How is customer retention for your e-commerce channel? Would you say you are satisfied with how your brand’s current social media presence boosts your brand’s customer retention rates? In this article, we dive into 2023 social media trends for e-commerce brands.
MedTech brands are seeing positive customer retention boosts from their social media efforts, leading to brands investing more in social media efforts in their 2023 strategy.
According to Shopify, which powers nearly one-third of all USA-based e-commerce websites.1 With 93% of all internet users also on social media,2 it may not be surprising to hear that 9 in 10 customers buy from brands they follow on social media,3 making social media a focus in 2023 for many big e-commerce brands.
Analysts agree that spending on social media advertising is projected to increase by over 103 billion dollars (USD) over the next five years – a +179% growth.4 Companies that want to stay competitive at both attracting new customers and retaining existing customers need to have a robust social media strategy and social team.
What is customer retention and why is it important?
Customer retention measures, within a specific time period, how many customers who have purchased from your store continue to come back and re-purchase. For example, if we set the date range for the last 180 days, your customer retention rate would be the number of customers reordering divided by the total number of customers active during that time period. If 10,000 total customers ordered during the last 180 days, and only 1,000 came back to make a second purchase, then your customer retention rate is 1,000 divided by 10,000 = 10%.
Your customer retention rate can help with revenue forecasting and also be a great metric to focus your business goals around. Imagine if that 10% retention rate from the example increased by +15% to 25%. That would mean, in that previous example, your business is getting 1,500 more customers reordering. This retention rate is especially important if your business relies on customers coming back to re-purchase, such as those with subscription-based business models.
What about Customer Lifetime Value (CLV)?
Customer Lifetime Value is a measurement of how much revenue each customer, on average, will bring to your company in their lifetime. This is an important calculation that often guides customer acquisition and customer retention strategies. The Customer Lifetime Value is determined by multiplying your customer’s average purchase value, average number of purchases, and average customer lifespan. Similarly, Average Customer Value is the average revenue brought in per customer multiplied by their average number of purchases. Here are the formulas for Customer Lifetime Value and Average Customer Value below.
Customer Lifetime Value = (Average Customer Value * Average Customer Lifespan)
Average Customer Value = (Average Purchase Value * Average Number of Purchases)
With some exceptions, many businesses want to ensure that their customer acquisition cost is lower than their CLV. Retention teams often use CLV as a metric to work on improving. Businesses with strong customer retention will have a higher Customer Lifetime Value.
5 ways to improve customer retention
We looked at the best practices of the most successful e-commerce brands, and distilled them down to the top 5 best practices for e-commerce stores.
1. Implement email automation
Successful e-commerce brands leverage email marketing automation to improve their conversion rates. Adding a well-crafted, high-value Customer Welcome Series Flow is proven to improve conversion rating by 2% on average across all industries.5 What information would be helpful to make sure your customer is set up for success using your product? A Welcome Series is also an excellent opportunity to make them feel welcomed into your brand with a warm, heartfelt message from the CEO or Founder. We have found that any email that is sent to customers has the probability of generating more revenue for your business, and can help identify your most engaged customers using email analytics from industry-leading email and SMS marketing platforms like Klaviyo.