What is customer retention on Amazon and how to increase it?

What is customer retention?

Customer retention involves fostering loyalty, leading torecurring purchases from the same customer. It reflects the degree to whichcustomers prefer your brand over competitors offering similar products orservices. It's about building long-term connections between your brand and yourconsumers.

Why is customer retention important?

When customers stick with your company, it indicatessatisfaction with your brand and what you offer. This helps your brand grow andavoid constant turnover of new customers. Customer retention is a key step inthe customer journey, after getting new customers on board. Particularly forwell-established brands, prioritizing customer retention and nurturing loyalpatrons may outweigh the significance and costs of attracting new shoppers.

Customer retention is crucial for company growth and successfor several reasons:

1.       Affordability: Attracting a new customer costs 6 to 7 times more than it does to keep an existing one

2.       ROI: Increasing customer retention byjust 5% can boost company revenue by 25-95%.[RC1] [MM2] [RC3] [MM4] [RC5] 

3.       Loyalty: Returning customers tend topurchase more frequently and spend more. They understand the value of theproduct or service and keep coming back.

4.       Referrals: Happy, loyal customers areinclined to recommend a company to others, bringing in new customers at noextra cost.

While it may seem obvious that retaining customers isimportant, rapid company growth can sometimes lead to neglecting proactivecustomer support for existing consumers.

How to Measure Customer Retention

To measure customer retention, focus on key metrics such asthe customer retention rate (CRR) and customer retention cost (CRC). Otheruseful metrics include purchase quantity, purchase frequency, and lifetimevalue.

Customer Retention Rate (CRR)

CRR compares the initial size of your customer base at thestart of a period to the final total number of customers, excluding newcustomers added during that period. The formula is:

Customer retention rate = ((Total customers – New customers)/ Initial customers) x 100

Customer Retention Cost (CRC)

CRC refers to the total cost of retaining a customer,encompassing marketing, sales, and customer service expenses. The formula foraverage customer retention cost per customer is:

Average customer retention cost per customer = Total cost ofcustomer retention/number of active customers

By tracking these metrics, you can gain insights into howeffectively you are retaining customers and the cost associated with theseefforts.

What improves customer retention?

Boosting customer retention involves engaging with returningcustomers effectively, and there are various methods to achieve this. Here aresome straightforward steps to enhance customer loyalty.

Step 1: Improve Your Relevance

Reaching new customers is essential for retention. Focus onimproving brand awareness and outreach. Educate potential customers about yourlatest offerings and keep the conversation going with recurring updates orsubscription options.

Step 2: Analyze Customer Purchases

In today's competitive market, guessing how to retaincustomers and boost loyalty isn’t enough. You need insights and analysis.

Start by analyzing customer purchases. Understanding theirbehavior helps target efforts to maximize retention and ROI. For instance, youcan identify:

- What products customers buy next after their initialpurchase.

- The most popular second purchase.

- Frequently bought product combinations.

Using an Amazon-specific tool like Nozzle provides detailedASIN data, helping you understand customer buying patterns and informstrategies like bundle deals and cross-selling. It also helps you understandyour average order value (AOV) to maximize returns.

Step 3: Address Customer Feedback

Customer feedback is crucial for retention. Use feedbacksurveys, customer service channels, and return policies to gather direct inputson what customers like, expect, and what could convince them to return. Utilizethis feedback to create open dialogues rather than one-way communication.

Step 4: Analyze Purchase Intervals

Next, analyze when purchases happen through purchaseinterval analysis. This reveals the gap between one purchase and the next,helping you predict when customers will return and when to target them withremarketing.

For example, data might show:

- The average time between a first and second purchase is 60days.

- 80% of repeats occur within 90 days.

- The best retargeting window is 61-90 days after the firstpurchase.

Nozzle can provide this data, helping you focus on customerlifetime value (CLV) and long-term brand investment.

Step 5: Understand Your Products

Understanding retention rates per ASIN is crucial. Toolslike Nozzle consolidate Amazon data, showing which products drive retention andgrowth. For example:

- The initial retention rate from Order 1 to Order 2 is 25%.

- The total retention rate from Order 1 to Order 5 is 10%.

- Retention rates increase after the first order, with 45%from order 2 to order 3, 60% from order 3 to 4, etc.

These insights help prioritize products that boost customerengagement and retention.

Step 6: Set a Customer Retention Rate

With your data, set a realistic customer retention rate(CRR). Understand repurchasing patterns and identify products with the bestretention rates to create a targeted marketing strategy. Utilizing Nozzle, youcan enhance your CRR and CLV, ensuring greater ROI from PPC campaigns and ads.

Step 7: Remarket

Now, remarket effectively. Analyze customer purchases,purchase intervals, and ASIN data to create targeted PPC campaigns. Thisstrategy improves your CRR, lowers ACoS, and increases RoAS.

Step 8: Incentivize Your Customers

Creative incentives are key for retention. Offer rewards orloyalty programs, referral discounts, or time-sensitive deals to encouragerepeat purchases.

Step 9: Reward Loyal Customers

Finally, reward loyal customers with special deals. Usepurchase analytics to create bundle deals or offer incentives like freeshipping. Exclusive discounts make customers feel valued, fostering loyalty andencouraging repeat purchases.

By following these steps, you can build a loyal customerbase and stay ahead of the competition.

Customer retention is undoubtedly vital for the continuousgrowth and success of any business. By prioritizing strategies that nurturecustomer loyalty, such as incentivizing repeat purchases, encouragingengagement, and actively listening to feedback, companies can fosterlong-lasting relationships with their consumers. These endeavours not only leadto augmented revenue and cost savings but also bolster a positive brandreputation and facilitate sustainable business expansion in the long run.Through consistently delivering value and exceptional experiences, businessescan evoke customer loyalty, transforming one-time buyers into devoted advocateswho return time and time again.

How can Nozzle help?

Utilizing Nozzle's Customer Analytics dashboard provides aholistic insight into your customer base, allowing you to focus on the mostprofitable segments. By enhancing your ads, you can drive improvements inoverall business performance, recognizing that knowledge is fundamental toadvancement. With our tool, uncovering retention rates for individual ordernumbers and ASINs becomes seamless, highlighting areas with the greatestpotential for growth. Moreover, understanding the frequency of repurchases and customerengagement levels enables precise adjustments to ad expenditure, facilitatingthe identification of prime opportunities for effective customer retargeting.

‍