Customer retention and churn rates are top key performance indices for online e-commerce stores. We know sales and revenue are a priority for every Shopify store which is why the retention and churn rate are taken seriously.
Table Of Content
1. Article Brief
2. What is Customer Retention Rate?
3. What Is Churn Rate?
4. How To Improve Your Store’s Customer Retention Rate
The number of customers with high average order value determines how much profit an e-commerce store will multiply. And most times, returning buyers are predicted to have a higher AOV than first-timer. This is because, over time, a returning buyer builds trust and loyalty for the brand.
In the same vein, every Shopify store experiences customers who just buy once and never visit again. This happens to all businesses. However, as a store owner, there is a need to minimize the rate at which customers churn your store.
To get your Shopify store in a good sales and profit state, you need to know your customers’ habits when it comes to patronage. How long does a customer stay or return to buy from your Shopify store?
Let’s take you through how to increase sales using these two giant e-commerce metrics.
What is Customer Retention Rate?
Customer retention rate is a term used to calculate the percentage of customers that continue to conduct business with a firm over time. It is computed by dividing the number of consumers at the end of a period by the number of customers at the start of that period and converting it to a percentage.
This measure is critical for e-commerce stores since maintaining existing consumers is usually less expensive than obtaining new ones. Usually, the period for calculating customer retention rate is dependent on individual stores. You can choose to do it monthly, quarterly, or yearly. Depending on your type of business or based on the store owner’s interest.
For example, if a business starts the year with 100 customers and ends the year with 60 customers, the customer retention rate for that year would be 60%. This means that 60% of the customers who were doing business with the company at the beginning of a period continued to do so at the end of your sales period.
To calculate customer retention rate, businesses typically use this formula:
A high customer retention rate you have at each period is considered to be a positive signal that your store is doing well. It implies that a large percentage of customers are satisfied with the Shopify store’s products or services and are likely to return to buy again from your store in coming days.
On the other hand, a low retention rate can indicate that customers are not satisfied with either your product quality or customer service and are likely to stop patronizing your store again.
There are many factors that can impact a Shopify store’s customer retention rate. They include the quality of products or services, the level of customer service, the overall customer experience, and the effectiveness of marketing and retention efforts.
It’s worth noting that the customer retention rate as an e-commerce indicator has a default you should consider when using this metric. Customer retention rate can measure past performance but can’t predict future attitudes of customers towards your store. However, it’s a powerful metric that can help store owners identify and address problems related to customer satisfaction and loyalty, which is why it’s popular in the e-commerce industry.
What Is Churn Rate?
Churn rate, also known as customer attrition or customer churn, is the rate at which customers stop buying from your Shopify store. In other words, it’s the percentage of customers who cancel their subscriptions, discontinue your service, or stop buying your product over a certain period of time.
Do you know what determines if a churn rate is good? The lower the churn rate for a store, the better for a Shopify store. And one way to approach this is by calculating using the formula.
Calculating churn rate is relatively simple. You take the number of customers you lost during a specific period of time (say, a month) and divide that by the total number of customers you had at the beginning of that period. Then, you multiply by 100 to get the percentage of customers that have churned.
Let’s say you started the month with 100 customers and ended the month with 95 customers, your churn rate for that month would be: (5/100) x 100 = 5%. This shows that 5% of your customers left your company during that month.
It’s critical to note that the customer churn rate has a lag as a KPI. This metric can only derive what happened with your customers in the past, but not how they will react to buying from you in the future. Nevertheless, it can be used as a benchmark for your store to measure the effectiveness of your retention efforts.
A high churn rate can indicate that customers are not satisfied with a store’s products or services, or that the store is not effectively retaining its customer base.
On the other hand, a low churn rate suggests that customers are happy with the Shopify store service and are likely to continue doing business with the store.
To reduce the customer churn rate for your store, you can analyze the reasons why customers are leaving and take steps to address those issues. This could include improving customer service, offering incentives to retain customers, or making changes to the product or service to better meet customer needs.
How To Improve Your Store’s Customer Retention Rate
When putting in efforts to improve customer retention rate, it shows that you are in a bid to reduce your customer churn rate since the two metrics are the direct opposites of each other. Taking measures to increase retention rate automatically reduces your store’s churn rate.
Here are some steps to take to improve your Shopify store’s customer retaining capacity;
1. Better Customer Service
This stands at the top of the table. It is a priority. Most online buyers have used the exit on many e-commerce stores due to unsatisfying customer support. This bare minimum should not be a reason you want to lose out on sales.
That is why the customer support team of every business is considered the strong room. Having satisfying customer service can help you retain about 11% of your churning customers.
81% of customers are likely to return to buy from your store when they consider your customer service satisfying. And the rate goes high as better the customer experience is. That is an indicator that you should not joke regarding having a good team behind your customer support.
2. Discover The Reason Why Customers Churn
Knowing the reason why customers stop buying from your store will help you improve those issues so you can retain more customers. To increase retentain rate for your store, you need to know the reason why your churn rate is high so you can work on that and reduce customer’s churn rate.
Since customer retention is the direct opposite of churn rate, taking measures to reduce churn rate automatically meand that your customer retention rate will increase.
3. Offers And Discounts
Strategically using this marketing trick can earn you more customers. Online buyers are usually attracted by discounts and freebies no matter how little. To know what offer to give your customers, you need to study their purchase habits on your store.
Another way to use offers to pull up your retention rate is to create a strategy with it for first-time buyers. This can encourage them to return and buy again from your store. For existing buyers, you can use discounts to increase their average order value by setting a purchase threshold to redeem a coupon disocunt.
4. Make Your Store Customer Friendly
When designing and setting up your Sopify store, make sure that you put everything together in a way that customers won’t bulge to much to know where things are and how to find heir way around the online store.
User friendliness is the core part of every website. As a store merchant, you need to take note of that and use it to help your customers have a better shopping experience especially when it comes to product search.
Using a search modal that auto-completes customers intentions can also help you improve your store’s usability. StoreBundle’s Instant Search feature helps you display popular products or other products in yout collection based on customers intent. You can as well upsell items in the search box using thei Instant Search App. Install here
Customers can churn your store when it becomes too difficult to navigate around the platform. IT might easily put off ideal buyers. You can use this strategy to increase customer retention rate.
5. Offer Good Product Quality
Selling quality items is a smooth way of retaining your customers. To customers, it is a show of genuineness that most online buyers look for. You can as well indicate the tier of the product in your product description to present customers with better details about the item.
If your customer does not trust you, there is no way they will return to buy from you again. That is why it is better to take product images in a very realistic way so that when customers receive their orders they can be exactly what they ordered.
Building customers’ trust by selling quality products can gain solid returning buyers who will tell your store to their friends and families. That in itself is a marketing strategy that can help you increase sales and customer base.
Keeping track of customer retention and churn rates is essential for any e-commerce business. By monitoring these metrics, you can identify areas of improvement and take steps to boost sales. One tip for increasing customer retention is to focus on building strong, personal relationships with your customers through targeted marketing and excellent customer service.
Also, implementing loyalty programs and offering special promotions for repeat customers can help to incentivize them to continue shopping with your business. By staying attuned to these metrics and making data-driven decisions, you can ensure that your e-commerce business is on the path to success.