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6 Powerful Customer Retention Strategies for Online Businesses

Sam Allen

A common mistake among online business owners is focusing their marketing and promotional efforts strictly on new customers. While customer acquisition is essential for a business’s long-term success, retaining existing clients is arguably even more important.

According to the Harvard Business Review (HBW), the cost of acquiring a new customer is between five and 25 times higher than the cost of retaining an existing customer. Furthermore, research conducted by Frederick Reichheld of Bain & Company suggests that increasing customer retention rates by just 5% yields 25% to 95% higher profits.

So, if you’re the owner of an online business, consider the following customer retention strategies.

1) Send Personalized Emails

Assuming you have customers’ names and email addresses, you can foster stronger relationships and subsequently increase your business’s customer retention rates by sending them personalized emails. A study conducted by Experian Marketing Services found that personalized emails generate 600% more conversions than non-personalized emails, but fewer than 1 in 3 businesses use them.

To create personalized emails, address the customer by his or her name instead of a generic “Dear sir/madam.” A client who sees his or her name in the message will feel more inclined to take action.

In addition to sending personalized sales emails, you can also send personalized non-promotional emails. If you know your customers’ date of birth, for instance, send them a happy birthday email, either with or without an exclusive offer. Little things like this make a business stand out from its competitors.

2) Ask for Feedback

Research shows that 96% of unhappy customers don’t complain. If you don’t know when a customer is dissatisfied, you won’t be able to resolve the issue and keep his or her business. A straightforward and practical solution is to use feedback surveys.

Feedback surveys can provide you with invaluable insights into how customers perceive your business and whether they were satisfied with their order. Using this information, you can make the necessary changes to improve customer satisfaction. If a customer was happy with the product but dissatisfied with the shipping, for instance, you should consider using a new shipping provider or offering different delivery options.

Here are some best practices to follow when creating and using customer feedback surveys:

  • Send feedback surveys via email, not regular mail.
  • Wait for one to two weeks to send customers the survey.
  • Avoid long, drawn-out surveys. Ideally, customers should be able to complete your survey in under five minutes.
  • Offer incentives, such as a 10% off discount, to encourage customers to complete the questionnaire.
  • Avoid asking for specific responses; use a multiple choice or a scale of 1 through 10 instead.
  • Thank customers at the end by telling them their input is highly appreciated.

3) Implement a Loyalty Rewards Program

A loyalty rewards program is a powerful customer relations tool that can help boost your business’s customer retention rates. Rewarding clients who continue to make purchases or interact with your business by giving them store credit, free products, special discounts or some other inventive is always greatly appreciated.

According to a survey conducted by TechnologyAdvice, 80% of consumers are more likely to shop at stores that offer a loyalty rewards program than stores without a loyalty program. Which is hardly surprising, loyalty rewards programs are a great way for shoppers to save money by sticking with their favourite brands.

There are dozens of ways to create a loyalty rewards program, one of which involves a point system. The online shoe and apparel retailer Zappos is known for its lucrative point-based reward system. Zappos customers earn points for making purchases, logging in to their account and writing reviews, which they can redeem for discounts. Every 1,000 Zappos Rewards points are redeemable for $1 store credit.

4) Cross-Sell Products

Another effective customer-retention strategy is cross-selling, by offering specific products to customers based on what they’ve already purchased or otherwise expressed interest in. If a customer buys a new TV, for instance, he or she may also be interested in a wall mounting kit and soundbar. Or if someone buys a dog grooming brush, he or she may also be interested in dog shampoo.

You can cross-sell products directly on your website as well as your email messages. To create an effective cross-selling strategy, however, you need to collect data on consumer behavior. Install analytics software on your business’s website to track customers throughout the sales process, checking to see what products they view, how long they spend viewing them, and which products they ultimately purchase.

5) Offer Exceptional Service

You can’t expect people to stick with your business if they are unhappy with your service. For many, service is even more important than price. If you go above and beyond to ensure customers are happy and any problems are handled in a friendly manner, you’ll have an easier time retaining customers.

On the other hand, bad service can be disastrous to your business. According to research from NewVoiceMedia, businesses lose approximately $62 billion per year because of inferior customer service. And a survey conducted by American Express indicates that 60% of consumers who experience bad service share it with others.

Follow these tips to improve your online business’s customer service:

  • Resolve customer complaints promptly whilst also offering some unexpected reward or incentive.
  • Whether you’re engaging with customers on the phone, through email, online chat or elsewhere, make sure they are satisfied.
  • Use feedback surveys to identify problematic areas of your business’s customer service.
  • Weave customer service into your business’s core values.
  • Make yourself available by offering multiple ways for customers to contact you.

6) Engage with Customers on Social Media

Social media is instrumental in maintaining a high customer retention rate. In fact, a survey conducted by Loyalty 360 ranked social media as the single most effective platform for customer retention. Using social networks such as Facebook and Twitter, you can engage directly with your business’s clients in a public and transparent environment.

There are several ways you can use social media to retain customers, including handling complaints, responding to questions and even thanking them for their purchase or comment.

When a client posts a message on your Facebook Page, for instance, take a moment to send a friendly and helpful response. Whether they are asking about a particular product or just dropping in to say hi, a response shows you care.

It’s nearly impossible to achieve a 100% customer retention rate — and that’s OK. As long as you focus on improving this metric, you’ll place your business miles ahead of its competitors.