By Conor McGrath, Head of UK and Nordic Clients at parcelLab
The changing nature of business means that few statistics stand the test of time. But one particular figure from over a decade ago by Frederick Reichheld of Bain & Company – originally published in the Harvard Business Review – continues to crop up when talking about the importance of customer retention. It says that increasing customer retention rates by 5% boosts profits by between 25% to 95%.
This statistic continues to feature to this day in various online publications, including both Forbes and Advertising Week – with the latter going as far as to proclaim retention as “the next frontier for today’s CMO”. The NEXT frontier? Doesn’t everyone know already that it’s cheaper to keep a current customer than find a new one?
Despite this piece of common knowledge, many companies still don’t champion retention as a top priority. This is certainly true in online retail, where the sudden growth in e-commerce has caused a rush to acquire customers by making the browsing and buying journey as smooth as possible and through new business strategies. The same effort has not been put into building loyalty in order to retain customers.
In an increasingly competitive global marketplace, keeping hold of customers has never been more important, which is why the profile of retention is currently being raised. Brands and retailers should be looking at creating year-long engagement and personalised, consistent communication with their consumers all year round and instead of constantly chasing new customers, turning the focus to creating loyal customers for life.
Ironically, one of the best ways online retailers can boost customer retention and loyalty is only practised by a minority of companies in the sector. The technique is communicating directly with customers once they have made a purchase during the shipping and returns phase. Most online retailers leave post-purchase communication to their courier company. In fact, only 11 of Britain’s 100 largest online retailers contact their shoppers directly during shipping*. By not doing this they are missing out on a big opportunity to drive immediate repurchase and retain customers.
Encouragingly, according to Dentsu Aegis Network’s CMO Report, 83% of CMOs identify the importance of seamless customer experience and commerce across channels, yet only 60% believe they are developing this capability well. So, what can marketers do to improve on this?
The answer is to invest more in the overall customer experience to retain loyal customers, rather than constantly seeking out new ones. A smooth post-checkout experience is paramount for customer loyalty, retention and repeat purchases. Retailers have a huge opportunity to extend their marketing and customer service strategy into and during the delivery window. Otherwise, the customer experience will continue to be poor and revenue opportunities will be missed. By taking control of the customer journey post-checkout, retailers can improve retention dramatically, reduce customer service enquiries significantly and increase revenue.
Assuming control of the post-purchase communications process means online brands and retailers can be more attentive and pro-active during shipping, keeping their customers better informed and in doing so increasing the number of marketing touchpoints. Each message can also be branded in terms of look and tone, reinforcing brand awareness. Personalised offers can be included in shipping and returns messages, together with suggestions for complementary purchases, turning the post-purchase phase into a marketing channel – and one that achieves 60% to 70% open rates on average.
Closing the post-purchase communications gap in this way not only drives customers back to your website but encourages repeat purchases, proving that it’s an excellent way to retaining customers and boosting sales.
Bain & Company’s retention statistic is the kind of universal business statistic that ages well, as it crosses sectors, industries and trends. Keeping a customer doesn’t only cost less than acquiring one, it also drives revenue by a considerable amount – and that’s why Bain & Company’s retention statistic very much still holds true!
*parcelLab’s UK E-Commerce Shipping Survey 2019