The Importance of Customer Retention in Ecommerce: Strategies for Improving ROI Through Loyal Customers

Customer retention is the key to improving return on investment for Ecommerce businesses. Check out how you can engage your loyal customers to have great customer retention rates. 


Customer Retention Loyal Customers

Image Source: Vecteezy


Sales people and marketers are concerned about the rising acquisition costs across the ecommerce industry. Businesses of all shapes and sizes often make new customer acquisition a major part of their business strategies. However, one great way to improve ROI is to focus on customer retention strategies.


Have you ever wondered why some ecommerce businesses seem to have a never-ending stream of loyal customers, while others struggle to retain even a fraction of their customer base? The answer lies in the importance of customer retention. 

Customer Acquisition Costs vs Customer Retention Costs – Which One is Higher 

Customer Acquisition Cost > Customer Retention Cost


The cost of retaining an existing customer is less than acquiring a new customer, here’s why:


Retaining your existing customers requires less budget because they always trust the brands they are familiar with. Customers spend 57% more money on the brands they trust and are loyal to.


Whereas, the acquisition cost is higher due to the fact that all the costs of the sales funnel add up from product awareness to the closing of the sales. It includes costs invested in improving brand awareness, providing discounts, and showing the product’s usefulness. It takes a lot of costs and effort to convert a new customer that includes, 

  • Referral fees
  • PR
  • Website
  • PPC
  • Social media campaigns
  • Events
  • Web3 Developers
  • Email campaigns, etc


These all costs add up making customer acquisition more expensive than retaining the new ones. In fact, the cost of acquiring new customers is five times higher than the cost of retaining existing customers. 

How to Measure Retention Rate

Retention rate refers to the percentage of people who buy from you over a specific period of time, and are loyal to your brand. 


Measuring the retention rate is crucial to design a great customer retention strategy. We have sourced this graphic from ZenDesk that clearly mentions how to measure retention rate, and a few other parameters like customer churn rate, customer lifetime value, and purchase frequency rate, etc that are crucial to designing a great customer retention strategy.  

measure customer retention rate


How much retention rate is good?

Ideally, a great retention rate would be 100%. For the ecommerce industry, the minimum retention rate should be at least 35%. However, the retention rate varies across business types. 


In this article, we will explore the strategies that Ecommerce businesses can use to improve ROI through loyal customers and highlight the importance of prioritizing customer retention. 

Importance of Customer Retention in Ecommerce

Customer retention is vital for the long-term success of any ecommerce business. Here are some reasons why customer retention is important for ecommerce:

  • Acquisition cost is higher because you have to invest money from the awareness stage to the action stage of the sales funnel
  • When you lose a customer, you lose its lifetime value 
  • It’s cheaper to market to existing customers because they are already familiar with your products
  • 65% of the revenue of an ecommerce business comes from existing customer


Repeat customers generate more revenue

Retaining existing customers is a proven way to boost revenue. According to research by Bain & Company, increasing customer retention by just 5% can increase profits by 95%. This is because loyal customers are more likely to make repeat purchases and spend more money over time.


Acquiring new customers can be expensive, and it can take a lot of time and effort to convert a new customer. In contrast, retaining existing customers is often much more cost-effective, as they are already familiar with the brand and have a higher likelihood of making a purchase.

Higher customer lifetime value

By retaining customers, ecommerce businesses can increase their customer lifetime value, which is the total amount of money a customer is expected to spend over their lifetime. A study has shown that returning customers spend 67% more than new customers.

Competitive advantage

In today’s competitive ecommerce landscape, customer retention can be a key differentiator. Businesses that are able to retain customers and build loyal relationships are more likely to stand out from the competition and succeed in the long run.

Brand advocacy

Loyal customers are more likely to recommend a business to others, which can help to increase brand awareness and attract new customers. According to research by Temkin Group, loyal customers are five times more likely to forgive a company for a mistake than new customers.

Strategies for Improving ROI Through Loyal Customers

Improving return on investment (ROI) through loyal customers can be achieved through a variety of strategies, including

Exclusive Promotional Emails

Sending exclusive promotional emails is a popular marketing strategy that can significantly improve ROI through loyal customers. By crafting targeted emails that offer unique promotions and discounts, businesses can encourage their loyal customers to make repeat purchases and even refer their friends and family to the brand.


Example: Starbucks Rewards is a loyalty program that rewards customers for making purchases at Starbucks. Members receive exclusive offers and discounts via email, as well as free drinks on their birthdays and other perks.


Create A Clever Social Media Strategy 


Social media platforms are where customers interact with brands the most, and having a solid strategy in place can help brands retain existing customers and attract new ones.


