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How to Build Customer Loyalty and Increase Retention: A Guide for Shopify Merchants

Posted by Hilda Wandawa on

How to Build Customer Loyalty and Increase Retention: A Guide for Shopify Merchants

To win at the eCommerce game, not only do you need to attract new buyers you also should strive to hold onto the existing customers. Therefore, they will become loyal to your business and make continued purchases.  In this article, we’ll break down customer loyalty and retention so that you can tailor your efforts to build loyalty and increase retention for your Shopify store.

What is Customer Loyalty and Retention?

Customer loyalty is the decision by the customer to regularly purchase from a business. A loyal customer believes that their chosen company has the best combination of product, customer experience, and price within its category. 

Customer retention goes hand in hand with loyalty as it places a figure on the number of shoppers who have stayed on as a paying customer within a given period. You can calculate the customer retention rate using the following formula.

customer retention formula

This formula shows you how to calculate the customer retention rate in a month. Change the monthly figure into quarterly or yearly, you have the retention rate of a quarter or a year. (Source: Live Agent)

What Makes Customers Loyal?

So, why will shoppers conclude that your brand is so superior to the competition that they reward you with their loyalty?

Besides providing a quality product, consumers are also looking for consistent and readily available customer care. A study found that 42% of shoppers who had a positive customer service experience returned to buy again.

Trust is also a key component in building and maintaining customer loyalty and retention. A whopping 83% of them say that their loyalty to a brand stems from trust. This trust can be related to a brand providing a reliable product or service, a consistent customer experience, or the feeling that their data is well protected.

The popularity of a business within its target audience can persuade consumers to remain loyal. In other words, the social influence your company carries can keep shoppers coming back. A study found that 42% of US consumers are loyal to a company that their family and friends do business with. Maintaining a good social standing within your target market can directly influence customer loyalty.

More and more consumers expect brands to have more of a human element that goes beyond the financial aspect of the business. This means shoppers want companies to align with their personal beliefs. In fact, 63% of consumers globally prefer to give their loyalty to brands that reflect their own beliefs and values. On the other hand, they will stop shopping with ones that fail to do this.

Millennials and loyalty

With Millennials spending $1.4 trillion in 2020 and representing the largest consumer group standing at 1.8 billion globally, we’d be remiss to not zone in on this lucrative audience. Plus, 70% of millennials will go out of their way to buy from a brand they feel loyal to.

According to Accenture’s Global Consumer Survey, Millennials value and will reward brands with loyalty if they provide the following:

  • Endorsements: Comments, reviews and ratings are a crucial factor in influencing loyalty for 46% of Millennials.
  • Supporting causes: This is more pronounced in Millennial women with 57% of them saying that their purchase decisions are driven by a brand’s values and stance on issues that are important to them.
  • Personalization: Millennials are willing to trade off their personal data if it means that they will get personalized experiences in return. Almost 60% of them are willing to make this exchange - the highest percentage of all generations.
  • Innovative experiences: This is another aspect that carries more weight among Millennials when compared to others. 47% of them have said that they feel more loyal to a brand that gives them interesting experiences compared to 35% of Gen X and 17% of Boomers.
  • Access to exclusive offers: When it comes to loyalty programs, Millennials find it most valuable to be granted access to member-only perks.

Why Do Loyalty and Retention Matter?

The greatest benefit of having a pool of loyal customers is the reflection it has on your bottom line. 

57% of shoppers spend more on brands or providers to which they are loyal. It’s also less costly to keep existing customers than it is to get new ones. Be prepared to fork up 5 times more money to convert new customers rather than focusing your efforts on people that have bought from you before. Furthermore, by increasing your retention rate by just 5% you could see business profits increase by 25% to 95%.

Giving attention to driving repeat purchases is a much easier task compared to getting sales from new customers. The likelihood of selling to an existing customer is at least 40% more than converting someone you haven’t sold to before.

Finally, another great draw for honing in on customer loyalty and retention is that you will create brand ambassadors. Recommendations from real people have a greater influence on purchasing decisions. 83% of consumers place more trust in this than any other form of marketing. With a hoard of loyal advocates for your business, you can alleviate some of the pressures of acquiring new customers.

Customer Loyalty and Retention Strategies

Now that the value of loyal customers is clear-cut, let’s take a look at some techniques and tools you can apply to gain customer loyalty and retention on your Shopify store.

Form a community based on emotional connection

To create and encourage brand advocacy and build a loyal customer base, tapping into emotions to establish a community is a useful tactic. This is because humans are wired to think emotionally rather than logically. Focusing on the emotional aspects of your brand in your marketing will be far better received.

Consider creating marketing campaigns based around relatable and emotional themes like togetherness, happiness, nostalgia or doing good for the community. 

One way to do this is to take a page out of GoPro’s book and use social media as your community tool. Focusing on the theme of adventure, their Instagram page is filled with action-packed content created by their users, regularly encouraging them to submit their pictures and videos made using their own GoPro’s.

gopro user generated content

With 18.3million Instagram followers and a constant stream of UGC coming their way, GoPro has successfully created loyal brand advocates who share the same sense of adventure they promote. (GoPro Instagram)

Many consumers expect businesses to act ethically and support communities. As a result, making your business a champion of social corporate responsibility can motivate shoppers to gather around and support your brand for the long run. 

