The Customer Analytics Blog

Actionable advice on optimizing the customer lifecycle

How Loyal Are Your E-Commerce Customers?

Market Trends - May 23rd, 2013 by Natalie Issa.

38 Flares Twitter 4 Facebook 18 Google+ 6 LinkedIn 10 38 Flares ×

Bricks and mortar retail stores jump through hoops to monitor and measure customer retention. They implement expensive and complex loyalty cards and programs so that they can track customer behavior.

But if you’re running an e-commerce site, you’re lucky – you can measure this data much more easily. Using retention analytics, you can measure loyalty in order to understand how to keep customers engaged and drive repeat purchasing.

Why Is Retention Important?

It’s always more cost effective to re-market to existing customers rather than attract, educate, and convert new ones. The fact that these customers have already demonstrated an interest in your offerings and are familiar/engaged with your brand gives you an advantage that you’d be mistaken not to capitalize on. The rule of thumb is that it is 6-10 times more expensive to acquire new customers than it is to retain existing ones.

In addition to cost savings, building brand loyalty among existing customers really means you’re building fans. And fans will evangelize for you in a very organic way, which ultimately brings you new customers. Keep your customers happy and engaged, and you’ll both benefit.

There are many different ways you can use retention analytics to measure customer loyalty. It all depends on exactly what your goals are and which questions you’re trying to answer. To start, here are just a few of them.

Continued Engagement

The most basic way to measure customer loyalty is to analyze for how long customers continue to engage with your website.

A simple retention report will give you the answer to the question:

After a customer visits our website, for how long do they continue to return?

In the screenshot below, we see that after the initial website visit, 51.2% of customers returned the following month, 24.0% the month after and so on.

Retention Returns After First Visit

Alternatively, you could answer the question:

After a customer makes a purchase, for how long do they continue to return to our website?

Both of these answers give you insight into customer engagement with your brand. While they’re not specifically measuring purchases, they give you an idea of how valuable customers find your offerings.

E-commerce sites engaged in a lot of content and social marketing will find these metrics especially telling, as they will give you visibility into the effectiveness of your efforts.

For example, a women’s apparel site invests quite a bit in social media and creating content for their website that defines their brand message and promotes a certain lifestyle. They know that in the fashion industry brand recognition and engagement are key revenue drivers. As a result, measuring brand engagement is important to them because it shows them how effective their marketing initiatives are, which in turn contribute to the company’s bottom line.

Repeat Purchasing

While not all e-commerce sites prioritize brand engagement, every single e-tailer’s number one goal is to sell product. Retention reports can help you measure repeat purchasing to understand how valuable customers find your product offerings.

Repeat Purchase Setup

This retention report will answer the question:

After a customer makes a purchase, for how long do they continue to come back and make additional purchases?

As we discussed above, winning repeat business from existing customers is far more cost effective than converting new ones. This report helps you understand if customers are simply buying from you once and never again, or if you’re building a loyal customer base.

Repeat Purchasing By Campaign

Understanding which marketing campaigns drive the most loyal customers helps you focus and optimize your efforts. Retention reports can tell you how long customers who were originally acquired from a particular campaign continue to make purchases.

For example, you may want to measure the customer loyalty of those who originally found your site through social media. This can be done with a simple retention report that is segmented for “customers who were originally referred by social media”.

Many marketers find that customers sourced from different campaigns have varying degrees of engagement and loyalty. This is largely due to the nature of each channel and how customers engage with you through that channel. Oftentimes we rely on guesswork or assumptions to determine which channels will bring the highest quality leads. Yet sometimes the numbers tell a different story, or at least give you hard data to back up your estimations.

Repeat Purchasing By Product Category

Retention reports can tell you about customer loyalty based on which types of products customers have bought. For example, you may want to measure how long customers who purchase a product from category X come back and purchase ancillary products. Similarly, you may want to understand which product categories drive the most repeat purchases.

Are You Measuring Customer Loyalty?

Tell us how you’re currently measuring customer loyalty and retention for your e-commerce store. Are you using analytics, another tool, or a combination?

To learn more about how to build a retention analytics report with Woopra, please see the tutorial.

38 Flares Twitter 4 Facebook 18 Google+ 6 LinkedIn 10 38 Flares ×