How to Use Retention Marketing to Your Company’s Benefit



With any business, whether it be online or a brick and mortar store, customer retention is key to growth, as encouraging past customers to make a future purchase with your company is far less expensive and of greater importance than attracting new visitors and encouraging them to make their first purchase.


If your current customers are not happy enough with your product or service to return in the future, this is a sign that something about your business should be changed, whether it be poor customer service that’s driving customers away, or a product niche that does not account for future purchases from the same individual (think: a car – if your company sells cars, but no car parts, there’s no reason for a customer to ever shop with you again, until they need a new car in five years).


Calling customer retention important is an understatement, and this importance of customer retention has led to a new type of eCommerce marketing known as “retention marketing.” When a company implements retention marketing, they are focusing on keep existing customers content with their shopping experience, in turn helping customers stay engaged with the brand and happy with the product or service they purchased. This method effectively encourages existing customers to keep coming back for more, making it very valuable for many different types of establishments.


We all know about the importance of customer retention, but why is it so vital to the success of all businesses, particularly eCommerce stores?


There is a decreasing value in paid advertising as more and more eCommerce stores make their place on the web. Because of this, companies are paying the same for advertising as they did several years ago, but are reaching a smaller audience in return.


Organic reach on social media platforms such as Facebook is also in decline, making the idea of free advertising through these platforms much less possible than it was just five years ago.


These declines in reach only serve to add value to customer retention, as customer retention is a company’s number one defense against lost engagement, despite reduced options for impactful advertising on the web. In addition, small companies find it absolutely crucial to maintain high customer retention rates, as their options for online reach are much less abundant as a result of limited funds and audiences, making each and every happy customer count.


Retention marketing is far from another business gimmick designed to get your attention without offering much in return. In fact, the practice of retention marketing has been shown to increase year-over-year sales by around 28 percent, and the average value of the company increasing by about 40 percent over the course of its lifetime when established using retention marketing practices.


And retention marketing really serves its purpose: according to Sweet Tooth Rewards, retention marketing leads to a 20 percent increase in repeat purchase rate, meaning that 20 percent more customers are making a second purchase when companies implement retention marketing tactics.


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Armed with the knowledge of retention marketing and how it can help you, you can now set out with a concrete goal for your marketing strategies: retain more customers. Shift your focus from obtaining new customers to pleasing the ones you already have, and word about your product or service will circulate without the need for any paid ads or viral tweets.


The method behind retention marketing is allocating about 20 percent of your budget for retention marketing, and using the remaining 80 percent for acquisition marketing. This may seem counter-intuitive, but by following this marketing plan, companies can expect an average of 8 percent of their site traffic to produce about 40 percent of their revenue, making this method very reliable and rewarding when implemented correctly.




There are three main retention marketing strategies used by successful businesses today:


  • Customer satisfaction – Focus on each customer’s individual experience, and give them the greatest shopping experience available in your niche. When customers are happy with their experience, they will remember this when they are faced with making a future, similar purchase.
  • Customer loyalty strategy – Loyalty strategies focus on providing incentives that encourage repeat visits. For example, Ulta Beauty offers shoppers exclusive loyalty points when they make a purchase, which can be redeemed for gift cards and free products. When customers feel as if their shopping habits are paying off and saving them money over time, they may begin shopping exclusively at the store providing them with these payoffs.
  • Customer referrals – The third main type of retention marketing is the customer referral strategy, which puts focus on encouraging customers to refer a store to their friend. Incentives such as exclusive discounts for referring a company increase the likelihood of a returning customers as well as the acquisition of a new one, making this strategy excellent for many businesses just getting their start.


In order to properly implement the strategies above, certain marketing tools will prove themselves useful. For example, outstanding customer support is important for any company looking to become a leader in their niche, however retention marketing will not work whatsoever without amazing customer support. While customer support can be expensive to implement and will require the time of multiple employees, excellent customer support keeps both new and repeat buyers happy with their experience, making them more likely to return for a future purchase.


Another tool many companies use as a means of retaining customers is through exclusive coupons and discounts, given only to customers who have completed at least one purchase with the customer. A very popular example of this method in use is the “hole-punch card;” for example, a coffeehouse may reward customers with a free drink once they have already purchased ten over time. This encourages customers to come back to a company over and over again, without costing the company much as far as lost revenue from the free drinks.


A more effect and modern alternative to the “hole-punch card” method is a loyalty program, which takes this idea to the next level, as it provides added benefits a standard patronage discount does not. Loyalty programs are very familiar with customers, making them trustworthy and easy to opt-in to for many. In addition, this method can be tailored to your company as needed, as the points system is a very open-ended idea with many possible rewards. The key to a successful loyalty program is making yours stand out from the rest, as customers will often become a part of many loyalty programs, oftentimes forgetting which ones they are signed up with.


Finally, another key way to implement customer retention marketing strategies into your business is by personalizing each customer’s experience. Everyone wants to feel like an individual, and when companies make their customers feel special and unique, the customers will be more likely to shop with that company in the future. Some eCommerce stores have begun to send out hand-written thank you cards to personalize each customer’s experience, however this can be done in any number of ways that fits your company’s niche.


Retention marketing is a fairly new phenomena, but has shown great effectiveness in allowing companies to increase their audience over time, while continually receiving orders from their already existing customers.  Nearly any store can benefit from retention marketing, and the tips above should make the processes clearer and easier than ever before.


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Steve has entrepreneurship in his DNA. Starting in the early 2000s, Steve achieved eBay Power Seller status which propelled him to become a founding partner of, a contact lens and eyewear retailer. Four years later through a successful exit from that startup, he embarked on his next journey into digital strategy for direct-to-consumer brands.

Currently, Steve is a Senior Merchant Success Manager at Shopify, where he helps brands to identify, navigate and accelerate growth online and in-store.

To maintain his competitive edge, Steve also hosts the top-rated twice-weekly podcast eCommerce Fastlane. He interviews Shopify Partners and subject matter experts who share the latest marketing strategy, tactics, platforms, and must-have apps, that assist Shopify-powered brands to improve efficiencies, profitably grow revenue and to build lifetime customer loyalty.

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