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Improve Your Ecommerce Customer Retention Rate

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Last editedJan 20232 min read

Your ecommerce website attracts a steady stream of new customers, but do they come back for more? Customer acquisition costs are high, so it’s worth investing your time and money in retaining an existing client base. The first step is to assess how you’re doing by calculating your ecommerce customer retention rate.

What is ecommerce customer retention rate?

The customer retention rate simply refers to the number of customers your ecommerce business retains over time. This is expressed as a percentage of total customers. The higher your retention rate, the better you’re doing with customer satisfaction and loyalty. Loyal customers lead to repeat business and even free word-of-mouth advertising, so it’s worth finding ways to improve your ecommerce customer retention rate over time.

What is the average customer retention rate in ecommerce?

Once you’ve calculated your customer retention rate, how do you interpret this figure? Retention rates vary widely by industry, so what is the average customer retention rate in ecommerce? According to Omniconvert, the average customer retention rate hovers around 30%. Experts at Blyp estimate this figure to fall between 30% and 40%, for a 35% average. If your rate is higher, you’re doing better than average.

How to calculate customer retention rate in ecommerce

Before you can figure out how to calculate customer retention rate in ecommerce, you’ll need to decide what period you’re analyzing. This could be a month, series of weeks, financial quarter, year, or another custom timeframe. You can then use the following customer retention rate formula:

Customer Retention Rate = [(E-N)/S] x 100

  • E = The total number of customers at the end of the period

  • N = The total number of new customers added during the period

  • S = The existing number of customers at the start of the period

Here’s an example of how that might work. Imagine that your ecommerce business starts the month with 500 customers and ends the month with 600 customers, while gaining 300 new customers.

  • E = 600

  • N = 300

  • S = 500

[(600-300)/500] x 100 = 60%

Your customer retention rate is 60%, which is higher than average and considered a good figure. You’ve managed to retain 3 out of 5 of your existing customers, while gaining new ones at the same time.

How to improve your ecommerce customer retention rate

If your customer retention rate is less than satisfactory, what recourse do you have? Fortunately, there are many strategies to try. Here are a few tips to help you improve your ecommerce customer retention rate.

  • Set up a customer loyalty program. Customers are far more likely to come back for repeat purchases if they’re offered incentive to do so. Start a loyalty or rewards program to boost engagement. Give away freebies, offer special discount codes, or create unique product bundles for existing customers.

  • Create a great omnichannel customer experience. The customer should enjoy a seamless journey across all channels, including your social media profiles, website, and mobile app. Focus on designing a user-friendly website and check in with customers for post-purchase feedback.

  • Personalize all customer communications. When someone signs up for your mailing list, use their name. Today’s email marketing tools can analyze buyer behavior and trends to customize all messages to best suit the shopper’s needs.

  • Be social on multiple platforms. Ecommerce shoppers are a savvy bunch, so go beyond email marketing to reach out to your customers across their social platforms of choice. A clever social media feed with fresh content keeps them interested.

  • Finally, don’t neglect the importance of the checkout experience. A clunky checkout page is a turnoff to customers, as is a website that doesn’t feel secure. Be sure that you cater to as many payment preferences as possible, going beyond credit and debit cards to include Buy Now Pay Later, digital wallets, and other alternative methods.

GoCardless offers a convenient way to collect recurring payments using ACH direct debit, ideal for subscription services. Ecommerce businesses can also take one-off payments with our Instant Bank Pay feature, powered with open banking for security and convenience. By offering an array of payment options alongside these other tips, you’ll help give your ecommerce customer retention rates a boost.

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Over 70,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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