4 signs it’s time to prioritise customer loyalty and retention

Lion image mural

As the ecommerce industry continues to grow at a rapid rate, so do the challenges and threats that merchants face, from price wars with competitors to basket abandonment and brand differentiation.

Today, one of the biggest headaches most retailers grapple with is challenges related to customer loyalty and retention. As businesses grow, they often struggle to build long-term relationships that go beyond one or two purchases.

However, customer loyalty and retention is now more important than ever, particularly with the drastic increase in CACs (customer acquisition costs) and the increasingly crowded and competitive ecommerce market.

Some believe that as a retailer, you should wait until you have a larger customer base before investing in customer loyalty and retention. The fact is, the moment your store begins to generate sales, there are opportunities for you to gain valuable insights, build on customer engagement, and encourage shoppers to return for their next purchase.

Increasing customer retention by just 2% can have the same impact as reducing costs by 10%, making it a savvy cost-saving measure too.

So, what are the telltale signs that your business should be prioritising customer loyalty and retention?

Sign #1: Your repeat purchase rate isn’t high enough to cover your customer acquisition costs


If you find that your customer acquisition costs keep increasing, bear in mind that customer retention costs five times less than acquisition. Consider your acquisition costs and evaluate whether focusing on customer loyalty and retention is more financially beneficial than focusing on acquisition alone.

Effective loyalty programmes are proven to increase purchase frequency, with customers who join and redeem a reward being 68% more likely to purchase a second time than those who don’t.

Your repeat purchase rate is calculated as a percentage, dividing the total number of orders over a specific period of time, by the number of unique customers within the same timeframe.

Repeat purchase rate formula


Your best timeframe is based around factors such as your product or services and the expected repurchase time. The higher your percentage the more profitable for your business.

If your repeat purchase rate is not high enough to cover acquisition costs, it might be time to consider investing in customer loyalty and retention, and looking into how a loyalty programme could help you increase it.

Organic beauty brand 100% PURE implemented points and rewards for purchases in order to increase their repeat purchase rate. Using loyalty tiers, they motivated customers to return and continue purchasing at their store to earn exclusive offers and benefits. This resulted in 92% of their customers going on to buy 5 more times after their 4th purchase.


Sign #2: Too many of your customers are ‘at-risk’


Do you have a high number of customers who have become disengaged and look unlikely to make another purchase with your store in your expected timeframe? If so, implementing a strategy to identify and re-engage ‘at-risk’ customers should be a priority.

That's where email marketing comes in, with a loyalty-focused twist. Emails related to loyalty perform 14 times better than the average marketing email, allowing you to use personalised messages to encourage customers to return and make their next purchase.

Those investing in loyalty programmes have multiple reasons to get in touch and engage members - such as to remind customers of their points balances and available rewards. At-risk customers can also be re-engaged with incentives to return and buy again, such as bonus points on particular products, or free shipping on their next purchase.

The personalised nature of loyalty emails allow you to show at-risk customers that you value and understand their individual preferences. It’s another way in which prioritising customer loyalty and retention can offer a cost-effective way to drive revenue. 

Sign #3: You have too many browsers and not enough buyers


If you're concerned about your cart abandonment and browser-only visit numbers, it may be time to look at improving the quality of your traffic. Focusing on turning your existing customers into advocates can help you attain new and higher quality website visitors, more cost-effectively.

A loyalty programme can also work as a referral system, allowing you to offer points to your existing loyal customers as an incentive to refer their friends. Your most valuable customers - those who shop most regularly and have the highest average order values - are most likely to act as advocates. Identifying them and motivating them to recommend friends and family could be the key to driving more qualified traffic.

74% of customers agree that word-of-mouth is a key influencer in their purchasing decisions and referrals generate positive awareness and preconceived trust with your brand. Customers acquired through referrals also tend to spend 200% more than the average customer.


Sign #4: You're competing in a race to the bottom


Customers who shop online have the power to effortlessly compare pricing and products against competing stores. For too many retailers, this means getting caught in a race to the bottom. The best way to avoid this, is to ensure that your brand offers a real point-of-difference. This is another fantastic way to encourage customer loyalty and retention, by making your business stand out against the rest.

Loyalty points and rewards can help you offer value to your customers that competitors who stock similar products don’t (or can’t) deliver. Structuring your programme in a way that allows customers to earn and redeem rewards within a reasonable timeframe can help you set your brand apart by offering customers immediate gains for their spend.

Clearly communicating that structure to prospective members can also help them to see the value of joining the programme and shopping with you, rather than shopping around for the cheapest price.


Making customer loyalty and retention a priority in 2023?


The ecommerce industry is more competitive than ever, and the turbulent financial situation makes it critical that brands make efforts to differentiate themselves and enhance their customer experience.

Prioritising customer loyalty and retention is key to securing competitive advantage. If any of these signs are ringing alarm bells for you, it could be time to consider new ways to drive customer loyalty - we can help with that.

Here at Underwaterpistol, we help ambitious merchants build up brand love with loyalty programmes that keep your consumers coming back for more, fusing technical expertise with intuitive design for a rewards scheme they won’t forget. Talk to us about how we can create yours.