A simple case for retention (it’s where the money is made)

retention the case

Somewhere along the line you make the switch from an all out assault on customer acquisition to retention. From getting customers to keeping customers.

Ask Shopify and they’ll tell you that heavy investment (time) is focused on retention when you’ve reach 10+ sales a day. The reason demonstrated by the graph below

customer retention rate over time

For guidance, the crazy upward trend is based upon a 10% customer retention rate compared with the less-exciting 5%. Retention is big business.

10+ sales per day? You should be split 60/40 in favour of focus upon retention over acquisition.

I never see this. The blend is rarely in favour of retention.

And I think I know why.

Even though most marketing directors would dream of replicating the graph above, it’s not where the money or the time goes. And it’s where the money goes that grabs our attention, our time. The budget. How well are you managing the budget? Are you driving ROI through your spend? Are you seeing results?

For many, that insight rarely ventures outside of the data that we gather through Google Analytics. Acquisition data. Retention, for whatever reason, is seen as ‘bonus money’. Again, because it’s not where we’re placing our bets on the Google or Facebook Ads roulette table.

I do see the passive retention strategy in play. The email newsletter. The serial bombardment of sales-laden promotions on our subscriber lists. The push push push of products in hope that we motivate folks to click and purchase.

But I tell you what, that playbook is long out of date.

Why? Because folks are smart. Your subscribers remember. They remember the 30% discount you pitched last week. They remember the buy one get one free from the week prior. They become accustomed to discounts. And, when you begin to explore other methods of influence, such as scarcity or social proof, they still want that discount. No discount no purchase. It’s what you’ve delivered in the past and it’s what they expect in the future.

You’re a consumer. You understand.

So where does this leave us?

You’re left with a continual focus on acquisition. On spending to drive growth. It’s not a place you should free comfortable in.

Somewhere along the line you need to make that switch. To greet new customers with a new method, new strategy for retention. To go beyond the relentless product pitching and to begin targeting. To make better use of the marketing technology you have available to you in order to better segment and, well, to make your retention marketing far more effective.

Create a retention goal and measure against it.

If you’re using Klaviyo, or a similar marketing platform that focuses upon lifecycle marketing, you will have access to cohort analysis. See below.

cohort retention analysis

The graph above details the value of a new customer to your business on a month by month basis. The placed order value per person. It demonstrates the value of a new customer. That new customer who spent £45.88 with your business in July 2019 only furthered their value to you by £2.90 the next month. There’s little growth in terms of customer lifetime value.

The above is a simple metric that you can use to begin identifying retention growth. How well you can drive order value post initial purchase. If a customer is worth £50 to you in October, can you work to make that customer worth an additional £10 to your store during November? Effectively more than doubling the value of the prior months?

Could that be a metric that will demonstrate retention success? Something that can be integrated into your month-end reports? Something that you can strive towards as you begin to put in place an advanced retention strategy for your store?

That’s how you double retention. That’s how you replicate the first graph with that tantalising upward sales trajectory. Customer-centred marketing.

And you know what? It’s doable. Rising first-time user conversion rates is a challenge. You have to build those layers of initial trust. For your existing customers? If you’ve delivered on your initial promise you have the opportunity to develop that relationship and present product that you know your customer will love. You know what they’d like/need to buy next on a personal level. Now replicate that with your post-purchase marketing.

The approach to retention varies widely. Your customers are different. Your products are different. Your business model is different. One thing isn’t. The need to develop channels of retention. If that retention isn’t in the form of repeat business (ie. luxury goods) then make sure, at the very least, that you retain interest. People talk. Word of mouth happens. And it happens far more frequently when you improve your post-purchase marketing.

So go ahead. Set benchmarks. Understand your current retention rate. If you have the technology in place, the data will be there.

And then set goals. Do the maths. Learn what a growth from 5-10% in retention rate looks like for your business. Then spend that 60% of your working week bettering your marketing in order to reach that goal. The potential results are exciting. They’re profit-rich and helping to future-proof your business.

No marketer likes feeding Google rather than their own business.

Written By:

Ian Rhodes


First employee of an ecommerce startup back in 1998. I've been using building and growing ecommerce brands ever since (including my own). Get weekly growth lessons from my own work delivered to your inbox below.

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