Author: Chris Pearson, Partner & Email Marketing Specialist at 3BM
Retaining customers is crucial for any ecommerce brand’s long-term success.
But many owners and fractional CMOs rely too heavily on surface-level metrics like repurchase rate and churn rate to gauge retention.
The problem is these metrics don’t expose the full truth.
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Without a deeper understanding of customer behavior, you run the risk of huge problems down the line.
Missed opportunities to increase lifetime value.
Failure to identify and re-engage at-risk customers before it’s too late.
Wasted marketing budget on ineffective retention tactics.
The costs of getting customer retention wrong are extremely high.
What’s scary is you could be looking at metrics right now thinking everything is fine, while serious issues brew under the surface.
By the time problems become visible in surface metrics, massive damage will already be done.
The time to take action is now, before churn sets in.
You need to look beyond the superficial retention metrics you’re tracking today.
Dig into the hard truths and hidden factors that ultimately drive customer loyalty and lifetime value.
Apply that understanding to improve your targeting, messaging, and retention strategies across the board.
In this post, we’ll explore some of the key customer retention pitfalls that surface-level metrics often miss.
You’ll learn techniques to capture a more complete picture and accurately assess customer loyalty.
Most importantly, you’ll get actionable tips to start properly identifying, segmenting, and re-engaging at-risk customers to maximize retention.
The insights you uncover could make the difference between struggling to retain customers versus building an army of loyal brand advocates.
Let’s dive in…
The Truth About Customer Retention
High Repurchase Rate
While a high repurchase rate is typically a positive indicator of customer satisfaction, it doesn’t always guarantee future retention.
If the repurchases are driven by short-term incentives or discounts, customers may not stay loyal once these incentives are gone.
Moreover, a high repurchase rate without a corresponding rise in CLV might indicate that customers are only buying low-margin items, which could be problematic for long-term profitability.
Customer Lifetime Value (CLV)
A high CLV suggests good customer retention, but achieving it is complex.
It requires understanding and predicting customer behavior over time.
Problems arise if the data informing CLV is inaccurate or if there’s an over-reliance on historical data without considering changes in customer preferences or market dynamics.
Additionally, if the focus is too much on high-CLV customers, a business may neglect smaller but potentially loyal customer segments that can add to the bottom line OR become high-CLV customers.
Low Churn Rate
A low churn rate is generally favorable for customer retention, but it doesn’t reveal the full picture.
For example, a low churn rate could be misleading if the overall number of customers is small or if the company is not acquiring new customers at a sustainable rate.
It could also mask segments of customers who are at risk of churning but haven’t yet, possibly due to a lack of competitive alternatives or high switching costs.
Understanding your customers beyond their relationship with your brand is important.
Positive Customer Reviews and Ratings
These are strong indicators of customer satisfaction; however, they can sometimes be an unreliable metric for predicting retention.
Not all satisfied customers leave reviews, and those who do might not represent the broader customer base.
There’s also the risk of fake reviews, which can distort the perception of customer satisfaction.
Plus, even satisfied customers can be enticed away by competitors’ offers.
Effective Loyalty Programs
While loyalty programs are designed to enhance customer retention, they can have limitations.
If the rewards are not perceived as valuable or relevant, or if the program is too complex to understand, customers may not engage with it.
Over time, the impact of a loyalty program can diminish if it is not regularly refreshed and if it does not evolve with changing customer expectations.
How to Improve Customer Retention and Lifetime Value with Email
Email strategies are designed to foster a closer relationship with customers, personalize their experience, and maintain engagement over time, which are all critical factors in addressing the common challenges of customer retention.
Here’s how:
At-Risk Customers
By focusing email efforts on at-risk customers, you can proactively address one of the issues with churn rate.
Triggered emails can be a solution to engage customers who may otherwise leave, directly tackling the problem of retaining customers who are not consistently engaged.
For example, a segment can be created for customers who open emails, don’t click through, and have not placed an order over the last X days.
This segment lets you know these customers are not buying, and you can trigger a flow to address them directly and reconnect.
Personalization
Personalization in emails can combat the issue of irrelevant loyalty programs and generic customer engagement, which might not resonate with all customer segments.
By targeting emails based on customers’ specific interests and behaviors, you can enhance the perceived value of your communications and offers, making them more effective at retaining customers.
What’s more, segment your list based on behavior + product benefits.
For example, segment your list to show a group of people who have placed an order on a pair of athletic shorts in the last 30 days AND has viewed athletic t-shirts in the last 30 days, but has not placed an order on a t-shirt.
This nifty little segment allows you to see behavior of your customers AND create opportunity to discuss the benefit of having a “full set” of athletic clothing from your brand.
