E-commerce in 2021: The challenge of customer retention

In light of the ongoing health crisis, a number of merchants have seen an increase in customers. In a very competitive market, the challenge in 2021 is to keep these customers loyal to your brand by deploying appropriate relationship marketing strategies. This trend is reflected throughout Europe with a 30% increase in expenses related to building customer loyalty.

It is often said that retaining customers is 5 times cheaper than acquiring new ones and that 80% of sales are based on 20% of existing customers. While these figures may need to be adjusted during this time of great upheaval, the fact remains that customer loyalty is a real strategic challenge. Loyalty, retention, what does it all mean? 

What is customer retention?

The Customer Retention Rate (CRR) is an indicator of a company's ability to retain its customers. In practical terms, it reflects the proportion of customers who remain loyal from one period to the next, most often from one year to the next, or from one fiscal year to the next.

Why calculate your customer retention rate?

This rate is a valuable indicator for calculating the real loyalty of your customers. It also allows you to measure the profitability of your customer loyalty actions over the medium and long term. It is at least, if not more important than your acquisition rate when it comes to assessing the growth of your business, especially if your business model is based on recurring purchases.

How to calculate your customer retention rate

First of all, you need to decide on a reference period (fiscal year, calendar year, school year, etc.). The calculation consists of subtracting the number of customers at the end of the period (CE) from the new customers (CN) and then dividing by the number of customers the company had at the start of the period (CS).

The formula is expressed as follows:

CRR = [(CE - CN) / CS] X 100.

Retention Rate = [(End Customers - New Customers) / Starting Customers] X 100.

For example, if at the beginning of the year 2019, you had 1000 customers. In 2020, you received orders from 500 new customers. At the end of the year, your number of customers is 1200.

CRR = [(1200 - 500) / 1000] X 100 = 70 %

What is a good customer retention rate?

It is difficult to compare retention rates from one site to another. In theory, the closer to 100%, the better. But, in reality, it all depends on how often customers tend to buy your products. A site that sells appliances will normally have a lower rate than a typical grocery store site.

However, an increase in your retention rate is always a good indicator. If your rate increases, it means that your customers are satisfied with your services and that they will continue to buy from you. On the other hand, if it is decreasing, excluding special events, you will surely have to rethink your customer loyalty strategy.

How can you improve your customer retention rate?

In addition to your rapidly changing competitive environment, which requires constant monitoring so that you don't fall behind, the first priority is... the customer!

Think about assessing your customers' satisfaction: surveys, questionnaires, polls, rating systems, customer service feedback monitoring, monitoring your e-reputation... Pay attention to what your customers think and say about your site. Quickly implement corrective solutions and keep your customers well informed. Also, you should think about consulting your customers before developing a new interface, a new service, a new product page... Your customers will feel more involved.

An effective relationship strategy

Surprisingly, according to a McKinsey study, 58% of customers do not take advantage of their subscribed loyalty program(s). The most important thing we can learn from this number is that customer loyalty is more than just loyalty points. Retaining customers is based on a sense of reward, but more importantly, a sense of recognition. Above all, they must feel appreciated. And while acquiring new customers is an important part of your marketing strategy, with increasingly large budgets, we often forget that customer retention is also an important growth factor.

Therefore, you should think about a way to reward your customers using the information that they have given you. Their birthday, their size, their favorite fragrances... Imagine a whole range of personalized special offers: free delivery with their umpteenth order or for their birthday, a single-use promotion code with the customer's name in it... all of which will keep your customers happy and help maintain their loyalty.

Your brand: a key asset

Your brand, your company's history, your story, your employees, your location... these are all important elements to share with your customers, who are becoming more and more concerned about where their purchases come from. In France for example, during the first lockdown, the popularity of French products and the support of local bookstores are proof of this. Clients know how to help support businesses...