Speaker 1: It's cheaper to get repeat purchases from current customers than it is to find new customers. Returning customers spend more money, buy more often, and can be counted on to sing your praises and refer their friends or family to your business. If you want to learn how to measure customer retention, why it's important, and the best strategies to keep customers coming back for more, then just keep watching. Hi everyone. My name is Michelle Bali. If you're new to this channel, make sure that you're subscribed. We have tons of amazing content to give you the knowledge that you need to start and grow a successful online business. If you've yet to re-engage existing customers, now is a really great time to start building a strategy. So let's look at how to get started. So what is customer retention? Customer retention refers to your ability to retain repeat customers and increase the lifetime profitability of each customer. This is impacted by the amount of existing customers that churn, which basically means they either close a subscription, cancel a contract, or choose not to return to your online store. A strong customer retention strategy is about maintaining relationships. It's also about creating value for your customers by helping them achieve the goal that they had in mind when they purchased your product or service. So an example of a customer retention strategy could be creating a customer loyalty program. So stay tuned until the end of this video, where I'll take you through even more tactics on how to retain repeat customers. Acquisition on the other hand, are the steps that you take to gain new customers. A good acquisition strategy is measurable and repeatable. Customer acquisition is often visualized through a funnel. So an example of an acquisition strategy could include Facebook ads, SEO, affiliate marketing. In short, an acquisition strategy creates the customer base, while a retention strategy builds the ongoing relationships that allow you to extract more value from your existing customer base. So why is customer retention so important? Well, it's going to boil down to four main reasons. Affordability, return on investment, loyalty, and referrals. As I mentioned before, focusing on customer retention is super important because it's going to be a lot cheaper to retain your customers than it is to find brand new customers. So if it costs you $50 to acquire a new customer, it's only going to cost you $10 for a repeat purchase. A rule of thumb is acquiring a new customer is going to be five to 25 times more expensive than retaining an existing customer. Now, logically, this makes total sense. You don't have to spend the time and resources finding new customers. You just have to keep the ones that you have satisfied. Increasing customer retention can have a big impact on your bottom line. Loyal customers spend more money than new customers, and that's because they understand the impact and value that your products have had on their lives, and they're happy to come back and spend more. Customer retention also encourages customer acquisition. It does this through referrals. So if you've been able to retain a satisfied customer for years, they're likely going to tell their friends about you and you'll gain new customers that way. So not only does your customer retention save your business money, but it makes your business money as well. What you sell has a huge impact on how much you should be focusing on retention. If you have high ticket items that need to be bought frequently, you are the one that has the most to gain from a solid customer retention strategy. In general, as you move right and up the matrix, you are the businesses that need to be focusing on retention. But even if you do fall in the bottom left-hand category, that doesn't mean that you should completely ignore a retention strategy. So for example, if you have a phone case business that drops collectible designs every month, that would require a strong retention strategy. Now, every business will have its own unique story, but practically every business can benefit from more loyal customers and repeat sales. Whether you focus on customer acquisition or retention will be dependent on where you're at in your business journey. If you're just starting out, you're going to want to focus solely on acquiring new customers and building up your base. Once you start gaining traction, spend most of your time trying to get new customers in the door, but don't neglect your current customers. I would even argue that these are the customers that you really want to reward. These are the people that sell value in a new business. They're rooting for you. They want to see you grow. So make sure that the love is a two-way street. At this point, you should start to introduce retention tactics like email marketing. But we'll talk more in depth about retention strategies at the end of this video. If you're at the stage where you're getting consistent sales, split your time 70-30 between nurturing existing customers and finding new ones. You can try a loyalty program or get serious with marketing automation. Once you're established, it's a common problem for stores to continually find ways to grow. Focusing on acquisition may lead to a lot of one-time purchases. And if that's the case for you, get serious about your retention strategy. This will get customers to buy more often, which increases their lifetime value. You know, I recommend focusing on a 50-50 split between acquisition and retention. If you're well-established, you should have tight processes and automations in place. Now would be the time where you want to focus heavily on retention. Feel free to pause and take a screenshot of this diagram if you need to. If you're looking to optimize your business for growth, Shopify is offering a free 14-day trial. This does not require a credit card and it makes selling online so easy. All you have to do is click the link in the description box to get your store set up in a matter of minutes and bring your brand to life. Here are some strategy ideas to boost your customer retention. So first, improve your customer support. A solid customer support strategy includes attention to the customer pre, mid and post-sale. I have my own small biz and last week I had a customer reach out to me and tell me that her product came damaged. So what I did was I refunded her the full amount within minutes of receiving the email, and then I gave her 20% off her next order. She left a positive review and placed another order. So there's a funny thing about customer satisfaction. If you make a mistake and you correct it, satisfaction shoots way up, even higher than if you were to have never made that mistake, so an effectively resolved complaint can result in a loyal repeat customer. If you help customers avoid problems and get the most out of your products, you're going to be helping them and you'll be helping your bottom line. Having a live chat available can turn a customer question into a sale or a complaint into a resolution. For this, you can try Facebook messenger live chat, which is a free Shopify app. Depending on the