A good customer loyalty and retention strategy is key to the success of any eCommerce business. But what happens when things go wrong? And what can you do to encourage loyalty and reduce churn?
Keep reading to discover the consequences of poor customer loyalty and retention practices. Along the way, we’ll also discuss tips for improving your brand’s approach, turning shoppers into fans, getting glowing reviews, and increasing revenue.
Why is customer loyalty and retention important?
Think about the most successful brands you know. Their customers are extremely loyal, right?
Take Apple, for instance. Their customers are more like fans. They post positive reviews, talk about Apple on social media, often refuse to use devices from competitors, and line up to purchase new products the second they launch.
The brand has put together a winning formula that makes people proud to say "I'm an Apple person." And thanks to that customer loyalty and retention, Apple reports billions of dollars worth of revenue every quarter.
If you want to make more sales, improve profits, and grow your business, you need to do everything you can to encourage customer retention and loyalty. In fact, Bain and Company released a study showing that increasing customer retention by just 5% can lead to a 25% to 95% increase in revenue.
Consequences of Poor Loyalty and Retention
So, we know good customer loyalty and retention can lead to excellent business outcomes. But what are the consequences of a bad approach?
There are a myriad of things that can go wrong if your customer retention strategy is poor (or nonexistent). Here are a few of the most notable pitfalls.
Unsatisfied Customers and High Churn Rate
This one's pretty obvious. A poor approach to customer loyalty and retention leads to unsatisfied customers and high churn rate. In other words, large numbers of customers will stop buying from you.
Put simply: when customers are dissatisfied or otherwise not encouraged to be loyal to your brand, they'll take their business elsewhere. In fact, 61% of consumers say they will switch brands after a single negative experience.
Again, not fostering loyalty and retention throughout every step of the customer journey can lead to dissatisfied customers. And unhappy customers are likely to leave negative reviews.
Research shows that customers who have a bad experience with your company are more likely to leave a review than customers who have a positive experience. Dissatisfied customers also tell nine to 15 people on average about their bad experience with a brand, and it can take 40 positive reviews to make up for one negative one.
Fewer Sales and Lower Revenue
What do unsatisfied customers, high churn rate, and negative reviews all have in common? They all lead to fewer customers for your business. And fewer customers = lower sales and revenue.
Higher Customer Acquisition Costs
Poor retention practices lead to much higher customer acquisition costs (CAC) for your business. Data from Invesp shows that it costs 5x more to acquire new customers than it does to keep existing customers.
If you aren't retaining a good percentage of existing customers, it can significantly impact your customer lifetime value (LTV) to CAC ratio. Learn more about LTV.
More Customer Support Inquiries
If you aren't doing everything you can to keep customers happy and loyal, it stands to reason that you will receive more customer support inquiries. We'll cover more on this in our sections on how to avoid customer retention pitfalls below, but the concept is simple.
The crux of customer retention and loyalty is ensuring customer satisfaction throughout the buyer journey. If you drop the ball at any stage (whether it's low-quality products or high customer effort), you're sure to get more customer service inquiries. That means more work for your customer support team, and less time to focus on growing your business.
Difficulties with Marketplace Ranking and Compliance
Poor customer loyalty strategies can lead to problems with marketplace ranking and compliance. For example, bad reviews can negatively impact your Amazon Seller Rating and cause your products to be listed lower on results pages. Lots of negative reviews could even threaten your store's compliance and ability to sell on the platform.
Use our Amazon integration to improve customer response times, smash SLAs, and improve your Amazon Seller Rating.
Stunted Business Growth
All of the previously mentioned consequences mean one big thing: stunted business growth.
With fewer repeat customers, fewer recommendations bringing you new shoppers, lower revenue, higher customer acquisition costs, and more, you can make one safe assumption. It's tough to build a successful business on the shaky foundation of a poor customer loyalty strategy.
How to avoid customer loyalty and retention pitfalls
Now that we've covered many of the negative outcomes brought on by a bad customer retention approach, let's get to the fun part.
Here are several pro tips to help you improve customer loyalty and avoid these pitfalls altogether.
Put together a customer loyalty and retention strategy
Increasing customer loyalty and retention starts with putting together an actual strategy. This means developing a strategy to deliver an amazing customer experience (CX) at every stage of the pre-sale, sale, and post-sale cycle.
Map out the customer journey
In order to improve customer retention rate, you need to map out the customer journey. How do customers find your brand or website? How do they contact you? How do they buy from you?
Relevant customer loyalty measures should be applied to every stage of the journey so shoppers recommend you to friends and keep coming back for more.
