Understanding E-Commerce Customer Retention

The Best Approach – Proactive E-Commerce Customer Retention

Alright! Let’s talk Customer Retention. It’s a known fact retaining current clients costs a lot less than paying to gain new ones. In this post we’ll walk through strategies and tactics for understanding and retaining your ecommerce customers. Let’s go!

Your business is always going to have a healthy number of customers who “churn” or stop purchasing BUT, in times like today where competition is getting hotter and the big players steal customers like a wolf in the night, it’s super important to identify:

• who your customers are,
• where they are coming from,
• where they’ve been (on your site), and;
• how to delight the hell out of them for future retention.

Who Are Your Website Users and Customers?

Right now you most likely have 3 – 4 types of users on your ecommerce website or customers in your database. Let’s walk through who they may be, how to understand them better, and some retention loyalty strategies.

1. The Passerby or Unengaged User

This user has a complex called “High Bounce Rate.” This is someone who has hit 1 or maybe 2 pages on your website and left, never to be seen again. You don’t want to spend a lot of time on understanding who this user is and why they bounced but rather look at where they came from – your referral traffic. If you are paying for ads and you have a high bounce rate, you have a problem. If you have “sketchy” referral sites sending you traffic, you may want to block this traffic and clean up your analytics.

Four quick(ish) action items to understand these ‘potential’ customers:

• Clean up your referral traffic in Google Analytics by blocking any referrer sending invaluable traffic.
• In Google Analytics, get a grasp of which pages have the highest bounce rate. You can quickly get to this data under “Insights.”
• Install HotJar or another heat map tracking tool to observe user behavior. You can segment traffic in HJ to only view videos where users have only hit 1 or 2 pages. Look for trends or friction points as the user navigates the site and then bounces.
• Prioritize an action plan to resolve any major challenge your users may be experiencing.

2. The Researcher or Comparison Shopper

These potential customers do their due diligence to compare and contrast pricing and product offering before making a decision. They want the full picture and it’s important to give it to them without focusing solely on them. The Engaged User when they do tend to convert or buy, end up being great loyal customers. These users tend to give you a ton of data on which content users engage with before conversion.

To better understand your user’s research journey consider looking at what the data says. Three quick(ish) action items to help better understand and convert researchers:

• Spend some time in “Behavior Flow” within Google Analytics. Look at what pages your users are visiting and where they are dropping off.
• Set up similar “Funnels” in HotJar and look at where friction lies in the user journey and compare and contrast it with what you see in Google Analytics.
• Using Google Optimize, design and set up A/B testing to start working on converting researchers into loyal customers. Conversion rate optimization can be magical.

Research Fact: “72% of users coming from paid ads move past the initial landing page and digest 2-3 more pages before getting back into the sales funnel.”

Up to this point we’ve focused on understanding quantitative data, now let’s marry quantitative with qualitative to understand the next two customers.

3. The One-Time Shopper

You get it, they purchased once only to never purchase again. Well that’s just sad. It’s really important to understand the reason behind why someone converted once and didn’t continue supporting your business.  Understanding this behavior starts with data but really goes beyond analytics and heat mapping. For these customers the user experience wasn’t the problem, they made it to the end goal. The biggest question here is, “how was the customer experience?”

Two action items to help understand the sentiment and “the why” of the One-Time Shopper:

• Design a Customer Feedback Study or poll with questions to understand why these customers haven’t returned. If your business is tied into an email marketing platform or CRM this type of tool should be included. If you don’t know where to turn, we’ll be glad to introduce you to our partner, SharpSpring. They make it easy to poll customers with the Survicate tool.
• Set up a simple email marketing plan to follow up with these customers. Based on their answers to the customer survey you could set triggers to segment customers into different email campaigns.

Designing a User Feedback Study and action plan could help you understand the One-Time Shopper and eventually turn her/him into a loyal customer.

4. The Repeat Customer or Engaged User (who hopefully sings your praises all over the internet)

No need to put any effort into maintaining their loyalty, right? WRONG! Losing a loyal customer is so expensive. Think about what it took to gain their loyalty in the first place and do everything possible to continue that relationship. Delight the hell out of them time after time. Again, designing a User Feedback Study gives your loyal customer a voice and when your customers speak you learn.

There is a ton you can do to retain and grow your loyal customers so stay vigilant to their needs and fulfill them. Here are some examples for retaining your loyal customers:

• Know their purchasing habits. If you have the right analytics and metrics in place you can get this data fairly quickly. Shopify and other ecommerce content management systems have built in tools and plugins you can purchase to get this data.
• Gift them discounts before their next purchase cycle. Consider it a kind unexpected gesture on your part.
• Don’t overwhelm them with too much email marketing content. Be intentional.

Before we get into determining Customer (user) Churn lets repeat one very important thing, the cost of replacing a loyal customer is very high and although cost varies across industry and across companies, when they leave, it’s never a 1 to 1 replacement.

Note: If you would like to explore the importance of creating 1-2 personas for the above user groups, read this Persona article.

Retention, Retention, Retention!

The best model for customer retention is to take an active approach. When it comes to user retention, you can’t base it solely on a small set of your most loyal users, look at a bigger data set and gain a clear picture of your user base in its entirety.

Simply put, churn is the percentage of customers who stopped using/buying your company’s product or service during a certain time frame. For subscription ecommerce businesses this is a lot easier to determine. For non-subscription ecommerce businesses you will need to rely upon repeat purchase patterns to determine what your churn percentage is.

So, how do you get actionable churn data? Here is a simplified version of how to determine the ecommerce customer retention or churn rate through qualitative user research:

1. Watch or gather “user engagement” data over a course of a couple months, maybe several to get the big picture. Determine what user engagement means to your business. It could mean the user is either purchasing or not purchasing what you are selling.
2. Understand your overall product cycle as a whole. Ask yourself, “how often do users purchase our product.” Now take the average as your baseline metric.
3. Set the baseline metric of time that qualifies your users as inactive, this is called customer churn.

Retention is going to be different for every business and this metric is very important because ALL businesses experience churn. For example, a business that sells high-end bags online may qualify as inactive if no activity has happened in 8 months and a business selling cookies online may qualify their customer as inactive if there has been no activity by said customer in 2-3 months or even weeks.

Looking at the data will give you a quantitative view of what is happening and doing email marketing and customer surveys/polls will help you understand the qualitative sentiment of your customers. Customer churn should be a baseline retention metric your ecommerce store uses to put an action plan in place.

It’s time to be proactive! Here are some examples of what a plan could look like before a users inactivity reaches X month(s) of inactivity:

• Design a “Post-conversion Survey” where after a user has made a purchase and hits the “Thank you” page (or the last page of the sales cycle), a poll is embedded or pops up asking if there was any friction in the buying process and other insightful questions. You can do this in HotJar.
• Design and implement email marketing campaigns that would kick in after the initial purchase and before a user reaches X month(s) of inactivity. This is where your baseline metric comes into play.
• Design and send out a “Product Poll” that asks specific questions about why they purchased said product and suggest complementary products.

Each of these examples can have triggers – when user X does Y – send or do XYZ. Always A/B test where you can. You get the idea, be top of mind at the right time for the right customer.

Most importantly, you’ve heard the mantra “People over Product.” The more you connect the dots between your customers (your people) and the entire ecommerce customer experience, the stronger the retention.