Shopify Customer Retention: Why it is important and strategies to improve it

Shopify Apr 07, 2022

Customer retention is essential for any sustainable business model (sustainable in the sense that the business can be profitable over a long period of time, we're not talking about the environment here).

And if there's something we at Opinew want to help our customers do is to build a successful and sustainable business on Shopify. With that in mind, we will explore why it's essential for your business and the strategies that you can use to improve your customer retention.

Table of Contents

  1. Why Customer Retention Is Important
    1.1 Over-Reliance On New Customers Isn't Sustainable
    1.2 Increased Revenue (the bottom line)
    1.3 Increased Value Per Customer
    1.4 Word Of Mouth Advertising
  2. Strategies To Improve Your Customer Retention
    2.1 Finding Churn Rate Moments (and fixing them)
    2.2 Loyalty Programs
    2.3 Provide Good Quality Customer Service
    2.4 Community Building
    2.5 Subscription Programs
    2.6 Customer Reviews
    2.7 Constantly Improve Your Product Or Service

Why Customer Retention Is Important

There are many reasons why customer retention is crucial if you're looking to create a profitable business. In this section, we will explore the main reasons why that is.

Over-Reliance On New Customers Isn't Sustainable

Seeking new customers is essential for growth, and it's something you have to assign considerable effort towards. We're not going to tell you to stop looking for new customers; instead, we're inviting you to look at how many of your customers return to make a second or third purchase and try to improve those numbers for a few key reasons:

Accumulative growth

In order for your business to truly grow, you need to be adding customers to an ever-growing list.

When your customers make exclusively one-time purchases, you're practically starting from scratch each day.

In contrast, they accumulate when you manage to retain customers while you prospect for new ones. Sure, maybe not every customer will come back to you, but the trick is to get as many as you can and expand a list that you'll keep growing.

Lower cost

Generally, it's cheaper and easier to retain customers than prospect new ones. Of course, you have to do both. But it makes sense to cater to customers you already know are interested in your products; they've purchased them once. If you were able to provide a positive experience for them (you delivered their order on time, undamaged, the quality of your product is satisfactory, and you did all that at a reasonable price), you're more than halfway there.

Increased Revenue

If nothing else, do it for the money. How much? That depends, but according to Zendek's What is customer retention? 11 examples and strategies to retain customers, "increasing retention rates by just 5 percent can increase revenue by 25 percent to 95 percent".

There's a big difference between a 25% increase and a 95% increase. That's a fact. But that's not a bad thing; it means that you should focus first on increasing your customer retention, and once you've gotten good at that, focus on increasing their average order value. If you see a huge increase from the start, it means their average order value was already high to begin, and all you needed to do is get them to come back.

Increased Value Per Customer

A customer who regularly purchases products from you is more valuable than one who does it only once. That's clear. So it makes sense that increasing your retention rate increases your value per customer -- as more and more customers are turned into returning customers, the more valuable they are.

And as we just said in the previous section, once you increase your retention rate, work on your average order value and further increase your value per customer.

Word Of Mouth Advertising

When you increase your retention rate, it means mainly one thing: you've increased the number of happy customers with your product.

Happy customers love to talk about the stuff they're delighted about and recommend a product they think is good to someone who will appreciate it. We all do it.

This advertising is highly effective, but it's also very valuable. Customers who come to you from word-of-mouth advertising are easier to retain because they come to you from a place of trust: someone they know told them that you're good business. All you have to do is not mess it up.

Strategies To Improve Your Customer Retention

Now it's time to explore strategies to increase your customer retention rate. We'll be making a few assumptions about your business, such as:
(1) what you're selling doesn't last a lifetime
(2) it's a product or service that solves a problem or adds value to the customer's experience because without these two factors, it would be almost impossible to achieve customer retention.

Finding Churn Rate Moments

Churn rate is the rate at which customers stop doing business with a company over a given period of time. That means this number represents the customers you don't retain -- in other words, that you lose. High numbers are bad, and low numbers are good.

So what do we mean when we say "finding churn rate moments"? You should identify the moment you're losing these customers and try to fix that part of their customer journey. Think of it as a leak; you want to seal it!

