How Customer Loyalty Influences Customer Retention

E Commerce market trends indicate continued growth in the United States market and ecommerce businesses will have to face stiff competition. So, customer loyalty will become a deciding factor for any ecommerce business to establish itself in the market. Many ecommerce brands use loyalty reward programs to increase the count of loyal customers.

If we talk about the United States ecommerce market, then there is a prediction about the continuous growth of the U.S. market. Studies suggest that the U.S. market will cross the $388.4 billion mark between 2024 to 2029. Based on this market research, ecommerce businesses will get many opportunities to gain new customers and with the right strategy, you can convert them into loyal customers.

Ecommerce businesses will also face stiff competition and whoever uses the right approach will have the chance to gain more customers.

Ecommerce Tiered Program

You can use a tiered program for your ecommerce customers based on their spending and engagement. It will encourage them to recommend your store to other customers to make a purchase.

Ecommerce Points-Based Programs

The point-based program allows customers to earn points for particular actions such as purchase, referral, etc. Use this point system to provide some discount. It will help ecommerce stores to increase their engagement.

Ecommerce Referral Programs

Referral Program encourages your customers to refer your online store to their friends and family and get more discounts. It will help ecommerce businesses to gain more loyal customers.

Customer retention is an important factor for any ecommerce store and identifying why they are losing customers is very crucial. Here are some common challenges for losing customers:

Poor Customer Service

It is one of the most common problems for many ecommerce customers. Many customers switch e-commerce brands because of poor services.

Solution: You should check and improve your customer services to enhance the customers’ trust. In the highly competitive world of ecommerce, every customer expects better customer service. You should identify the touch points where you can have some interaction with your customers, understand their needs, and provide better service.

Lack of Personalization

Personalization is another important aspect of any ecommerce business. Many ecommerce businesses lack this practice and lose important customers due to their inability to provide a customized experience for each individual customer.

Solution: Personalization is a process to understand your clients’ experience in your online store and based on this, create special offers for them. Show them the best product recommendation or send them personalized email. Those practices will help your customers interact with your store more frequently and increase their loyalty to your brand.

Ignoring Customer Feedback

Ignoring customer feedback is a big mistake and can lead to the loss of valuable customers. It will also help you to understand the pain points of your customers and deliver better services.

Solution: Use a software to collect all the feedback at one place and check them regularly. Eg, using a form builder, one can effectively and efficiently collect customer feedback for desired improvements.

Not Rewarding Loyal Customers

Not rewarding your loyal customers on time can cause their trust to diminish, damaging your reputation and causing loss of business.

Solution: You should make a process for rewarding your customers in a timely manner. Loyal customers are the backbone of your ecommerce business and by rewarding them, you are showing your gratitude toward them.

Paying More Attention to New Customers

Paying too much attention to new customers can cause issues because you may not be paying enough attention to your loyal customers.

Solution: You should ensure that you are paying equal attention to your new and loyal customers. This is the best way to create a balanced process for attracting new customers and rewarding loyal customers. We must understand that we need new customers regularly to convert them into loyal customers.

Ecommerce business owners should calculate these metrics to understand the customers’ behaviors in their online store. Find them below:

Customer Retention Rate

First, understanding the customer retention rate and making a strategy to improve it can help you to grow your customer base. Check out the formula for calculating the customer retention rate:

Customer Retention Rate = (Number of Customers at End of Period – Number of New Customers Added During Period) / Number of Customers at Start of Period x 100.

Repeat Purchase Rate

It is another important metric to calculate and it will help an ecommerce business to understand customer loyalty. Check out the formula to calculate repeat purchase rate:

Repeat Purchase Rate = (Number of Customers who Make a Second Purchase / Number of Customers at the Start of Period) x 100.

Customer Lifetime Value (CLV)

This metric helps ecommerce businesses to calculate the revenue generated by a customer over a specific time period.

Customer lifetime value (CLV) = Customer value x Average Customer Lifespan

Customer Churn Rate

It calculates how many customers an ecommerce business lost during a specific time period.

Customer Churn Rate = (Number of Customers at Start of Period – Number of Customers at End of Period) / Number of Customers at Start of Period x 100

Net Promoter Score (NPS

A measure of customer loyalty and likelihood to recommend a brand.

NPS = % promoters – % detractors

Those metrics are very important to understand customer retention and loyalty. It is essential for ecommerce businesses to track them regularly to monitor customer satisfaction and make improvements as needed.

AiTrillion is a customer insight platform offering a customizable loyalty reward program for Shopify store owners. We understand the need for an ecommerce business and help them create an engaging customer loyalty program to boost their online business. We know how to help ecommerce brands increase customer retention and drive repeat purchases through personalized rewards and incentives.