8 min read
Published On: 2022-07-28
Acquiring new customers is great. But for a DTC brand to be successful in the long run, customer retention is equally important. Paid acquisition online is no longer cheap and losing money on the first order is becoming the norm now.
In such a scenario, profitability relies on existing customers where repeat orders equalize acquisition costs. Once you've paid to acquire customers, make the most out of it.
As per a DTC metrics report, DTC brands enjoy a retention rate of 28%. Even more interesting is that 60% of the revenue comes from return customers. In short, DTC brands thrive on a loyal customer base.
Plainly put, the customer retention rate is the ability of a business to retain its customers over time. A higher customer retention rate signifies that the business has managed to build a sustainable customer relationship. At its core, DTC customer retention is about keeping your customers engaged with positive experiences and turning one-time buyers into loyal long-term customers.
The customer retention rate formula is a percentage and can vary depending on your industry and sales lifecycle. For ecommerce brands, a 35% retention rate is considered good.
So without further ado, here are 12 strategies to increase the retention rate for your DTC brand.
When you see a drop in customers buying from you, figure out where in the customer journey users tend to drop off and if you can solve any issues. Google Analytics can help you find out where users are clicking, the pages they are visiting, and where you are losing them.
Keep a track of important metrics that indicate issues in the customer journey, including:
For example, if you have a high return rate, check if there is an issue with the product itself or if the product does not match the description.
Or send surveys to customers who haven't purchased from you for a while. Here's how Fabletics uses a quick and simple survey to ask customers why they haven't returned to the brand.
By knowing your most valuable customers, you can implement behavioral upsell strategies to improve the customer retention rate and the customer lifetime value.
So how do you find out the top 20% of your customers who're driving the maximum value?
Use the RFM (recency, frequency, and monetary) approach to know where 80% of your business revenue comes from.
Here, recency answers when the customer purchased from you - customers who purchased recently are more likely to convert to loyal customers.
Frequency means how often a customer purchases. The more frequent the buyer, the higher the chances of them being loyal to your brand.
Monetary implies how much a customer spends on each purchase. High spenders are more likely to stick around your DTC brand.
Merge this data to determine your valuable customers and target your customer lifetime value campaigns towards them.
A great customer retention strategy for your DTC brand is using retargeting. Studies have shown that retargeting can increase conversion rates by upto 150%!
Research shows that retargeting ads outperform all other formats of targeted ads and are 76% more likely to be clicked on rather than a regular ad.
Here's how you can get the best out of retargeting ads:
For example, Warby Parker retargets visitors who've browsed through the seasonal collection by showing the spring collection:
On the other hand, this retargeting ad offers a free trial and is shown to visitors who explored the try-on page on their website:
What if your customers did not have to come back to your DTC website to reorder? That's where subscription plans come in. They are recurring orders to secure brand loyalty and increase your bottom line.
What's even better, it not only commits a customer for future purchases but also improves your customer lifetime value - necessary for the survival of your DTC brand.
Here's how Birchbox has multiple subscription plans that a customer can choose from:
As a part of your customer retention strategy, test if offering discounts can bring inactive customers back into the buying game. If they don't respond, it is best to let them go.
A common question for ecommerce stores and DTC brands is “How do we prevent customers from switching brands?”
When you reward customers for purchasing from your brand, it creates a reciprocal relationship that has high value for both the brand and the customer.
Instead of a plain loyalty program, try out different variations like:
Tier-based loyalty program - Sephora's loyalty program (Beauty Insider) uses a tier-based system in their loyalty program with exclusive rewards that are not accessible at lower levels:
VIP program - If you're deciding how to work out your customer retention rate, another strategy worth trying for your DTC brand is having a VIP program that offers great perks and gives a sense of community.
The North Face's XPLR pass appeals to its customer base with unique extra offerings like gear testing, discounts, and access to unreleased gear along with points for specific sustainable actions.
The reason why North Face's VIP program stands out is that it knows the customer's specific wants and needs.
Be generous with free samples - Free samples have proven to increase sales by as much as 2,000%. The best part, free samples help build brand loyalty and often lead to the second round of purchases. You can combine free samples with your loyalty program as a part of your DTC customer retention strategy.
Here's how Bobby Brown added a free sample on the purchase of its lipstick at checkout:
High-performing DTC product pages that bring potential customers and sales have one thing in common - they provide a positive user experience on their website.
Looking to create a seamless and easy experience for your visitors to encourage them to buy on your website? Some tips worth following:
For inspiration, refer to The Lip Bar's DTC website:
Ideally, your DTC brand should be where your customers are and use all channels as per the customers' preferences and past behavior. To improve your DTC customer retention rate, open up multiple communication channels like:
This email from Birchbox is a great example of keeping customers connected to your brand:
As per a case study, they generated $155,000 in 30 days with Messenger automation!
