By Alex McEachern, from HubSpot Marketing Blog – http://bit.ly/1COqzbG

A study in the Harvard Business Review showed that increasing customer retention by 5% can lead to a 25% – 95% increase in profit. But what is customer retention, and how do you increase it by 5%?

Customer retention is the act of getting more of your customers to stay loyal to your brand or business. A successful customer retention strategy turns one time shoppers into loyal, repeat purchasers that buy more, more often.

A customer retention strategy will boost your profitability while encouraging repeat business that drives a sustainable long term business model. Here are 5 tools you can use on your ecommerce site.

1) Loyalty Programs

Best for stores with repeat purchasability

A loyalty program is a fantastic way to boost customer retention. When a shopper is given additional value (like points) for shopping at your store, it becomes much more difficult to choose a competitor for their next purchase. Points create a switching cost. If a customer moves to a competitor, they will be leaving money (points) on the table.

Ecommerce loyalty programs allow you to reward more than just loyalty. You can reward points to drive other profitable actions like reviews, referrals, and social sharing. Points are often used to mask the true value of what you are rewarding. For example: you may be willing to pay 3 cents for a share on Facebook, but 30 points is a stronger motivator for your customer than 3 cents.

Who should use it: I generally recommend a loyalty program like Sweet Tooth to retailers with around 10% margin, or higher. Loyalty programs work best for retailers who have products that are purchased regularly (a couple times a year). Industries like fashion, supplements, and pet supplies are all great examples.

2) Gamification

Great when you are targeting a young audience

The application of game mechanics is not just for mobile apps and video games anymore! You can get the power of gamification working for your customer experience and purchase process. With gamification you are encouraging shoppers to complete actions by making it more enjoyable and adding a sense of competition.

Sites that incorporate gamification often have leaderboards, status, and badges so shoppers can showcase where they stand relative to others. Gamification is great because it can be incorporated into other things like promotions and even loyalty programs.

Who should use it: Gamification works well for retailers with a demographic that is familiar with game mechanics (usually a younger demographic). It also works very well when used in tandem with a loyalty program.

3) Personalization

Should be used by every merchant

Personalization allows you to increase customer retention through more relevant and tailored experiences with the brand. Personalization requires you to collect data about your customers that you can later use to to make recommendations and tailor promotions to each customers individual needs. There are a few ways to use personalization.

An example of this is Bodybuilding.com, they take all your previous purchase information and make product recommendations based on what you like and the product you are currently looking at. Another example is U.S. Patriot Tactical – they made their homepage “smart” and it provides relevant offers and click through opportunities based on the interests of their contacts.

A simple way to use personalization to increase customer retention is through email. Many email service providers allow you to mark emails with personalizations such as name and company. When a shopper is addressed by name with content they care about, they will be much more loyal to you and your store.

Who should use it: A total personalization strategy is something to work towards, but simpler tactics like email personalization should be used by every store owner!

4) Support Systems

Very useful for technical products

Support systems are anything added to your site to improve customer service and satisfaction. These systems could be help desk software like Zendesk or Freshdesk or live chat software like Olark or Zopim. All of these support systems allow you to resolve customer issues and conflicts quickly and efficiently, which provide a few key benefits.

The first benefit of support systems is that it provides a one on one experience. You can easily address customer issues and quickly get things resolved. A quickly resolved conflict can actually create a lifelong customer. Secondly, live chat software allows you to engage with customers in real time. Shoppers don’t want to wait, live chat is a direct and real time connection to your customer. Customer connections lead to retention!

Who should use it: These support systems are great for retailers who have a technical product that may require some explaining. It is also effective for retailers selling items that need to be installed. These systems are good if your customers need additional information or instruction.

5) CRM

Amazing for subscription model businesses

CRM is a tool used to increase satisfaction by keeping track of a customer’s entire journey. A CRM tool is used in tandem with other tools on this list to provide a total customer retention strategy. You can use your CRM to track which customers have received which badges with your gamification tactics or which customers have earned points in your loyalty program.

A CRM has many operational benefits, but it also can help with customer retention. When all customer information and interactions are stored in one place, it becomes much easier to provide an amazing customer experience (the backbone of a total retention strategy).

Who should use it: Retailers who have an established customer acquisition process, and have several interactions with each individual customer. A CRM works very well for industries with high customer lifetime value and are particularly effective for subscription based ecommerce retailers.  

A Customer Retention Strategy

Profitable for all ecommerce merchants!

Customer retention is the future of ecommerce! As more and more merchants start to sell online it will become harder and more expensive to acquire new customers, making retention even more important. Ecommerce merchants that focus on customer retention will be more sustainable and more profitable than those focused on always acquiring new customers.