We’ll lead off by echoing the thesis of a recent post on the Whiplash Blog: a laserlike focus on customer retention is absolutely crucial for brands as we enter the 2022 holiday season, look toward 2023, and plan for the future.
Really, the focus on retention must be table stakes. The CAC is too damn high.
Those high acquisition costs must mark the beginning of long-term customer relationships. Which is why, to paraphrase from the same article, the only thing that’s more important than the first purchase is the second purchase.
Tracking that repurchasing behavior and working to increase it, therefore, must also be table stakes. In short, you need to increase your repeat purchase rate.
Here are 5 ways to do so:
Zero-party data is information that customers voluntarily share with you via surveys, messages, profiles, and elsewhere.
We think of zero-party data as “conversational data:” information you might learn if you were chatting with a customer about their preferences, background, and opinions.
You might learn that their favorite flavor is chocolate, that they shop for themselves and their partner, that they have a 50lb dog, and that they’ve previously purchased from one of your competitors. And so on.
Zero-party data allows brands to tailor messaging, offers, and experiences for customers in ways that are impossible through first-party data alone.
This meets customers’ demand for personalization: McKinsey reports that 71% of consumers expect personalized interactions from companies, while 76% get frustrated when they don’t receive this treatment.
Personalized experiences mean happier customers, and happier customers are more inclined to make repeat purchases. So, let the zero-party data collection begin.
Collecting this data can begin with a broad question, à la a Vuori discount pop-up:
Vuori encourages customer email signup and an initial zero-party data point via 20% discount.
Vuori can immediately offer tailored product emails to a new customer and better match their wants, which helps drive a first purchase. After the first purchase, the brand is nicely set up to send the customer a post-purchase survey that leads to further product recommendation personalizations, which increases the chances of repurchases.
Or it can take the form of asking for personal details via an on-site survey, which Harper Wilde uses:
At the end of this survey, Harper Wilde asks for the customer’s email, and then provides size recommendations based on the results both onsite and via email.
In Harper Wilde’s case, by asking questions that help (literally) fit the customer’s needs, it can recommend a size most appropriate to the customer. The results? An appropriate first purchase, a significantly better customer experience, and a fresh go-to bra brand for the customer. As an added bonus, Harper Wilde can reduce the likelihood of returns after a first purchase given the sizing questionnaire, which saves margin.
RFM (Recency, Frequency, Monetary) analysis is a way of ranking customers based on how recently they’ve purchased, how frequently they’ve purchased, and how much they’ve spent in a given timeframe. After customers are rank ordered, they are usually broken into segments, such as pentiles or deciles.
Note: Brands can also break down their customers into groups on a strictly monetary basis, such as by revenue or gross margin. The one weakness with this approach, however, is that it doesn’t consider customer engagement. For instance, a brand may have customers who have contributed an enormous amount of revenue, but those customers may not have been active for years. Brands have a much lower odds of driving repeat purchases among customers who have been inactive for over a year (i.e., they have churned).
Brands can approach RFM via a scoring system or formula. But regardless of the RFM system, we have found across the board that relatively small percentages of customers on an RFM basis have outsized impact on profits. In this case, we’ll look at RFM on a gross margin per customer (a.k.a. LTV) basis.
Consider the visualization below:
This brand’s top 2 RFM deciles comprise 60% of its LTV, and its top RFM decile contributes 43% of its LTV.
In other words, the brand’s best 20% of customers account for 60% of its LTV, and the brand’s top 10% of customers account for a whopping 43% of LTV.
Also, note that the bottom 10% of this brand’s customers contribute negative LTV.
A brand’s customers with the highest RFM scores are the most engaged highest spenders, and targeting them is one of the best ways to increase repeat purchase rate.
Send these top customers your best offers, your top loyalty program rewards, early access to products, birthday gifts, and even personalized messages from the founders or team. Let them be beta testers. Ask them their opinions: send them surveys and quizzes (and collect zero-party data!). Invite them to events, either online or in person. They are examples of your marketing and acquisition costs truly paying off.
You’ll build even more loyalty and engagement, which will drive even higher repeat purchase rates—and LTV!
The brands with higher repeat purchase rates and customer retention have strong, compelling cultures that grow and develop over time. The cultures naturally invite customers in and hold them close.
Further, their marketing doesn’t seem like marketing. Customers look forward to reading brand emails and SMS. Education, news, stories, and promotions blend seamlessly into darn good content.
Building such a culture and releasing such content, of course, is much, much, MUCH easier said (or written) than done. But if you’re looking for some inspiration, there are plenty of brands that nail the cultural side as well as the content.
The philanthropic, phast-growing, and phunny home essentials brand Who Gives A Crap is a great example of a brand winning hearts, building loyalty, and growing fast – in no small part because of its culture.
WGAC has a lot of fun with its products, adding engaging designs to the mundane. Its toilet paper wrappers have seasonal designs (e.g., holiday designs for quirky gifts), prompt you to go to certain web pages “while on the loo,” and otherwise bring joy to the biggest staple of customer staples.
On the content side, Marine Layer is known for its funny, inspiring, and even self-deprecating messaging that compels email opens and click-throughs. Check out this year in review email sent going into 2022:
We might be able to gently debate bringing back a well-trodden Bernie Sanders meme, but it fits the lighthearted and attention-grabbing email. You likely do want to learn why Marine Layer almost got sued, and holy shirt indeed. You do want to learn more about old tee shirts being repurposed.
And, maybe, you’ll check out a new style shown at the bottom.
Most brands can come to expect having hordes of one-off holiday customers. You know the ones. The folks who see an ad, lie in wait, and come BFCM and December, swoop in and grab the very steepest discounts—never to be seen again. (Let’s be real, though: we’ve all done this).
These customers, however, shouldn’t be one-off buyers. If you spent the money to acquire them, you can implement a simple tactic to help retain them and drive repurchases—even if they still only shop with you once a year.
We recommend building a “holiday shoppers only” segment who you can start to market to in the weeks leading up to BFCM and over the next year via email and SMS.
For both evergreen and seasonal text-inspo, check out Attentive’s Texts We Love.
Go all out and send your holiday shoppers those steep discounts, because if they purchase a few years in a row, they’ll likely become profitable in the end.
In the end, none of these strategies to retain customers and increase repeat purchase rate actually matter if there are issues with customers’ orders. The best data and analytics in the world won’t save you—nor will that personalized touch.
Customers demand that orders arrive on time, every time, and a poor experience with delivery is a death knell for what could have been a long-term relationship. In fact, 84% of customers won’t shop from a store again if they have a poor delivery experience.
That poor fulfillment experience means the high CAC may lead to one-off, likely unprofitable customers, negative reviews, and an all-around miserable time.
As a brand, you need to have reliable fulfillment, which Ryder E-commerce by Whiplash provides, even for high-SKU brands with complicated omnichannel fulfillment needs.
If a customer has a great pre-purchase experience and delivery is on point, you’ve immediately boosted your chances of winning their loyalty… And future purchases.
We hope we’ve provided a new way or two to think about increasing your repeat purchase rate that can be implemented over the coming months and years. After all, long-term customer relationships are fundamental to brands not just surviving but thriving.
Daasity is a data and analytics company, purpose-built for omnichannel brands. For more, visit Daasity.com.