List Segmentation and Targeted Offers
This strategy ties into the potential problem of a high repurchase rate that doesn’t translate into a high CLV.
By using list segmentation to offer targeted upsells and cross-sells, you can increase the profitability of each customer, ensuring that the repurchase rate correlates with a high CLV.
What does this upsell and cross-sell look like?
- List out all of your top sellers
- List out all of the directly related and indirectly related products to those top sellers
- Connect the products in follow up email through benefit and reason-why copy.
You’re essentially mapping out a path from your customers current undesired state to their future desired state–your products are the bridge/path/trail to that future.
Warm Welcome Emails
The issue of positive reviews not translating into retention can be mitigated by establishing a strong initial relationship with customers through warm welcome emails.
A positive onboarding experience can lead to higher customer satisfaction and potentially prompt more positive reviews and higher retention.
The last thing you want your potential customers to feel is like a transaction.
Many brands miss the boat on this and focus primarily on “getting the sale,” but…
There is a way to sell through value and not discounts or deals.
The brands that sell through value are developing deeper, more meaningful relationships with their customers over time.
A dangerous, but often promoted strategy with email, is the “churn and burn” strategy.
Get as many sales as possible from your list before they leave, because they eventually will.
Combine this with a huge effort to grow the list to outpace list churn.
Does this model work?
Yes, but…
This way of “doing business” is exhausting, draining, and slightly abusive to your subscribers, customers, and market.
If all you’re doing is “extracting dollars out of email addresses,” you’re in for a hot crash and burn when you hit market saturation.
If you sell through value… and focus on developing some kind of emotional connection with customers, then you’re able to keep them around for longer and increase their value to your brand, as well as increase the positive impact in their lives.
And, yes, you can (and should) sell in your warm welcome series.
Do it through value (trust) and not discounts (transaction).
Leverage Best-Performing Campaign
The problem of effective loyalty programs becoming stale is addressed by recycling best-performing email campaigns.
By reusing successful elements, you can maintain a high level of engagement and keep your loyalty offerings fresh and appealing.
Once you know your customer’s problems, challenges, pains, fears, goals, desires, and more…
You’re able to test and iterate on your offers and messaging until you find the “message combination” to unlock trust.
Once you unlock trust, recycle those emails and send them again.
You can also use those emails, modified slightly for the platform, across paid, social, organic, and more.
The game isn’t about “being everywhere, all the time, all at once…”
It’s about putting out the appropriate message to the ideal audience at the right time in THEIR journey to solve/remedy their problem/concern.
Brute forcing your product into a market only gets you so far, before the market ignores, pushes back, or actively attacks.
The “all the time, everywhere, at once” strategy is only half the effort.
The other half has to do with what works and what doesn’t for your audience to pay attention, take action, and buy.
Continuous Engagement
Regular, valuable emails can keep the brand top of mind and help sustain a long-term relationship, which is critical for retention and lifetime value
What does “valuable” mean in this context?
Here’s what:
- Entertainment
- Education
- Empowerment
- Your Products
Notice how discount, deal, or promotion didn’t make the list?
In the US alone, people spent:
- $5.99 billion on movies.
- $2.68 billion on education.
- $13.4 billion on self-help.
These three categories alone show us over $22 billion spent in entertainment, education, and empowerment.
And these are only three sub-categories!
So, when it comes to sending “value” to your list, a discount, deal, or promotion ought to be the last tactic on your list to try.
If you sell a great product that gets results for customers, then communicating that “value” is the aim, not offering people a percentage off or store credit to give it a try.
A little counterintuitive, I know, but to play the “infinite game,” it’s about trust, not transactions.
What did you learn?
- Monitor repurchase rates along with Customer Lifetime Value (CLV) to get a full view of retention. High repurchase alone doesn’t guarantee loyalty.
- Personalize communications and offers based on individual interests and behaviors to enhance perceived value. One-size-fits-all programs often fail.
- Segment your list and make targeted upsell/cross-sell offers to increase customer profitability.
- Establish an excellent onboarding experience with warm welcome emails to set the foundation for a lasting relationship.
- Refresh your loyalty program regularly with new, appealing offers based on past successes. Don’t let it become stale.
- Send valuable, entertaining and educational emails on an ongoing basis to sustain engagement over time. Avoid over-relying on discounts.
- Identify at-risk customers based on behaviors like lack of purchases or engagement and trigger reactivation campaigns.
- Map out the customer journey from problem to desired solution. Position your product/service as the bridge to help them get there.
- Once you find messaging that establishes trust, recycle and repurpose it across channels. Trust opens the door to sales.