of business, the baseline metrics may change- for example, an FMCG eCommerce store may have more frequent orders and retained customers than other categories, but this does not mean that they do not have issues with retention. It is always best to compare data with industry benchmarks.
2. Evaluate your shopping experience for flaws
Shopping experience also plays a significant role in increasing customer retention rates. An unsatisfactory product experience drives customers to never come back for more.
D2C businesses can enhance their product experience by making purchasing as friction-free and rewarding as possible.
The first step towards achieving this is providing as much information upfront as possible. Since the physical experience of touch-and-feel is missing in the eCommerce context, customers need ample information in the form of product dimensions, material description, high-resolution pictures, and in some cases, product videos.
Despite this, consumers are bound to have questions, so a chat function on the website is almost mandatory today. Linking this to WhatsApp allows you to get back to the consumer in time.
The next friction point is usually around product returns. Every time a product is returned, it must be thoroughly inspected for damages and issues to understand why the product is sub-par. Moreover, providing a seamless returns policy, particularly for apparel and accessories that might have sizing issues, encourages customers to make a purchase again even if their first purchase doesn’t go as planned.
Also, if the product is difficult to use, people are more likely to not purchase it a second time, thereby hurting your retention rates. However, a connected world offers several possibilities as we see with brands such as Smartivity. Because their STEM toys can be challenging to explore, every toy comes with a QR code which takes the user to a tutorial on YouTube on how to use it.
Key Takeaway: People are different, and so is their shopping behavior. Knowing that they can return the product when they’re not happy with the purchase is a big aspect of customer engagement and therefore retention. Fixing issues in this area can sustainably improve customer retention over time.
3. Build a unique loyalty program
Businesses can increase profits by 25% to 95% by just increasing the customer retention rate by 5%. Introducing loyalty programs is one of the easiest ways to retain more customers. Customers redeem the loyalty points they obtain from past purchases to get better discounts and offers on subsequent ones.
However, loyalty points only work in contexts where loyalty exists. In other words, a brand that is struggling with retention issues wouldn’t see overnight changes with a loyalty program without fixing product issues and baselining analytics first.
However, where these aspects have been taken care of, a good loyalty program can encourage people to come back and make several repeat purchases. In order to appeal to people, the program must be very simple. It is best to stay away from purchase tiers in the beginning and use a system that offers points for all purchases, irrespective of order value.
Moreover, redeeming these points must be simple- customers should be able to apply these points on a purchase of any value, and they shouldn’t have to click through the website endlessly to find out where to redeem them.
Key Takeaway: Customers who are part of a loyalty program buy more than those who aren’t. They also form a unique audience segment that can be nurtured using deals and rewards to increase their average order value over a period of time, making them an extremely lucrative segment to retain.
4. Use personalization and segmentation to drive retention
In the age of hyper-personalization, no one appreciates being just one among many. Customers are no exception. Creating a seamless experience from discovery to engagement, and finally to the purchase stage, is vital in customer retention.
There is no one-size-fits-all solution for your customers. Therefore, to engage them more effectively, you need personalization in messaging as well as good audience segmentation. You can segment your customers into different segments based on their purchase behavior, browsing behavior, and interaction with your products on different social media platforms.
From this point on, we know what customer information we have access to. For example, in some cases, a customer may have unsubscribed from all email communication, but continues to browse the brand’s website. In such cases, retargeting them with product ads is a good way to encourage them to complete their purchase.
In other cases, we may notice that a customer is highly engaged with the emails, but does not complete a purchase off the back of them. A simple survey and a reward attached to this survey can help us identify why these customers aren’t completing their purchase- it could be an issue with an earlier purchase, or not having enough information to be able to buy.
In both cases, effective segmentation enables us to understand what is preventing us from achieving better retention.
It is important to understand that segmentation and personalization are not just messaging strategies. For example, sizing issues are extremely common in apparel retail, with people returning products until they find the right fit, or getting frustrated when they cannot. To counter this, many brands offer a try-before-you-buy service, or provide a no-questions-asked replacement option for apparel.
These brands understand that their audience segment expects great service (segmentation), and have personalized their buying experience to suit their needs.
Key Takeaway: Customers today expect to be treated like the individuals that they are. Personalized communication and experience allow a brand to do just this. Good personalization is always dependent on effective segmentation. Over time, audience segmentation coupled with a personalized experience helps the brand retain more loyal customers.
To know more about audience segmentation, please take a look at this guide.
To grow and scale a D2C business, customer retention must be the number one priority. Businesses can create a predictable and stable flow of income by increasing customer retention rates. The higher revenue generated from repeat customers also reduces the company’s reliance on outside cash to fund its operations. The strategies discussed here can help eCommerce brands retain more customers and spend less on advertising.