It may be a small thing like some nuisance while inputting their payment method, or something more complicated like bad customer service. Identifying it is the first step. Fixing it is the second one.

If you want to learn more about churn rate and churn revenue, check out salesforce's How To Calculate Customer Churn Rate and Revenue Churn Rate

Loyalty Programs

Rewards, referrals, or any loyalty program will help you entice your customers to return and earn some benefits for doing so. It's also a good way to show your customers that you appreciate their business.

If you're not using any app that helps you manage loyalty programs on Shopify, you should check out RAHULOGY's 7 Best Shopify Loyalty Apps To Start A Loyalty Program [Compared]

Provide Good Quality Customer Service

Customer service makes or breaks a business. It's as simple as that. Make sure that your customer service is set up in a way that doesn't make your customers jump through hoops. Develop communication guidelines and style for your customer service representatives, train them on the value of customer satisfaction, give them tools so that they can solve a customer's problem.

There's only so much a customer service representative can do when they lack the proper tools (the ability to make adjustments and not merely inform, for example, give refunds, make cancellations, among others). They can be as empathetic as humanly possible, but without the means to solve the customer's problem, it will not make much of a difference.

If it's not good for your customers, it's not good for your business.

Community Building

There are many ways to build a community around your business. We'll give you a few ideas, but you can get creative and come up with your own it's an exciting part of having a business (and a taxing one -- in the sense that it requires effort).

Starting a newsletter or a blog can be a way to build a community.

Incorporating content on your social media provided by your customers is another way to offer them a sense of belonging.

Offering exclusive products to loyal customers is a way to have them stand out. If done right, it can be very effective.

Offering courses on things that relate to your product or service can also help you develop a strong sense of community.

Organizing events either online or IRL (in real life) is a great way to build community.

Subscription Programs

If your customers have a certain frequency with which they make a purchase, then perhaps it's time to figure out what they buy and how often so you can create a subscription program that makes sense for them. That's attractive, and that offers an advantage over just making purchases whenever they need them.

If you create a subscription program that works well for your customers, they'll use it.

If you got them to subscribe, that's pretty much as far as you can go regarding customer retention. They're automatically purchasing stuff from you. That's the dream. However, one thing to note is that you can't just offer them a subscription program and expect them to sign up for it if you haven't done all the other steps towards providing a positive customer experience.

Your customers need to trust you. You need to earn their trust. Don't go straight for the subscription program if you haven't tackled other issues your business may have.

Customer Reviews

Adding customer reviews to your Shopify store is a great way to offer your customers a way to directly tell you what they like (or don't) about your product or any part of their customer journey process. Because reviews create an open space for customers to express themselves, they'll often talk about what mattered most to them in their interactions with your business, and that's a super valuable insight that can help you lean on harder on good selling points you might not have noticed before or fix issues in your product or customer service that you were not aware of.

On top of that, reviews are a great tool to nudge first-time customers into becoming returning customers via review requests. It works like this:

  1. You set up review requests to be sent out automatically to customers who have recently received their order.
  2. In that review request you offer them a coupon in exchange for a review.
  3. If they write a review, they get a coupon and now they've got yet another incentive to make another purchase with you.

And that's just one of the many ways we can help you boost your sales. Opinew offers a robust set of tools, but telling you about all of them is beyond the scope of this article.

If you'd like to add customer reviews to your Shopify store, please check out our plans and pricing. We'd love the chance to help you connect with your customers and improve your business.

Constantly Improve Your Product Or Service

Lastly, even if you're doing everything great and your customer retention rate is through the roof, you can't sit back and relax. Businesses exist in a competitive environment, and there's always someone else out there trying to snatch your customers away.

You need to constantly look for opportunities to improve your product or service in order to keep your customers happy because there's always another business that wants them.

We hope we have answered most of your questions. If you've got any remaining questions, be sure to contact us, and we'd love to hear from you.

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Santiago Rodriguez

Writer based in Monterrey, Mexico, dedicated to content creation, creative writing, screenwriting and translations. Studied Law at UANL.

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