The Body Shop have built their brand around this idea stating that they have “always believed in business as a force for good”. As well as using only ethically sourced ingredients and creating charitable programs, their passionate stance filters through to the rewards scheme which allows members to use their points to donate to charity.

Personalize marketing and customer service

It’s no longer enough to just include a shopper’s name in your communications with them, personalization needs to go to the next level if you want customers that continuously make purchases.

Using customer data to make personalized product recommendations, discounts, and content for individual consumers is a must. This is at the core of the beauty retailer, Birchbox.

birchbox personalized content

Birchbox keeps its customers by offering them discounts on their birthday and using past purchase history to make personalized recommendations with promotions. (Sources: Hubspot and Campaign Monitor)

 Birchbox uses extensive customer data to aid personalized discovery, making recommendations on their website, mobile app, as well as in emails based on customer ratings and order history. It also has an omnichannel strategy, tracking customer interactions at all their touch points so the company can deliver the right messages at the right time.

Shopify merchants can step up their personalization game with Wiser, an app that makes unique product recommendations based on browsing history on the Shopify store and in emails.

Customer service is also key to retaining consumers. One survey found that 46% of consumers began doing more business due to exceptional customer service and 40% stopped purchasing from a company due to poor experience. So what can you do to ensure outstanding customer service? 

First, you should unify your customer data so information on their purchase history, preferences, and previous contact with customer care is in a centralized place accessible to all representatives. Gorgias is an extremely helpful app in getting these data points in a single place.

Ensure that there are multiple avenues for customers to air their issues. Consider using live chatbots to help answer queries 24hrs a day, and include FAQs on your store website.

Build a rewards scheme

This one’s a no-brainer! To garner customer loyalty and retention, they need to be rewarded for their purchases. Rather than settling for a simple points system that can be spent on products, why not offer your loyal customers something a little more special?

Sephora’s rewards program adopts the traditional earn points per purchase model, but they give members the ability to choose from a variety of ways to redeem their points. This includes access to limited-edition products and in-store beauty tutorials. Members can also earn savings on shipping and get extra off seasonal sales events depending on how much they have spent cumulatively. This rewards scheme is so effective that its members account for 80% of the company’s annual sales.

The North Face allows members of its rewards scheme to earn points not just from purchases, but also by checking in at National Parks, downloading their app, and referring a friend.

RunGum customer loyalty retention

Run Gum was able to double their repeat purchase rate using Smile Rewards & Loyalty. (Source: Smile.io)

If you’d like to make your own unique rewards scheme for your Shopify store check out Smile Rewards & Loyalty or Growave. Both apps let you give your customers points for a wide range of actions like following your social media pages, writing a review, referring a friend, or simply because it’s their birthday. They also provide various choices for members to spend their points. Smile Rewards & Loyalty goes an extra mile by giving Shopify merchants complete freedom to set what points are redeemed for. to choose exactly create bespoke ways for points to be used.

Pursue lost customers to increase retention

To encourage repeat purchases and improve your retention rate, it is vital to pursue customers who have not made a purchase in a while or have abandoned their carts. 

You can read all about mastering the recovery of abandoned carts here

Winning back shoppers who haven’t returned to buy from you can be tricky as this could be for a number of reasons - exactly why customer feedback is imperative! However, crafting a fun email with a promising offer for the next purchase can be a good hook to pull customers back to your online store. Let’s have a look at a few examples to get your creative juices flowing.

american apparel win back email BucadiBeppo win back email | customer loyalty retention

Buca di Beppo (left-hand image) tries to win back their customers with the offer of money off in this tongue-in-cheek email. Meanwhile, American Apparel (right-hand image) delivers an affectionate message giving returning shoppers 15% off everything. To make shopping easier they include a link to their best-selling products. (Source: Smartr EmMail)

Build trust

Shoppers will keep coming back if you consistently deliver on your brand promise. This proves that you are a reliable retailer and they can trust you to fulfill their needs. 

An actionable way to show that you follow through on your brand promise and instill trust is to first make sure your products are of good quality. Offer a satisfaction guarantee by allowing for a full refund if the product is not up to par.

Bombas’ confidence in its own products and commitment to customer happiness lets shoppers know that it is a business worthy of their trust.

Let your customer know that their data is protected by complying to data protection rules and regulations. Be transparent with them about how their data is used.

You should also encourage customer feedback. If you find that your store’s retention rate is lower than you’d like, it’s a good idea to find out why that is. Asking customers to provide their feedback post-purchase can help you identify and iron out any problems your products or service has.

After each purchase or customer service encounter, send out an email requesting feedback on their experience and encourage this with an offer of a discount or promotion.

User-generated content is also a powerful tool in building trust in your brand and products. Shopify merchants can take advantage of social proof by adding UGC to their store with apps like Loox and Okendo. These apps make it easy for customers to leave reviews on products and help merchants encourage reviews. 

Reviews shouldn’t just be limited to your website, use social media as a channel for this too. Partner with micro-influencers and incentivize customers to share images and videos of them using your products to share on your social media channels.

Final Thoughts

Customer loyalty and retention can be a hard thing to attain, particularly as customer expectations grow. However, it’s a worthwhile investment to direct your attention to holding on to shoppers that have purchased from your store before. By analyzing your existing customer base and understanding what they want from businesses, you’ll be well on your way to having lifelong customers.