type of business that you run and your margins, sending a small gift to your best customers can be a really great way to surprise and delight your customers. It also reminds them to return to your store, but giving an unexpected gift is going to play to the law of reciprocity, which refers to our tendency to respond to a positive action with another positive action. So for me, after looking at my numbers for my small business, I saw that I did have a bit of leftover budget and I wanted to use it to reward my top customers, so I sent them one of our newest products and I actually was not expecting reciprocity, I just wanted to thank them for being with me on the journey of launching my brand. And I did see a surge in sales after this. In a world that runs over the internet, a handwritten thank you note gives a personalized touch that goes a long way with customers. This thoughtful attention to detail is going to help you stand out in an ocean of automated receipts. And it's also going to enrich the experience of being a business owner. It can potentially create a loyal customer for life. So customer service that turns numbers into faces is really a win-win for everyone. Emails give you the opportunity to continue a relationship with your customers and is known as one of the highest converting tools. So I've noticed that a lot of small business owners worry about annoying their customers with emails. You're not going to annoy them as long as each email is adding value and you're only starting out with a couple of emails per month, but it is true that overstaying your welcome with too many low quality emails can lose some customers, so here are some ideas for good quality emails. Get started with follow-up emails, send personalized emails, checking up on your customers and see how they're liking the product. Thank them for supporting your small business and sign off as the founder. It's a win-win because customers will feel acknowledged and you get valuable feedback on your products and service. You can even ask them to leave a formal product review to start building up your brand and your product's credibility. If you have a product that's perishable or needs to be refreshed over time, knowing your product's lifespan and sending well-timed emails can be the perfect way to re-engage customers. Customers love these emails because it reminds them to re-up before they run out. So for example, Luxie hair extensions last three to six months on average. And knowing this, Luxie could set up a series of automated emails to go out after three and six months. These emails would help educate a first-time buyer about the benefits of keeping a fresh set and it will keep Luxie top of mind. Offer a discount or credit. Generally, I would tell you to be wary of discounting. You compete with yourself because customers start to expect lower prices from you. However, when discounts are sent to a first-time buyer, I actually love it. You can also discount to re-engage customers that haven't purchased in a while. So if you do have space to do this, try giving your customers 20% off and really think of it as an investment in boosting your repeat customer rate. You may also want to experiment with offering credits to your store, like $10 towards any purchase. The idea of a virtual gift card might be more enticing. A loyalty program is also a great way to increase purchase frequency, because it's going to motivate customers to purchase more often to earn those valuable rewards. This creates two-way value. Your customers get more value each time they shop and you get repeat business. Most loyalty programs fall into one of four categories. You've got points, tiers, social media, and paid programs. Examples of wildly successful loyalty programs are Starbucks Rewards, Sephora Beauty Insider Rewards, and Tom's One for One. You can encourage customers to sign up by giving them an instant reward when they create an account. How to measure customer retention. Once you start employing these strategies, you'll want to track if they're actually working. So here's how. You can measure how healthy your customer retention is with two metrics. Returning customer rate and average order value. If you have a Shopify store, you can find these metrics easily. From your Shopify admin, you're just going to go to analytics and then you're taken to a dashboard where you can see tons of useful metrics. The key to improving your customer retention rate is understanding your underlying metrics, knowing which numbers to focus on and how to measure them will equip you with the knowledge you need to craft a strategy that has a strong impact on your store's profitability. With that in mind, let's look at repeat customer rate. Measuring your repeat customer rate is the key way of measuring how well your retention strategy is working. If you have a Shopify account, this calculation is already done for you, but if not, you can calculate this by taking the number of customers with more than one purchase divided by the number of unique customers. Make sure that you're only counting within the last year. Your average order value is the second metric that you'll look at. This metric refers to the average amount a customer is going to spend per transaction. You can find your average order value again in your Shopify analytics, but if you don't have Shopify, just divide your yearly revenue by the number of orders your store has processed, increasing the average order value maximizes your retention strategy efforts. So what I mean by this is let's say your average order value is $20. And let's say your email marketing retention strategy costs you $17 per customer, you're not really maximizing your time or money that way. So if you have a healthy average order value, more than $20 in that case, then this would be an indicator that your marketing and retention strategy are paying off. The last metric that I want to share with you is customer value. So customer value is the ultimate goal of retention marketing because it helps you understand how much each customer is actually worth. In order to calculate it, multiply purchase frequency and average order value. Now you have the tools to get you started on creating loyal customers. Remember, your current customer base is the best asset that your store has. They cost less and earn more because they already know your brand and appreciate the true value of your product or service. Crafting meaningful human connections with your customers is the most enriching part of owning a business. So I hope that you use these tools, not only to increase your revenues, but to build your relationships as well. If you want everything that you're going to need to sell online, I recommend that you try Shopify for free for 14 days. Like I said, there is no credit card required. All you have to do is set up your store and pick a plan when you're ready. If you found this video helpful, make sure that you're giving it a big thumbs up because that helps our community and our channel grow, and also don't forget to subscribe. I'm your host, Michelle Bali. Thank you so much for watching, and I will see you in the next one.