Why Retention is the New Growth Lever for Shopping Apps
App User Lifecycle

Why Retention is the New Growth Lever for Shopping Apps

Shopping apps are losing customers faster than acquiring them.

One fourth of all apps get used only once before being discarded.1

On average for shopping apps, 78% of users churn after 30 days of downloading the app.

For marketers in the ecommerce space, clicks and conversions often come with a price tag. The high customer acquisition costs make it close to impossible to keep adding more users and grow the top line.

In short, without focusing on retaining current customers, ecommerce apps are trying to fill a leaky bucket by constantly acquiring users that don’t stick around.

This problem results in low customer lifetime value, hampering brand loyalty and growth in the long run.

Instead, let’s see how retention can drive long-term growth for your business.

Why Retention Is the New Growth

Data shows that repeat purchases make up only 8% of customers, however, they contribute up to 40% of all sales.2 This also means that an uplift in retention results in an increase in Average Order Value and Customer Lifetime Value.

Moreover, consider the graph below: a small improvement in retention rate results in big gains over time – the power of compounding.

customer retention improves revenue

(Source)
Lastly, for most businesses, the saying holds largely true — it is cheaper to get an existing customer to purchase than to get a new customer. Research by Harvard Business Review3 estimates that it is anywhere from 5 to 25 times more expensive to acquire a new customer than it is to keep a current one.

Now, let’s delve deeper into the strategies to engage and retain users.

Retention Strategies for Ecommerce Apps

Before we begin, let’s start with defining what retention is all about.

Customer retention involves creating campaigns that focus on your existing user base. The goal is to create habitual active users and repeat customers, and increase metrics like session length and frequency or purchase frequency and average order value.

Here are some of the key strategies you can apply to retain your users:

Personalize the User Experience

Customers today, expect brands to proactively deliver a personalized shopping experience. Their expectations are never the same – they keep expecting more over time.

To improve the shopping experience, integrate contextual and relevant product recommendations into your overall engagement strategy, using channels like push notifications, in app messages, text messages, and email, amongst others.
personalized recommendations

Granular Audience Segmentation

Segmentation helps you group your audience into homogenous sets of users so that you can target each one of them differently.

You can segment your users on the basis of user behavior data including advanced segmentation on psychographic traits or recency, frequency and monetary value of user actions. And, you should target each segment with the right message and campaign.

rfm segmentation

Launch a Loyalty Program

Incentives influence customers to act in a certain way. Loyalty programs are really effective in driving repeat purchases and turn one-time shoppers into frequent shoppers. In addition to that, it also helps customers form a relationship with your brand.

Take for example, Sephora’s Beauty Insider Loyalty Program, that has 17 million subscribers contributing as much as ~80% to its annual revenues.4 Rewarding the right set of users to keep purchasing from you is a long-term game you should pitch to play.

sephora loyalty program

Introduce Gamification

When executed to perfection, gamifying the buying experience or a part of the user experience on the site or the app brings up customer satisfaction scores.

Victoria’s Secret, the lingerie retailer has a separate brand geared for their younger audience called PINK. Perfect for the millennial crowd, their PINK Nation app merges the classic ecommerce experience with fun games and contests.

pink nation by victoria's secret

Stay Top of Mind with Retargeting

Oftentimes users search for a product but do not buy. Even existing users come to your app or site, search for a product but do not purchase. Using retargeting techniques, you can reach these users on other sites with targeted messages containing details of the products they were interested in.

Similarly, retargeting can also be used to combat shopping cart abandonment, which happens when users add product(s) to cart but do not complete the purchase.

Improve Customer Support

Customer support is the moment of truth where customers get a lasting impression of your brand. Make sure you deliver a delightful one. The customer support channels like live chat help in the pre-purchase as well as the post-purchase phase.

Improve the overall experience customers have with your brand by focusing on all touch points – physical or digital. Excellent customer service goes a long way, as you can see it has the highest impact on repurchase:
better customer support leads to better retention
(image source)

Reward Your Most Valuable Customers

Reward repeat customers and champion customers with exclusive offers so they engage with your brand more frequently. Personalize the offers with coupon codes that are just made for them.

shopping apps retention

Retention Focused Campaign Ideas Based on User Segments

During the retention stage, shopping apps should focus on driving repeat purchase by sending targeted campaigns that resonate with each segment.

User SegmentTactics

Engaged but Not Loyal User

Users who purchase infrequently
(Hibernating Users)

  • Send Product Recommendations via push notification or email campaigns on days 1, 3, 5, and 7 since the user’s last app launch
  • Run personalized push notification or email campaigns showcasing new products and deals on days 3, 5, 10, 17, and 30 since the user’s last app launch
  • Incentivize users to open the app with time-sensitive offers sent over push notification or SMS

Engaged and Loyal Users

Users who purchase regularly
(Champion Users)

  • Run push notification or email campaigns with product recommendations based on items in wishlist or last purchased product
  • Use in-app notifications to ask for app ratings and/or reviews after users have purchased at least 5 times
  • Use personalized push notification, SMS, or Email campaigns to send discounts or promotional offers
  • Emphasize and communicate the benefits of the loyalty program with targeted campaigns to onboard users into the program

Disengaged Users

Users who used to purchase frequently but haven’t purchased for a long time
(Can’t lose them)

  • Send reactivation campaigns on push notifications, emails, SMS, containing discounts and deals to incentivize repurchase
  • Offer assistance and seek feedback on their experience of using products they purchased before
  • Run drip email campaigns with the latest offers, discounts, and product recommendations on days 14, 21, 28,and 42 after last purchase

 

Get Set, Retain!

We have seen how focusing solely on user acquisition is a recipe for failure in the long term. The proof of the pudding lies in keeping users engaged and in retaining them.

What are the successes and challenges you have seen in retaining your users? Let us know in the comments section below.

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