Pay attention to customer behavior
If you want to reduce customer churn and make repeat sales, you need to pay attention to customer behavior. This lets you know what's working, and what you should continue doing (or what you should do even more). Behavior analysis can also tell you what's not working and what you should fix.
For example, this practice can show you if multiple shoppers are complaining about the same products over and over, or leaving your website at the same point, so you can take the appropriate actions.
Want to identify which products receive the most queries or when your support team is busiest? eDesk delivers powerful built-in reporting functionality so you can analyze, understand, and share key metrics about your business.
Include every department in your customer retention strategy
A big mistake many brands make is assuming that it's just the responsibility of the marketing or customer service department to increase customer loyalty and drive retention.
However, the most successful companies know that every department plays a crucial role in this strategy. From engineers who make sure your website runs smoothly, to product departments ensuring items are high-quality, to customer support and sales, every member of your team affects customer retention. Make sure your strategy includes protocols for your whole staff.
Offer high-quality products
We've mentioned product quality already, but it bears repeating: the quality of your offerings has a direct impact on brand loyalty. No customer who is consistently disappointed with their purchase is going to keep buying from the offending brand over and over. And they're certainly not going to recommend them.
Measure customer loyalty
If you're taking steps to put a strategy in place, then you should be measuring customer loyalty. That way, you'll know whether your strategy is working or if it needs to be tweaked. From surveys to simply keeping track of churn rates and repeat orders, there are a number of ways to collect data that will let you know how your retention strategy is performing.
Implement customer loyalty programs
One of the best ways to encourage repeat business and glowing reviews is to create a customer loyalty program. Loyalty programs could include giving discounts to repeat customers, offering existing customers early access to new releases, and anything else that rewards customers for frequenting your business.
Pay attention to your Net Promoter Score (NPS)
Want to know how likely a customer is to recommend your business? Calculate your Net Promoter Score (NPS) with an NPS survey.
Reduce customer effort
Customer effort is exactly what it sounds like–the effort required from a customer to shop your website, buy your products, or otherwise do business with you.
By doing everything you can to reduce customer effort, you can delight shoppers and boost loyalty.
A few ways to reduce customer effort are to ensure your website is easy to navigate, streamline your checkout process, make it simple to contact your customer support team, and offer self-serve options like FAQs and knowledge bases. (According to Hubspot research, customers prefer knowledge bases over any other self-service channel.)
Want to make it easier for customers to get answers to questions while they’re shopping? Support them in real-time with our live chat functionality. You can even include links to your FAQ and knowledge base pages in your live chat window so shoppers can find the answers they need when you’re not online.
Provide excellent (and fast) customer service
If you want loyal customers, you need to provide excellent customer service. After all, loyal customers are happy customers. And the most effective way to make customers happy is to give them amazing support. Answer their questions, offer thoughtful resolutions, honor your promises (like return policies), and take great care of your shoppers.
Hubspot research shows that 93% of consumers will buy again from brands that offer excellent customer service. 94% of customers say "very good customer service" will cause them to recommend a company.
You also need to be quick. the same Hubspot research says that 90% of shoppers rate an "immediate" response as "important" or "very important," while 60% of respondents define "immediate" as 10 minutes or less.
If you're an eCommerce seller, we make this part easy. With our eCommerce customer support software, you can centralize the messaging from all your marketplaces and selling channels into one smart inbox. Incoming customer messages will automatically be organized and sorted properly in accordance with the rules you set up. The best part? You can deliver incredible customer service, all while spending far less time and effort on your support!
Create more customized campaigns
Customers want to feel like more than a "number." That's why you should create more customized marketing and communication materials. This can be as simple as using tags to automatically insert a customer's first name into an email.
For example, our help desk software for eCommerce lets you easily customize and personalize virtually any facet of your customer service messaging.
Request feedback from satisfied customers
Finally, if you're providing amazing support throughout every stage of the buying cycle and you know your customers are thrilled with your brand, ask for reviews! That great feedback can lead to new customers.
And when those new customers encounter your amazing retention strategy, they'll then become loyal customers who leave reviews and attract more new customers… That's the never-ending cycle you want to foster.
When it comes to retaining more loyal customers, there are a lot of pitfalls you can encounter. A poor (or nonexistent) approach leads to lost customers, fewer sales, lower revenue, marketplace issues, and a host of other problems.
However, by implementing the right strategy, you can avoid these consequences, retain loyal customers, and see a massive boost in profits and ROI. Ready to take your customer loyalty and retention strategy to new heights? The first and biggest step is to get your customer service under control. With eDesk, you can improve every facet of the customer experience. From live chat to meet customers where they are, to automation to ensure customers receive quick replies even when you're not around, our features can help you knock support out of the park.