Reeling Them In: The Importance of Customer Retention and Product Reorder

When I first moved to my current neighborhood, I explored the area and came across a coffee shop within walking distance from my house. As a new customer, I was drawn in by the extensive menu, store decorations, and cozy interior populated by people of all ages. Over the next few months, I visited most days of the week and soon became a neighborhood regular.

Customer Retention Strategies and Revenue Sources

For both large companies like Starbucks and Amazon and smaller businesses like my local coffee shop, regular customers, or repeat purchasers, contribute a significant portion of a brand’s revenue. In fact, only 8% of this subset generates 41% of a business’ total revenue. While acquiring new customers will remain an important goal for marketers, there is overwhelming evidence to encourage them to focus their efforts on customer retention and product reorder.

New Customer Acquisition is Expensive

It is more cost-effective for brands to retain customers: not only can it cost up to 5 times more to acquire new customers, but a 5% increase in customer retention rates can increase a brand’s profits by up to 95%, according to a study conducted by Bain and Company. According to a recent consumer study, a customer who makes an initial purchase has a 27% chance of later returning to the same store, while a customer who returns and makes a second purchase has a 54% chance of eventually making a third.

These numbers depict a narrative that highlights the importance of consumer loyalty and satisfaction. I often recommend brands or restaurants that have provided great products or service to my friends, and this is a repetitive cycle that has in turn introduced me to some of my go-to brands and locations as well. Unsurprisingly, repeat customers are more likely to refer a business to potential customers and are more willing to try a brand’s new products. Additionally, loyal customers can give marketers valuable feedback that will further improve the customer experience.

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It's Not Just Customer Service

There are a number of classic strategies that marketers can employ to increase retention rates and drive customer loyalty. These include targeted email communication, discount loyalty programs, social media rewards, content personalization, and sustained communication with customers. However, with the rise in ecommerce during the pandemic, consumers are increasingly taking control of their shopping experience, which underscores the importance of an easily-accessible and user-friendly digital experience. One way to accomplish this is through having an efficient product reorder process.

Product Reorder and Your Customer Loyalty Program

At its most business-oriented essence, your customer loyalty program (often referred to interchangeably as a customer retention program) is all about efficient and forecastable product reorder. As mentioned above, it's a well-cited fact that getting new customers is expensive. However, it can be equally as expensive if an existing customer wants to reorder but is met with friction during the reorder process. To that end, it's just as important to inspire your customer base to reorder as it is to make it easy for them to do so. Threading that needle is key to expanding your customer lifetime value, no matter what industry you're in.