8 Benefits of Customer Retention (Including 2 You Wouldn't Expect)

When you start lifting weights, some results are immediate — like not being able to lift your arms the next day.

And if you keep it up, you’ll expect to see muscle tone. But some results, like increased confidence, may come as a bit of a surprise.

When you start working on improving your customer retention, some benefits are expected. If customers like your products, that should mean more repeat purchases and lower customer acquisition costs. But over time, and as your customer retention improves, you will likely find some unplanned upsides as well.

The benefits of customer retention touch all areas of your ecommerce business, even some you wouldn’t expect. Here are eight ways strong customer retention helps your organization.

1. Higher Profitability

High customer retention leads to increased profitability because your customers want to buy more from you.

Congratulations! If you have high customer retention, you’ve been given “favorite brand” status by many of your current customers.

According to a study by ZenDesk, 52% of customers will make a concerted effort to buy from their favorite brands. So, more of your customer base will go out of their way to shop with you, even if a competitor is more convenient or slightly less expensive. Loyal customers will also be more willing to give your brand a second chance if the product isn’t perfect or the shipping is delayed.

That favorite brand halo also extends to your new products as well. Engaged customers are more open to trying your newest items because they’ve had a good experience with you in the past. And those repeat purchases mean more revenue for your store and a stronger bottom line.

2. Lower Marketing Costs

Acquiring new customers is hard. Especially when there are hundreds of ways to reach your audience. But once a customer is in your funnel, you have their email address. Sending targeted emails is always cheaper than paid ads. And chances are, they opted in to your communication, so they want to hear from you — taking fewer marketing resources to keep them engaged.

Another reason high retention lowers your marketing costs is that your customers do your marketing for you. KPMG found that 86% of loyal customers will recommend you to their friends and family. Many may even post testimonials on social media about their favorite products or the positive experience they had with your customer service. And if you are lucky — or if your products can withstand a car fire — it might even go viral.

When you have strong customer retention, you also have a good amount of data about your target market. That makes it easier to identify look-alike audiences for paid spend on your marketing campaigns. You also need fewer coupons and incentives to bring your loyal customers back to your site. The chances of an existing customer buying from you can be as much as 14 times higher than selling to a new customer.

3. Enhanced Brand Loyalty

The more customers purchase from you, the more opportunities you have to earn their trust. Wowing customers again and again pays off — more than 60% of consumers consider themselves loyal to a brand after three purchases.

And because many of your new customers are finding you through word-of-mouth referrals, those relationships are likely to be stronger from the start. According to Nielson’s trust in advertising study, 88% of global respondents trust recommendations from people they know more than any other channel.

With enhanced brand loyalty, you’ll also see lower customer churn — your customers are more likely to stay in your funnel. More than 80% of satisfied customers were likely or very likely to continue to shop with a company after a bad experience and give them another chance. So, as your customer retention rate increases, you’ll see your churn rate decrease.

4. Honest and Useful Customer Feedback

Your hand cream is a hit. You almost can’t keep it in stock. That’s when you start getting comments from existing customers about offering it in a different size or making a lavender scent. More than 70% of customers who have a great experience on your site are likely to tell others.

This customer feedback is product development gold. Even the less positive comments can be helpful. Your loyal customers want you to succeed, so they are more likely to reach out when they have feedback instead of simply switching to a competitor.

The feedback provided by your engaged customers is based on actual knowledge of your products and site, so the suggestions are more likely to be feasible. If you provide vegan skincare, your loyal customers aren’t going to suggest a product with honey as an ingredient. The feedback is also likely to reflect your best customers. Incorporating the changes not only helps you retain your current customers and improve the customer experience but also helps attract more customers like them who have similar tastes.

When you have a high customer retention rate and a variety of feedback channels, you increase the opportunities to show you are taking feedback seriously, which improves trust. Improving trust leads to stronger customer loyalty, thus creating a retention “loyalty loop.”

5. Better Cross-Sell and Upsell Opportunities

With each purchase a customer makes, you learn something new about what that person likes. With strong customer retention, you get more data points to help you create incredible recommendations.

When you have multiple purchases to pull from, you understand your core personas well enough to suggest other products and identify trends in purchasing behavior. You know that current customers who purchase those socks also tend to like this specific water bottle. But people who buy those socks and these running shorts eventually also buy the backpack. So, you can begin to create bundles and recommendations for new customers to follow that same pattern.

According to McKinsey, companies saw a 15-25% increase in cross-sell rates among satisfied and engaged customers.

As you collect customer data on specific buyers through their order history, you are able to provide hyper-personalized recommendations. Those personalized recommendations then continue to drive customer engagement and brand loyalty. A study by McKinsey found that more than 70% of customers expect personalized interactions, and 76% of them get frustrated when they don’t get it.

6. Higher Customer Lifetime Value

Like many of the benefits of strong customer retention, an increased customer lifetime value (CLV) just makes sense. When you retain customers, those customers buy more, they buy more often, and they buy over a longer period. According to Motista, customers who have a strong emotional connection to a brand continue to make purchases with the brand for 5.1 years compared to 3.4 years for an average customer.

Engaged customers are typically less price-sensitive and more likely to try new products, so their average cart is also higher. Just look at Apple — more than 90% of current Apple customers plan to stay with an Apple product when it’s time to upgrade instead of switching to Android. Put that together, and you have a higher customer lifetime value.

7. More Innovation

One of the less obvious benefits of high customer retention is a more creative and innovative organization. It might not be something you see right away, but when you have a strong group of repeat customers, your organization has the data and space to innovate.

Your data is more reliable because you have quantity and a longer timeline. You can segment your target personas and identify trends early. This data enables you to be proactive with your product development instead of reactive, giving you a competitive advantage.

Also, when you’re not focused on customer acquisition, you have time to develop new products. Customer acquisition is a long and expensive game. When you have engaged customers who are willing to do much of the marketing lift for you through positive word-of-mouth, you can focus resources on delighting them. This solid customer foundation — and repeat sales — also helps you forecast better so you can more appropriately delegate resources.

8. Higher Employee Morale

You won’t find this benefit in your ecommerce metrics, but it might be the most important. Strong customer retention helps employee morale. Your employees are more likely to take pride in a brand that people like.

And it doesn’t hurt that happy customers are more fun to work with. It’s hard to be excited about your work when you have to hear from angry customers all day. Loyal customers are more willing to forgive a negative experience, so even when a problem happens, those customers are less likely to be rude to your customer support.

Happier, more engaged employees also keep the retention loop spinning: More than 70% of customers say that cold or disengaged employees are a turn-off.

Personalization: The Key to Great Customer Retention

Ready to start working on improving your customer retention? Start with personalization. Every customer wants to be treated like the fabulous person they are, with individual tastes and preferences. And they don’t want to be overwhelmed with options that don’t apply to them.

Use the data you have about their order history or preferences from customers with similar demographics to provide tailored recommendations. When your customers feel like you take the time to know them, you create the kind of experience that brings them back.

Learn how to put the power of personalization to work for your ecommerce site with Rebuy. Sign up for a demo today.

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