If your users have opted-in to receive updates through WhatsApp, you can send them reorder messages (especially when you have a subscription model), price drops, sales alerts, product recommendations, and coupon codes.
Shoppop has some great WhatsApp templates for reference.
In addition, WhatsApp chatbots for DTC brands have numerous use cases. With WhatsApp's business API, the conversations are automated and are used to answer customer queries 24/7. Hidesign, a brand selling leather accessories uses WhatsApp to answer frequently asked questions:
Traditionally, order status updates have been sent through email and SMS, and they tend to go unseen. LensKart uses WhatsApp chatbot to keep customers updated about their package status.
Customers can also reply, ask for rescheduling, or change the delivery address right from WhatsApp:
There's nothing better than existing customers promoting your brand for DTC retention marketing as this validation comes from real people instead of the brand.
Be it on social media or on your website, encourage customers to create content with your products and incentivize them in different ways for sharing it on their social media. This could include sharing on your company page, offering discounts, freebies on the next purchase, and so on.
Your DTC brand can make the most of UGC in several ways:
The clothing brand Camping with Dogs' Instagram page is filled with photos of their customers and their dogs on camping trips.
You can mention a specific hashtag in your bio and ask customers to share their experiences using the hashtag.
- Unboxing videos are extremely popular among online shoppers.
Apart from seeing the product in action, it captures the customer's excitement and satisfaction with the purchase.
Man Crate is a brand that capitalizes on unboxing videos for social proof:
Product bundling helps DTC stores increase their average order value and improve customer retention rate. You could group several products and sell them as a combined package, often for a cheaper price than what they cost individually.
Additionally, it is an effective way to offload lower-selling or less popular products by bundling them with bestsellers.
Skincare brand Murad repeatedly references how the price of its Hydrate Trial kit bundle is lesser than the combined price of individual products. The buyer feels that they're getting a good discount here in addition to being nudged to enroll in the subscription plan:
While content marketing as a customer retention strategy is well-known and commonly used, you can leverage different formats of content for buyers at different stages in their journey.
For example, Northern Brewer is an ecommerce brand selling home-brewing kits, equipment, recipe kits, and ingredients. Home brewers can benefit from expert advice and that's what Northern Brewer addresses using content marketing.
The website has a whole section dedicated to customer education:
Within the articles, they seamlessly weave their products, which helps buyers find what they need while improving sales.
Plus, they have a massive video library where buyers can get stepwise instructions from experts:
They offer free interactive tools like a refractometer calculator to make the brewing process easier:
Northern Brewer shows that customer education can improve your DTC business's customer retention rate. Find areas where you can share your knowledge to educate buyers.
Offer customers a personalized experience by going beyond including a customer's name in the email. Ecommerce brands are coming up with innovative email customer retention strategies:
- Thank you and confirmation emails have an open rate of 65%, so customize them with a feedback survey, ask for testimonials, or recommend similar products.
See how Bellroy sends a post-purchase NPS survey email 30 days after the purchase:
- Suppose you sell protein supplements that need to be replenished every 12 weeks, send automated reminders 10 weeks after each purchase as repeat purchase email campaigns have an open rate of 53.6%.
- Although winning back customers is an effective customer retention strategy for small brands, it is not easy. Most of your customers are being sent out winback emails by several companies, meaning they are used to the old trick by now.
How do you stand apart?
Prove to customers that you've improved your product or service since the last time they purchased. Show that you've listened to customer feedback and done something about it and that's where product emails come to help.
In this example by Outdoor Voices, the company explains how they've added new products that customers asked for:
Another customer retention example for DTC brands worth trying is sending product updates when you've launched a new line or offering - to dormant or lapsed shoppers. If the customer has purchased from you earlier and likes your products, they'll be likely to come back and purchase from the new category.
Product return and shipping policies can have a significant impact on customer satisfaction. 55% of shoppers would not choose to shop with DTC brands who don't have flexible return policies. What's more, 49% said they check a store's return policy before buying from a brand.
When writing a return policy, be sure to mention the following:
At the bottom of every product page, Chubbies has its returns policy briefly mentioned:
In addition, they have a separate page and form for customers looking to initiate a return. There's a separate support email in case customers have difficulty filling out the form.
Include links to your return and shipping policies at several “hard-to-miss” places on the website like the footer, FAQs page, product page, cart, and checkout. This will help set the right expectations before a purchase is made.
By now, you know how strong DTC customer retention strategies create loyal repeat customers with an excellent ROI. Remember, at the end of the day, your brand isn't about you, it's about your customers. Strengthen your relationship with them and see how they stick to you.