Retention Marketing Strategies

Improving your retention rate is a massive opportunity in your business. This article breaks down successful retention strategies by some of the most successful eCommerce stores.

 An often cited study by Bain & Company (in conjunction with Harvard Business School) has said that a 5% increase in retention can improve profitability by as much as 55%. 

Implementing the lessons learned from these top retention marketing strategies will increase profitability in three major ways:

  • Increases LTV of customer - As you increase the frequency and amount that each customer spends with you, you are directly impacting the LTV and profitability of each customer.
  • Enables new sales channels - by increasing the LTV of your average customer, you can afford to spend more on customer acquisition. 
  • Increases AOV -This study by Adobe shows that repeat customers make up 40% of sales, while only representing 8% of customers. 

Update: This article was last updated on January 11, 2019.

How to Develop a Retention Marketing Program

There are two questions you need to answer to successfully create and implement a retention marketing program.

1)  How many customers are leaving?
2)  Why are customers leaving

But before we dive into how the most successful eCommerce stores are utilizing retention strategies in 2018, I want to define what retention marketing is.

What is retention marketing?

Retention marketing is a strategy which focuses on your existing customer base. The goal is create repeat customers, and increase both their frequency of purchase and the average order volume per purchase.

The most popular metric to measure the success of a retention marketing campaign is retention rate.

How do you measure retention rate?

Retention rate measures what percentage of your customers are retained during a given period of time. It is the inverse of churn rate, which measures how many customers leave during a given timeframe.

If a customer continues doing business with you, they are retained. If they are no longer a customer, than are "churned".

The formula, according to Inc., is customer retention rate = ((CE-CN)/CS) * 100, where:

– CE= number of customers at end period

– CN= number of new customers during period

– CS= number of customers at start of period

Determining what a "good" retention rate depends on a number of factors -> your industry, product, switching costs, and business model. 

Retention Marketing Strategy #1: The RealReal & Advocacy

What is Advocacy Based Retention?

Advocacy marketing focuses on getting current customers to talk about your product to their friends or network. It depends on capitalizing on positive experiences to not only gain customers, but increase retention.

​How The RealReal Increases Retention through Advocacy

The RealReal formalized their advocacy marketing with their “Refer a Friend” offer. The program encourages repeat purchases for customers who choose to refer in a number of ways.

1) Consistency Bias - By openly endorsing The Real Real, these customers are more likely to use the service again. This phenomenon is known as the Consistency Bias.

2) Monetary Incentive - Second, this program provides a direct monetary incentive to use the platform again in the form of Store Credit.

Retention Marketing Strategy #2: Instacart & Reactivation Campaigns

Retention Strategy through Reactivation Campaign

How Reactivation Campaigns Increase Retention

A reactivation campaign is a series of messeges delivered to past customers who are no longer engaging with your products or service.

At Barilliance, we focus on personalization above everything else.

Like all retention strategies, to be successful, a reactivation campaign must first identify a specific segment of customers that are about to leave or that have already left, and second, accurately determine why they are leaving and propose a value proposition to overcome this.

One simple example is to set up a rule that sends an email based on recency of visit.

In this example, the segment is “Customers who haven’t visited the site in x days.”. The copy and series of messages should be directly tied to ​why your customer stopped ordering from you.

Return Path conducted a great study on best practices for reactivation campaigns. Some findings include:

  • Specific Dollar Incentives - Specific dollar incentives in the subject line are almost 2x successful as % off discounts (despite most emails using % incentives)
  • Recency Matters - Reactivation campaigns are more effective the sooner they are launched. Emails sent to “long inactive” customers had a meager 1.8% read rate compared to 12% average.

Advanced Reactivation Campaigns: See how Barilliance combines online and offline data, automatic segmentation, and triggered behavioral emails to create advanced reactivation campaigns. Request a demo here.

​Instacart's Reactivation Campaign Example

Instacart provides a great example of how to conduct a reactivation campaign.

The First Email

Their first email in the campaign urges the customer to download the app and gives a nice little bonus of free delivery. They also use urgency by putting a clear expiration date on their offer.

The Second Email

When a customer doesn’t bite, Instacart is quick to send follow-up emails. Each day an email is sent. The additional emails do a great job reinforcing the scarcity and developing the value proposition of why they should buy again.

In this example, they identify three ways Instacart benefits you in addition to the free shipping bribe.

Retention Strategy Instacart's Second Email

The Sixth Email

At this point, most eCommerce reactivation campaigns are run through. However, Instacart shows how you don’t need to take no as a finality.

First, they empathize with their customer. The copy removes guilt from the transaction. It makes it ok that their first offer wasn’t taken, and gives permission to take advantage of the offer after the expiration date.

Retention Marketing Reactivation Campaign Example 6 email

The Ninth Email

As customers continue to decline, Instacart begins builds more reasons for their customers to re-engage.

