When it comes to long term success in ecommerce it is just as important to retain customers as it is to acquire them. Getting repeat sales from your existing customer base is just good business. That is why it is important to both measure and minimize customer churn.
Measuring customer churn lets you know whether you are meeting customers expectations enough for them to continue doing business on your ecommerce site. It is no longer enough to attract customers and guide them to the shopping cart, you must make the effort to keep them around.
What is Customer Churn in Ecommerce?
Customer Churn is a measurement of how many customers stop buying from a retail store over a defined period of time. Also referred to as customer attrition, customer churn in ecommerce refers to customers that purchase from an online store on a regular basis, but suddenly stop doing so. While it is impossible for any business to retain 100% of their customers, the best ecommerce customer churn rates are in the single digits.
How to Calculate Customer Churn Rate
Measuring customer churn rate is easier for some ecommerce businesses than it is for others. To calculate churn rate you have to know how many customers you have and when you expect them to make their next purchase. For businesses using a subscription model, calculating customer churn rate is as simple as counting customers that stop their subscriptions and divide that by the number of total customers over that period. For all other businesses, however, calculating churn rate is a little bit more difficult, but no less important.
To calculate churn rate, review customer order history and determine patterns that show how often they place orders. For example, if you sell bicycles and accessories, you can check how often a customer replaces their tires. Knowing the rhythm and tendencies of regular customers lets you know when to expect another order and notice if that doesn’t happen. Once you have these patterns, review how many customers buy regularly and what percentage stop doing so over a sales cycle.
Why Does Customer Churn Rate Matter?
There are several advantages from understanding customer churn rate. Determining whether your churn rate is trending up or down tells you if there is a problem with your ecommerce business. It also lets you calculate sales forecasts by measuring how many customers you would expect to drop out. This can help you to determine how many new customers to add to replace the ones you lost.
But perhaps the most important role for the customer churn rate is in helping you identify opportunities to make improvements to your customer journey and improve your ecommerce business.
Steps to Mitigate and Reduce Churn Rate in Ecommerce
One you have defined and measured your customer churn rate, the next step is to decide how to reduce it. Average churn rates can range from 3% to 25% depending on your industry and how you measure it. Rather than trying to hit a target churn rate, your goal should be to make improvements. A reduction from 25% to 23% is just as good as one from 8% to 6%.
So how do you reduce your churn rate? Here are a few suggestions:
Collect and Use Data to Select Your Strategies
Use customer order history to identify lapsed customers and look for signs, patterns and trends that might shed light on why. Did they post a negative review? Was there a delivery exception? How many times did they reach out to customer service? Once you identify the events that preceded a customer leaving, you can address the issue and eliminate any potential problems. Who knows, you might even be able to get those customers back.
Stay in Touch With Your Customer Base
Sometimes, the reason a customer stops buying is because they haven’t heard from you recently. This is especially true for products with long sales cycles or with seasonal items. Make sure to stay top of mind with your customers especially around the time you would expect their next order.
Offer Discounts and Freebies
Reach out to regular customers and give them an incentive to come back. This way, when it is time to replace their last purchase, they get it from your online store. Incentives will not only continue engagement with your brand, but also create a reason for them to return.
Share Educational Updates
Being an expert in your field adds authority to your brand and increases the trust your customers have in your products. Send out regular communications to customers discussing the history of your industry or sharing tips and tricks of the trade. Customers will think of your online store when they are ready to make their next purchase.
Create Abandoned Cart Reminders
Set up your store to send emails to customers that reached checkout but didn’t buy. There are many reasons why a customer might do this, and a reminder might just be enough to get them to complete the purchase.
Refine Your Customer Experience
Prioritizing the customer experience by using a branded tracking page where shoppers can track their order is a great way to reduce customer churn. Keeping the customer engaged during the post purchase experience will increase brand loyalty, reduce customer frustrations with order tracking, and give you an opportunity to customize offers and cross-promotions that will keep your customer coming back.
Conclusion
Customer churn is an important part of understanding your ecommerce business, keeping your customers satisfied, and making improvements to your customer journey. Once you understand why your customers might be leaving you can develop strategies and understand where your customers might be hitting roadblocks that keep them from returning.
The WISMOlabs post purchase platform was developed to keep customers engaged after the purchase and to make it easier for customers to continue visiting and shopping in your store. The platform is trusted by the most innovative and fastest growing retailers to help them reduce their customer churn. Contact us today to see how we can help you.