To create a clever social media strategy, it’s important to understand your target audience and their preferences. By understanding your audience, you can tailor your social media content and messaging to better resonate with them, leading to increased engagement and loyalty.


Example: Frank Body, a skincare brand that shows appreciation for their customers is by sharing content created by them on its Instagram profile. This user-generated content (UGC) is reposted as a way to show that the company values its customers.

customer appreciation



Personalize Communication Wherever Possible


Personalized communication involves tailoring marketing messages, offers, and experiences to suit individual customers’ needs and preferences, based on data collected from various sources. By doing so, businesses can create a more engaging and relevant customer experience, which in turn fosters brand loyalty and increases customer retention rates.


Example: Hallenstein Brothers, a men’s fashion brand that sends out personalized emails to its subscribers, which are tailored to the individual’s browsing and purchase history.

purchase history


Double Your Focus on Customer Service 

Great customer satisfaction is the key to build irresistible brands. By focusing on customer service, companies can create a loyal customer base that will not only continue to do business with them but also refer others to their products or services. This can ultimately lead to a higher ROI and a more successful business.


Example: Shady Rays, a sunglasses brand, sends out a thank you email and lets the customer know that their purchase has resulted in 10 meals being donated to fight hunger. By doing so, Shady Rays is able to highlight its commitment to social responsibility and make the customer feel good about their purchase. 

customer satisfaction



Curious about customer service best practices? Here’s how you can provide excellent customer service by relying on empathetic responses and statements  in customer interactions. 

Simplify Customer Account Access


Make your buyer’s journey easy and simplify it. If you provide a great experience, they will always come back to you. By making it easier for customers to access their accounts, companies can increase customer satisfaction and reduce frustration, ultimately leading to increased loyalty. This can be achieved through various means, such as implementing single sign-on (SSO) technology, improving user interfaces, and providing clear and concise instructions for accessing accounts.


Example: Amazon has made it easy for customers to access their accounts by implementing features such as one-click ordering, personalized recommendations, and easy account management. This has made the shopping experience seamless and convenient for customers, resulting in high levels of customer satisfaction and loyalty.


Initiate A Customer Referral Program


By offering incentives to customers who refer new business to you, such as discounts or exclusive access to special events, you create a win-win situation where both the referring customer and the new customer benefit. This not only encourages existing customers to remain loyal to your brand but also incentivizes them to actively promote it to others.


Example: Seamless provides the best example of utilizing referral programs to boost revenue and enhance customer loyalty.

referral programs



Send A SMS With Coupon Codes


SMS marketing is a direct and immediate way to communicate with customers, and coupon codes can incentivize them to make a purchase. By offering loyal customers exclusive coupon codes through SMS, they feel appreciated and valued, leading to increased customer satisfaction and loyalty. Moreover, since SMS has a high open and read rate, coupon codes sent through SMS are more likely to be redeemed than those sent through other channels.


Example: GREATS, an eCommerce sneaker brand, incorporates the use of SMS messaging as part of their abandoned checkout follow-up sequence.

sms coupons


Design an Effective Customer Onboarding Program


The onboarding process is the first impression that a customer has of a brand, and it can greatly impact their future loyalty to the company. An effective onboarding program should focus on creating a positive experience for the customer, providing them with the necessary information and resources to use the product or service, and building a relationship with them.


Example: Birchbox, a company that offers subscription boxes for beauty and grooming products, sends out an email detailing what subscribers can expect to receive in their next box.


Introduce A Customer Loyalty Program


By implementing a customer loyalty program, you can build stronger relationships with your customers, increase customer satisfaction and retention, and ultimately boost sales and revenue. These  loyalty programs are effective because they create a sense of exclusivity and belonging among customers. When customers feel like they are part of a special group, they are more likely to continue doing business with your brand.


Example: Sigma, a beauty cosmetic brand, has a great example of a customer loyalty program name ‘Pink Perks’ in eCommerce. 

customer loyalty programs


Conduct Survey To Identify Areas For Improvement 


Conduct a survey to gather information about the customers’ experiences with the company’s products or services, their satisfaction levels, and their loyalty towards the brand. Then, analyze survey results to identify areas that require improvement, such as customer service, product quality, pricing, or marketing. 


Before conducting a survey, it’s important to define what you want to achieve through the survey. For instance, do you want to know how your customer support staff is performing?


The Final Thoughts 

Designing great customer retention can help you have an irresistible brand. It is clear that customer retention is not just about making sales but also about building trust, loyalty, and advocacy among customers. Therefore, it’s essential for ecommerce businesses to prioritize customer retention and invest in the necessary strategies to keep their customers coming back for more. By doing so, they can improve their ROI and enjoy long-term success in the competitive ecommerce landscape.