Customer retention is the process of retaining individuals as customers for an eCommerce business. It helps to build long-term relationships with customers and improve customer loyalty. The customer retention rate is mostly relevant in subscription-based business models. It helps in predicting the growth and ensuring the long-term success of the business.
Here are some reasons why customer retention is important for eCommerce business:
Return on Investment (ROI): Retaining existing customers is much cheaper and involves less effort than acquiring new customers. You can save ad spending and marketing costs and invest time and money to retain existing customers, which would bring growth in the long run.
Increase brand awareness: Loyal customers are your best advocates. They are most likely to spread the word about your business and increase your brand recognition. This word-of-mouth publicity is more effective than any of your marketing campaigns to bring new customers.
Increase Customer Lifetime Value (LTV): Loyal customers are more likely to make repeated purchases on your eCommerce website and contribute to the lifetime value.
Focus on growth: Acquiring new customers will bring you revenue, whereas retaining existing customers will bring growth to your business. By retaining customers, you can have a fixed revenue stream along with the revenue from new customers.
Reduce marketing costs: Retaining customers are more likely to make repeat purchases and requires less marketing spend than acquiring new customers. This will significantly reduce the marketing costs for your business.
We also recommend you read the below articles:
What is Subscription Churn? How to Reduce it?
8 Key Metrics to Track for a Successful Subscription Business