How to Improve Customer Retention Rate for Your eCommerce Business

As an eCommerce owner, you’re likely focused on driving traffic to your site and acquiring new customers. But what about keeping the customers you already have? Customer retention rate is a critical metric that shows how many of your customers are coming back to make additional purchases. The higher your retention rate, the more loyal your customers are, and the less you’ll need to rely on expensive acquisition strategies to grow your business. Let’s explore why customer retention is key to success, and how you can improve it.

The Hidden Cost of Low Customer Retention

Many eCommerce businesses are heavily focused on customer acquisition, and understandably so—getting new customers is important for growth. But what often gets overlooked is that acquiring new customers can be up to five times more expensive than retaining existing ones. A low customer retention rate can eat into your profits, increase marketing spend, and reduce overall profitability, which is closely tied to customer loyalty and retention.

When customers leave after their first purchase, you not only lose out on potential future sales, but you also miss an opportunity to build brand loyalty and advocacy. Loyal customers spend more over time, are more likely to refer others to your store, and cost significantly less to market to compared to new customers. In fact, increasing customer retention rates by just 5% can boost profits by 25% to 95%, according to research by Bain & Company.

Simply put, if your customer retention rate is low, you’re leaving money on the table. Improving retention should be a top priority for any eCommerce business that wants to achieve sustainable growth.

Why Retention Is the Key to Long-Term Profitability

Customer retention isn’t just about keeping customers around for a little longer; it’s about building deeper relationships with them that lead to increased lifetime value (LTV). When customers feel connected to your brand and enjoy the experience you provide, they are more likely to return and make additional purchases, highlighting the importance of customer loyalty.

But how do you know if your retention efforts are working? The first step is calculating your customer retention rate. Here’s a simple formula:

Customer Retention Rate (CRR) = ((E - N) / S) x 100

Where:

• E = Number of customers at the end of a given period

• N = Number of new customers acquired during that period

• S = Number of customers at the start of the period

This formula gives you a percentage that shows how well you're retaining customers over time. A higher retention rate means you’re doing a good job of keeping customers engaged and satisfied.

So, why is focusing on customer retention such a smart move? When you boost your retention rate, you’re not just getting more sales—you’re increasing the average order value and the frequency of purchases, which drives up the overall LTV of each customer. Plus, satisfied customers are more likely to refer others, which further fuels growth without increasing your acquisition costs.

Consider the subscription box industry as an example. Brands that focus on customer retention often implement referral programs, giving existing customers incentives to invite friends or family members to sign up. This strategy doesn’t just bring in new customers—it rewards loyal ones and deepens their connection with the brand. The result is a steady stream of referrals and repeat purchases, both of which significantly impact profitability.

Strategies to Boost Your Customer Retention Rate

Now that you understand the importance of customer retention, let’s dive into actionable proven customer retention strategies and strategies for building customer loyalty to help improve your retention rate.

1. Personalize the Customer Experience

Customers expect a personalized experience, whether they’re shopping online or in-store. Use customer data to tailor your communications and product recommendations. For example, send personalized emails with product suggestions based on past purchases or offer exclusive discounts for their next purchase. Personalization makes your customers feel valued and understood, which keeps them coming back for more.

For instance, many leading eCommerce brands use data to send abandoned cart reminders with a personal touch. Instead of sending a generic reminder, they highlight the specific products left in the cart, add a personalized greeting, and sometimes offer a small discount to encourage customers to complete their purchase. This small effort can lead to significant boosts in conversion rates and repeat purchases.

2. Create a Loyalty Program

A well-designed loyalty program can significantly boost your retention rate and maximize ROI through customer retention. By offering points, rewards, or discounts for repeat purchases, you incentivize customers to stay engaged with your brand. Studies show that customers enrolled in loyalty programs are much more likely to make repeat purchases, and they tend to spend more on each visit.

Take Sephora’s Beauty Insider program, for example. It’s a tiered loyalty program that rewards customers with points for every purchase, which can then be redeemed for exclusive products or experiences. As customers spend more, they move up the tiers, unlocking even better rewards and discounts. This not only encourages repeat business but also increases the average order value, as customers are motivated to reach higher tiers.

3. Focus on Exceptional Customer Service

Good customer service goes a long way in fostering customer loyalty. Make sure you’re offering fast, responsive support across multiple channels, such as live chat, email, or social media. Proactively solving problems and making your customers feel cared for will increase their likelihood of returning to your store.

A great example of customer service-driven retention comes from Zappos, which is known for its customer-centric approach. The company offers free shipping and returns, a 365-day return policy, and 24/7 customer support. This commitment to customer service has helped Zappos create a loyal customer base that continues to shop with them, even when there are cheaper alternatives available.

4. Leverage Push Notifications for Re-engagement

One of the most effective ways to re-engage customers is through push notifications best practices. With Unblocked Brands' Passport solution, you can send timely, personalized push notifications to customers without needing a mobile app. This allows you to promote new products, offer discounts, or remind customers of items left in their cart—all in real time.

Unlike emails, which can get lost in crowded inboxes, push notifications are always on and have a much higher engagement rate. With Passport, you can set up these notifications in under 5 minutes and begin building a perpetual audience for organic re-engagement. By reducing the friction typically associated with app downloads, Passport makes it easier to stay connected with your customers and drive repeat sales.

5. Offer Exclusive Content or Access

Make your customers feel special by offering them exclusive content, early access to new products, or special deals available only to repeat buyers. This sense of exclusivity can create a deeper bond with your brand, making customers more likely to return.

For example, Nike’s SNKRS app offers exclusive access to limited-edition sneakers, creating a sense of urgency and excitement among its loyal customers. By offering something that’s not available to the general public, Nike has built a community of passionate fans who regularly return to the app to check for new releases.

6. Follow Up Post-Purchase

Customer retention doesn’t end at the point of sale. In fact, the post-purchase experience is critical to keeping customers engaged. Follow up with customers after their purchase by sending thank you emails, product care tips, or personalized recommendations for complementary products.

For instance, if someone buys a high-end camera from your store, follow up with an email offering suggestions for compatible lenses, tripods, or photography courses. This helps to extend the relationship beyond the initial transaction and keeps customers coming back for more.

Take Steps to Improve Retention Today

If your customer retention rate isn’t where you want it to be, don’t worry—there are steps you can take today to start seeing improvements. By personalizing the customer experience, investing in loyalty programs, and using smart tools like Unblocked Brands’ Passport solution for push notifications, you can create an environment where customers are eager to return.

The long-term benefits of a strong retention strategy are clear: higher customer lifetime value, increased profitability, and more sustainable growth, underscoring the significance of customer loyalty. And don’t forget—if you’re looking for an easy way to increase engagement and retention, Unblocked Brands' Passport solution is here to help. You can also join our community for marketing insights to learn from experts and access exclusive resources.

Building Loyalty to Drive Growth

Customer retention is the cornerstone of sustainable growth for any eCommerce business. By focusing on retention and using proven strategies like personalization, loyalty programs, and push notifications, you can significantly boost your customer retention rate and drive long-term profitability.

With Unblocked Brands’ Passport solution, you have the tools you need to keep customers engaged and loyal, without the hassle of developing a dedicated mobile app. Start improving your retention today—because keeping customers is just as important as acquiring new ones.