Customer acquisition has always been a battleground for brands who spend millions of dollars for it. Customer Retention usually costs one-fifth of the traditional customer acquisition cost, yet many players don’t invest in the channel, experts say.
So, how can brands boost customer retention in a retail space dominated by discount-seekers and impulse buyers who may not return the next time?
Studies indicate the festive season is the most conducive ground for brands to forge the “long term relationship” with consumers.
Customer retention firm Criteo's Holiday Preview 2023 reveals that the holiday season, extending far beyond Diwali, presents a great opportunity to acquire new customers and turn them into repeat customers.
“In 2022, we observed 78% increase in new buyers on Black Friday and 5% increase during Diwali in India. Furthermore, 34% of new buyers during the two weeks approaching Diwali 2022 went on to make at least one additional purchase from the same retailer between November 2022 to March 2023,” Taranjeet Singh, Managing Director – Enterprise, APAC, Criteo, tells e4m.
Holidays offer a unique opportunity to build and maintain customer loyalty by leveraging emotional connections, personalization, and increased consumer spending.
Understanding the length of the holiday shopper journey is crucial to helping marketers optimize their strategies. The data reveals varying timelines, with some customers taking weeks before Black Friday and others only a few hours to complete their purchases. To maximize holiday campaigns, businesses should plan to target and engage both early planners and last-minute shoppers, industry experts say.
More retention, more growth
In the D2C and e-commerce landscape, customer engagement and retention are critical for success. Engaging customers on a personal level, providing exceptional support, and leveraging digital platforms for interaction are key to building brand loyalty. Customer Retention is believed to be the key differentiator between enduring businesses versus those that end up struggling despite massive budgets.
Businesses that prioritize customer retention see higher ROI, and increasing retention by just 5% can drive a 25-95% hike in profits, says a research by Frederick Reichheld of Bain & Company. According to a report by Forrester, existing customers account for more than three-quarters of annual revenue for organizations.
A good repeat purchase ratio (RPR), an indicator of the ratio of repeat customers to the overall customer base or the percentage of repeat customers (two or more purchases) is about 30-40%.
“Studies have shown that most apps will lose as many as 95% of their daily active users within the first 90 days. Added to this, these losses result in a huge increase in net customer acquisition cost,” says Anand Jain of Clevertap.
This forces brands to struggle with data collection and derive insights from it to properly contextualize their campaigns and deliver it to the right audience. Even Foodtech and e-commerce brands’ customer stickiness currently stands at a meagre 15% and 17% respectively.
With an established customer base, advertising costs can be lowered, Moreover, a retained customer base often becomes a source of referrals and word-of-mouth marketing. This organic brand advocacy can significantly boost sales and brand visibility. Additionally, the established trust with existing customers creates opportunities for upselling or cross-selling other products, further increasing sales and improving overall profitability for D2C brands, Sheetal Vanwari, Head of Marketing, Awfis.
Customer retention strategy ecompasses Cohort analysis, conversion funnels to profile data, app uninstall tracking, building actionable user groups, perfecting audience targeting, creating powerful and omnichannel user experiences with messaging campaigns across 12 channels including push, email, in-app, WhatsApp at scale among others.
Combining real-time analytics, a powerful segmentation engine, and a suite of engagement tools, can help brands to decode the complexities.
To unlock the benefits of customer retention, marketers need to evaluate the holistic customer experience, experts say. They need to figure out what it takes to keep customers happy and coming back for more in an increasingly crowded landscape.
Jain explains that e-commerce marketers face both a challenge and an opportunity: they must make sure their company's app not only distinguishes itself in a saturated and highly competitive market but also motivates users to make swift purchases, come back for repeat buys, and ideally, spend a substantial amount with each transaction.
“In today’s fiercely customer-centric world, succeeding in this endeavor is truly the only way to achieve healthy and sustained engagement and retention, while also lowering customer acquisition costs and increasing revenue,” Jain highlighted.
Customized messaging informed by behavioral insights are crucial to get customers to return to the app interface and drive up this metric, he noted.
Jain says through hyper-personalization, brands can meet the needs of today’s most-demanding customer. “There are three core pillars of hyper-personalization: 1) Individualization, by treating each customer as a segment of one. 2) Real-time, predictive engagement and 3) A customer journey that is hyper-personalized at each step.”
Key customer retention metrics include customer retention rate, customer churn rate and customer lifetime value that measures the total revenue you can expect from a customer, during their lifetime. Lifetime value helps a business discover its most loyal customers.
“Brands must continuously gather customer data to understand their patterns, create personalized experiences, and adapt retention strategies to maximize Customer Lifetime Value”, says Sayak Mukherjee, Co-Founder & Director, Brandwizz Communications.
With the advent of AI and Predictive Analytics, the job will keep getting easier for us, Mukherjee remarks.