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Along with new customer acquisition, it is critical for merchants to equally prioritize existing customer retention. Stagnant, or worse, declining revenues from existing customers can be a big red flag. It indicates that merchants need to improve customer engagement and deliver a better customer experience towards higher revenue realisation. The customer retention strategies could range from delivering the best-in-class payments experience, offering new products, cross-selling, rationalisation of price structures, or alleviating customer pain points.
Consider the following stats:
- New customer acquisition can cost 5x times more than existing customer retention
- Enhanced 5% focus on customer retention can boost profits between 25-95%
- Success rate of selling to existing customers is estimated at 60-70%, as against a 5-20% rate for new customers
- Studies by a customer experience agency reveal that loyal customers are 5x times likely to buy again, 4x times likely to refer others and 7x times likely to experiment with a new product of the same merchant.
Like corporate performance may be gauged with financial and operational ratio analysis, broadly, the following ways are used to measure the effectiveness of a merchant’s customer retention strategies:
• Customer retention rate: This metric measures the percent of customers retained by a merchant during a certain period of time
• Customer churn rate: This metric measures the percent of existing customers that were lost during a certain period of time. As per industry standards, 5-7% is considered acceptable. A value exceeding 10% indicates deep customer dissatisfaction with the products offered or services rendered
• Customer Lifetime Value: CLV is the total amount spent at a merchant store over the lifetime as a customer. Since Buy Now Pay Later allows customers to extend their payments over a period of time, this means they would be engaged with the merchant for a longer time span, which may boost customer retention rates.
• Revenue churn rate: This is closely correlated to the Customer Churn Rate. This measures the revenue lost or declined owing to losing customers due to product or contract cancellation or a scaling down of their usage levels during a specified period of time. This indicates that the customers perceive less value from the product offered by the merchant compared to peers.
• Net Promoter Score: This indicates the percent of satisfied customers who are referred or recommend the merchant’s products to other potential buyers. This reveals the quality of the product as perceived by the customer.
• Product Return Rate: This indicates the percent of products returned back in comparison to the total product units sold. A high value indicates a serious problem in the product quality and can severely impair the brand’s reputation.
• Repeat purchase rate: This reveals the percent of customers who buy repeat orders, which may also be in the form of subscriptions or contract renewals. This may be due to good offers, competitive pricing, or bulk purchases.
• Loyal customer rate: This metric reflects the percent of customers who make repeat orders from the merchant. This indicates customer loyalty levels. The key difference between loyal customer rate and repeat purchase rate is that the former is tied to customer loyalty while the latter is towards customer convenience.
Winning customer loyalty is key
Since both- new customers, as well as existing customers, are equally important for merchants to grow their business in a sustainable manner in the long run, we shall look at some time-tested strategies that merchants can deploy to boost sales from their existing customer base:
1. Deferred payment solutions
Since the payments, part of the online transaction is the crucial revenue realization stage, it is imperative for merchants to ensure a smooth, prompt payments experience with the best UX. Simpl offers merchants with a frictionless one-tap Buy Now Pay Later payments option. Under this, the merchant is instantly paid towards the value of the purchase, while the customers get to avail of deferred payment with an interest-free credit period. It would be prudent for merchants to integrate a payment platform that offers flexibility to end customers. Simpl offers Pay in 3, a convenient option under which customers can split their repayment. Offering flexible payment options can boost customer loyalty levels for merchants.
2. Constant customer engagement
Value-centric interactions between merchants and clients can build loyalty. Social media is a powerful channel to engage with customers. Further, offering robust 24*7 post-purchase support and chat box to resolve customer queries contribute to brand equity. For example, D2C brands take huge efforts to build a loyal community of followers, many of whom may convert to customers. A transparent payments process that promptly processes refunds in case of returns also enhances the merchant’s credibility.
3. Prompt transaction completion
A BCG survey reveals that on average, an e-commerce website needs shoppers to click 23 times from the point of selection till a purchase is completed. Since that time is money, merchants would do well to revamp the shopping experience and enable a one-click checkout with secure online payment systems. Simpl enables a frictionless payment at the checkout page with credit approval in an instant. A superior payments cum checkout experience would drastically reduce instances of cart abandonment and boost conversions.
4. Rewarding loyalty
Every customer likes to feel valued by the merchants that they shop with. A loyalty program with frequent buyer discounts, special offers for high-value purchases, points towards bulk purchases that can be redeemed etc would increase website visitor traffic and might boost sales, both by value and volume. D2C merchants can send personalised messages to existing customers regarding benefits programs by sending targeted emailers or SMS with customized rewards and points status. Many merchants may also offer co-branded offers with connected products.
5. Secure payments
This is a critical aspect to ensure repeat customers. Customers are attracted to browse and buy from merchant websites that are up to date and well-maintained with superior UX. This extends to the payments aspect as well. It would be prudent for merchants to ensure that the payments option is well integrated and secure. Simpl offers an encrypted payments experience with 100% data privacy. There is no need to provide bank or card details to merchant platforms. Customers only need to share KYC details in an encrypted environment.
This speeds up the transaction time as the customer would not have to re-enter the details each time before a purchase transaction across multiple merchants.
6. Optimal costs
A charge for using the payment gateway is frustrating for customers. Ideally, merchants should integrate a seamless plug-in payment system. Simpl is 100% zero-cost and free of charge for the customer. A charge applies only if the repayment is delayed beyond the payback period.
An informed customer is generally a loyal customer. To retain existing customers, merchants could include a knowledge segment or resources with information on the products, FAQs related to the purchase process and payment options.
8. Product innovation
Constant product innovation is a must for the business to thrive or survive. Merchants can offer personalised recommendations to customers based on the data analytics of past transactions. Merchants could also enable better product selection options with history or transactions, customer reviews, etc, for minimum navigation time till the customer reaches the payments page.
9. Customer feedback
Besides the implementation of customer retention strategies, it is imperative for merchants to keep an ear to the ground and stay aware of the latest developments in the sector and gauge evolving customer expectations. For example, the pandemic forced many traditional business entities to transition to a digital online shop and several leading FMCG players to adopt a D2C model, apart from a physical store presence. Getting customer opinion via an optional pop-up survey or a quick questionnaire regarding the ease of online shopping and product quality would go a long way in winning customer confidence.
Merchants are facing increased competition in today’s digital era, emphasizing the importance of robust differentiation strategies across verticals – be it product, payment experience or website UX. Providing a secure payment experience with zero failed transactions and prompt transaction completion would go a long way in fostering customer trust, simplifying online shopping and ensuring higher sales conversions from existing customers.
Simpl is a merchants-first payments platform that boosts trust between merchants and their valued customers. Visit us at to know more.