Supercharging Customer Retention

Lifetime Value, or LTV, is key to growing your business. Without it, you might as well turn off the lights and go home.

LTV is the total amount of money that a merchant receives from a customer’s entire lifetime of association with a seller. Thus, if you have an e-commerce store and your average customer spends $200 per year for an average of three years, then the average customer lifetime value (CLTV) is $600.

For many retailers — online or in-store, the customer journey ends once the sale is made. But those brands are making an expensive mistake when they ignore the need to nurture follow-up sales.

Why does that matter?

Andrew Chan, cofounder and CPO of tracking and post-purchase e-commerce platform AfterShip, believes post-purchase engagement boosts customer retention. Ensuring a convenient experience after purchase — from shipping, tracking, returns, and reviews — helps retailers sell more to happy, repeat consumers.

Without a steady inventory of repeat customers, you can expect your warehoused product lines to grow old and moldy. Research emphatically proves that point, he asserts.

Post-sale engagement is more crucial than ever. Research shows that 76 percent of customers prioritize convenience when picking a retailer. Even more convincing is that 75 percent of shoppers value convenience more than they did a year ago.

Still not convinced?

Then consider this: customer retention also reduces spending because today’s cost to acquire new customers continues to rise.

“We all know returning customers generate more revenue than those customers who come once and go. It is simple numbers,” Chan told the E-Commerce Times.

The two key questions he challenged are: how can you strategize to get more returning customers, and how can you make those customers buy more when they return?

An Open Discussion

We pressed Chan to offer answers to his two vital questions about supercharging customer retention.

E-Commerce Times: Why should retailers prioritize customer retention rather than customer acquisition?

Andrew Chan, Cofounder of Aftership

Andrew Chan: Retailers should see their businesses as selling as a service and focus on increasing lifetime value by retaining their customers after acquiring them. The cost of customer acquisition is no longer cheap compared to what it was 10 years ago.

If a store looks to get customers to buy once and then leave, we rarely see that store make money in the long run. Keeping your current customers happy helps turn them into your advocates. They then promote your products for free. This increases your sources of direct traffic to your stores rather than relying purely on paid marketing.

How can retailers prioritize their customer retention strategies beyond traditional loyalty programs?

Chan: Retailers should invest heavily on post-purchase experiences to increase customer engagement. Instead of sending customers to third-party websites for tracking, it is crucial to keep customers coming back to your store to track what they are doing while there.

How does using AfterShip foster better post-purchase experiences?

Chan: Our customers use tracking pages built with AfterShip technology to generate 3.1 times more visits per order. We also see brands sending shipment notifications via email to achieve a more than 50 percent open rate. Brands can also include product recommendations and marketing assets to ensure customers continue shopping or follow their social media pages.

How can retailers effectively meet consumers’ changing demands in this post-pandemic retail challenge?

Chan: Most customers are also asking for a no-questions-asked return experience, as well as the ability to generate shipment labels without contacting a support agent.

It is important for brands to build an easy, automated return experience because customers have based their expectations on Amazon’s shopping experience. Those post-purchase touchpoints increase brand awareness, reduce customer complaints, and generate more sales.

What role does a unified approach to data play in supporting customer retention?

Chan: Retention rate and customer LTV are not hard for retailers to monitor. However, the toughest part is capturing all the different events that help improve customer retention. It is crucial for retailers to track data from the events surrounding key post-purchase touchpoints of the customer journey to aid retention.

For example, merchants use AfterShip to collect delivery events surrounding their orders to find any exceptions to the on-time rate of the shipment regardless of which carriers they use. This helps ensure your shipments are arriving in a timely manner.

What can retailers do to tweak their customer journey process to improve customer retention?

Chan: The best way to learn more about the customer journey process, and therefore to improve customer retention, is through strong customer support and sales staff. If the customers are not happy with your shopping experience, customers will churn. It really is that simple.

Start from the customer support side and check the reason why customer inquiries and complaints are coming in from top to bottom. If you find most of your customer inquiries are about order status, then there is something wrong with the tracking experience.

Either you are not giving the right expected delivery date, or worse, you are not giving one at all. Or you are not proactively updating customers.

Imagine your customers facing a delivery exception, but your store simply ignores the problem. Those customers will not be coming back.

What concrete steps should brands take to encourage repeat purchases?

Chan: Start by looking for solutions that will help with retention right away. For example, if you run a Shopify store, you can find apps that focus on post-purchase experiences such as order status tracking, returns, and reviews.

These can be found at the Shopify App Store. Many apps and solutions are available and tailor-made to solve your e-commerce issues. The hardest part is identifying those problems to begin with.

Why is customer retention a cheaper option for brands than customer acquisition?

Chan: Modern, forward-looking companies know that the customer journey continues after their purchase with events like shipping, tracking, returns, reviews, and more. These experiences all take place before the customer makes another purchase. It is crucial for brands to have a unified view of all customer data to know if a customer is happy or not.

For example, if a VIP customer makes a purchase and selects two-day shipping, and then the delivery is late, should the support team reach out? Should the brand offer something to the customer?

Having a unified view helps teams make automatic decisions about providing better customer service to buyers. This, in turn, encourages repeated purchases.

What is more essential to growing a business — retention or acquisition? Or is it establishing a balance? Why?

Chan: No doubt, it is still important to acquire customers. However, the overall goal is to find the customer segment that has the highest retention rate so you can retain them and generate higher LTV. Once you figure out the best approach to retain those customers, you should invest aggressively in acquiring those target customers.

What are the most effective customer retention methods?

Chan: Other than providing a great customer experience in regard to order tracking and returns, many brands ignore the importance of customer reviews. If you shop at Amazon, you are prompted to submit customer reviews on your purchased products.

Getting customer reviews on your own products can help improve the product’s quality and identify the brand advocates to whom you can offer coupons and referral fees. These can be used to entice them to promote your brand.

How have these methods changed over traditional low-tech approaches?

Chan: Personalizing the customer experience is very, very important today. It is all about providing a series of selected experiences to targeted customer segments. By identifying and improving the major experiences that impact customer conversion of key customer segments, personalization can improve conversion rates overall and offer a better customer experience.

For example, if you are selling bubble tea, you might want to create a personalized customer experience that offers “less sugary” drinks to customers who previously selected “less sugar.” However, maybe some customers complain in their product reviews that even this version is too sweet for a “less sugar” product.

As a product owner, you should think about how to address such feedback. Maybe adjust the sugar level or offer another sugar level. Having a data-centric customer service team that relays this important information to the correct internal business units so that adjustments can be made quickly is crucial.