Why and How to Prioritize Customer Retention Over Acquisition in the Future of E-commerce

Published July 01, 2021·Written by Wonderflow

Customer Retention

With more online shoppers, customer retention should be prioritized over customer acquisition. Find out why and how to better your success in the future of e-commerce.


Globally, as more and more shoppers migrate online, increased competition for companies further means higher customer acquisition costs across channels. A fundamental way to combat growing acquisition costs is to prioritize your existing customers over trying to gain new ones. Brands can then better prepare for the future of e-commerce, which, as we’ve shown, will only continue to boom. 

However, first, we must understand why prioritize the current customers (or why acquisition costs are increasing). Then, you’ll realize different e-commerce trends to know how to up your customer retention strategy or how to prevent churn.

Why Prioritize Customer Retention Over Acquisition in the Future of E-commerce 

Customer acquisition costs are rising in the future of e-commerce. The 2020 COVID-19 pandemic mainly helped to fuel the growth and consequently, online competition surged, further resulting in more digital ad spending. So, businesses must spend more on web campaigns to attract new customers and to stand out among the ever-growing marketplace.    

For example, in 2020, digital ad spending was estimated to increase by 13%, such that Facebook costs rebounded, paid social advertising surged by 24%, and paid search increased by 17% near the end of the year. Therefore, brands are more pressured to refocus their targeting strategies and thus, prioritize customer retention over acquisition. 

Furthermore, and according to Harvard Business Review, brands that increase their retention rate by 5% might likely see an increase in profits by 25% to 95% as a result.  Of course, it’s not to say gaining new customers no longer matters. It’s just about time that all the hard ‘selling, selling, selling’ talks die down. In a way, the higher acquisition costs reinforce the value of current customers for many businesses. 

Example of increased digital ad spending as a result of the 2020 pandemic:

Source: IAB

How to Prioritize Customer Retention Over Acquisition

To better prepare for the future of e-commerce, digital-first brands can consider the following customer retention trends or strategies, which can potentially further lead to stronger customer loyalty. In other words, convert those current ‘Passive’ customers to ‘Promoters.’ 

Refine and implement loyalty/rewards programs 

As explained better in our recent post on six ways to build customer loyalty, a loyalty or reward program is one of the effective ways to improve customer retention. So, extending from the article, here are more of the same ways to, at least, retain the number of Passive shoppers:

  • Ensure reward points are integrated to make them immediately redeemable during checkout
  • Consider exclusive qualities in designing customer rewards programs, such as VIP access or early access to new products
  • Create a customer advisory board that allows customers to earn points for enrolling and provide feedback about your product or services. This can make your brand more welcoming of feedback, thus improving loyalty and overall brand image.
  • Turn loyal customers into sales reps (i.e., brand ambassadors) by creating referral programs
  • Incorporate a time stamp on promotions, such as “limited time only” on collecting reward points and specific discounts, to show how soon an offer experiences. Thus, a sense of urgency that can reel in more sales.

Consider a subscription-based model 

Offering subscriptions to existing customers can further increase retention rates and generate an ongoing stream of revenue. In fact, 75% of direct-to-consumer brands are expected to provide subscriptions by 2023. 

Depending on your products or services, they can be sold as a subscription. After adopting such a recurring revenue business model and building a good number of subscribers, your business can consider several retention tactics, including:

  • Creating convenience by offering different subscription tiers or options that are each priced differently 
  • Automate and simplify the billing process by implementing AI tools
  • Use personalized marketing by identifying and recognizing your most valuable customers to cross-sell and upsell to different segments properly

Target the most valuable customers first and rank them accordingly  

Essentially, you as a business want to increase the lifetime value of your customers. To do that requires your team to segment the buyers based on their lifetime value, while also taking into account how they were converted in the first place. Plus, creating a lifecycle grid or mapping out the customer journey. 

Mapping your customers’ lifecycle journey allows you to, for instance, find out the time it takes in between purchases (assuming they are bought in a typical sequential order). Then, your team can go in at certain moments of the shopping experience to influence quicker purchases. How you can do that is via personalized selling tactics. 

For example, consider segmenting your audience first based on the amount of times those current customers have bought from your shop. Then, match them according to the right customer lifecycle stage. By correctly visualizing a grid that maps past purchases and the time gap between different transactions can enable your department to:

  • Predict the customers’ next move 
  • Intervene at the right time to avoid churn
  • Speed up the time to next purchase 

Wonderflow Helps to Maintain and Increase Customer Retention 

Wonderflow adds an easy-to-understand metric to your customer experience strategy. Identify why some customers are unsatisfied or at-risk with the detection and analysis of hundreds of topics. Within a relatively short period, your brand can achieve +100% in CSAT and NPS.

Our granular Net Promoter Score analysis allows you to retain your existing customers while attracting new ones by quickly and easily detecting customer issues as they arise. You’ll increase loyalty and gain insightful data in real-time.

Examples of using our software to benefit your business and customers include some of the following:

  • Detect whether customers are happy or unhappy about your loyalty or reward programs and ways to improve them
  • Discover whether your new subscription plans, including different prices, are popular based on Voice of the Customer (VoC) data analysis 
  • Identify keywords from customer reviews to determine their value for your business, including possible action verbs used to indicate what they might buy next (or if they will again)

With so many more capabilities of our AI-based text analytics tool, we’d be happy to discuss it more in a free demo. Book now to win. 


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