At the 9th email they introduce a monetary incentive to entice customers to come back. Notice that they use an exact $ amount, per the best practice.

Retention Strategy through Reactivation Campaign

Retention Marketing Strategy #3: Holla & Daily Deals

The Two Types of Deals For Retention

There are two main types of deals eCommerce stores use to drive repeat purchases.

Discounts - Offer products at a reduced price.
Exclusivity - Offer products not normally carried to a particular group.

​How Hollar uses Daily Deals to Drive Repeat Purchases

Hollar is a fast growing online dollar store and do an excellent job leveraging daily deals to drive repeat purchases.

A few tactics that Hollar uses to make their deals more effective are:

  • Consistency - Hollar has committed to integrating deals as part of their retention strategy. It is a perfect fit for their value proposition of low priced, high quality products. Because they promote deals daily, their customer base expects it and looks for opportunities to take advantage.
  • Branding - Each daily deal is branded as a “Wow!” deal, adding to the expectancy of each deal.
  • Urgency - Again, we see urgency used. Hollar forces customers to act now if they want to take advantage of the deals. Each offer expires today. 

Retention Marketing Strategy #4: Thrive Market & Subscriptions

Using Clubs + Premium Memberships to Increase Retention

Premium memberships are not a new concept.

The most famous example is Amazon Prime. Amazon offers free 2 day shpping (in addition to unlimited streaming through Prime Video as well as the ability to “borrow” books on the Kindle platform) in exchange for a yearly membership fee.

Some estimates say that the average
Prime member spends 2x as much as non-prime members.

​How Thrive Market Uses Memberships To Drive Retention

Thrive’s whole business model revolves around it’s premium membership.

Like Costco, customers sign up for one yearly membership. This membership the primary revenue driver for Thrive, as they sell their products for near cost to their customers.

Thrive Market does an excellent job reducing friction through the signup process. First, they allow you to see exactly how much money you would save by becoming a member. Then, they give you a month free.

This membership design encourages retention in two significant ways. First, because customers pay upfront, customers want to shop more at Thrive to maximize their benefits. Second, Thrive Market’s business model allows them to monetize their customer base in a different way, giving them a competitive price advantage over other online grocers.

Putting it all together

Because retention is the most effective way to increase profits, all of these eCommerce brands incorporate multiple strategies.

Here's how Hollar & TheRealReal integrate multiple retention marketing strategies.

The RealReal adds Exclusive Offers (Retention Strategy #3) + Premium Memberships (Retention Strategy #4)

We already saw how The RealReal utilizes customer advocacy to boost retention.

They also take advantage of exclusive offers. 

Like Holar TheRealReal uses deals to encourage customers to return. However, instead of providing a straight discount on their products, they focus on providing additional value through credit. 

This makes the retention strategy even more successful. The customer only gets the $100 bonus on their next visit. 

The RealReal Premium Membership (Retention Strategy #4)

Retention Strategy from TheRealReal Premium Membership

Additionally, TheRealReal leverages memberships to increase the benefits of becoming a loyal customer. 

However TheRealReal's membership model differs from Thrive's in a number of ways. 

First, it is primarily centered on getting "first look" access to new, one of a kind products. Next, it offers multiple tiers to its membership program. 

Key Takeaways

Don't constrain yourself with a single retention strategy. Each strategy can be modified to fit your specific positioning. 

For example, if your brand is positioned as the premium option (like TheRealReal) in the space, focus on creating value through exclusive events, products, and customer service/experiences. 

How to Enable Your Retention Marketing Strategy

The key to any retention marketing strategy is unified data. 

You need to have a holistic view of each customer, and have distinct, personalized responses for first time buyers, most frequent purchasers, and high spenders. 

Barilliance Retention was built to give you this functionality. You can define as many segments as you want, based on any number of gathered data from time since last purchase, order volume, product pages viewed, previous email engagement, physical location, etc. etc. 

Once a segment is defined, you are able to create personalized emails, including embedding 1:1 recommendations based on that person's viewing and purchase history. 

Create Retention Marketing Campaigns: See how Barilliance enables Retention Marketing here

Next Steps

The first step is to commit to retention. This means tracking your retention rate, selecting a core customer segment to target, and creating retention marketing strategies to improve.

We put together two detailed articles on two excellent customer segmentation techniques to power your retention strategies.

  • RFM Analysis - This powerful technique come from direct marketing and segments your prospects according to the three biggest factors in purchase intent: recency, frequency, and monetization. Read here.
  • Psychographic Segmentation - The truth is, we make purchase decisions on emotion. Using psychographic segmentation empowers you to give relevant offers beyond demographic information. Read here.

To learn how Barilliance helps eCommerce brands identify priority customer segments and create targets reactivation campaigns, read about our retention marketing product or request a demo here.