Building for Success: Prioritising Retention Strategies from Day One, Beyond High CAC Costs

Priya Ghai, CEO, Passionfruit Direct
By Priya Ghai, CEO, Passionfruit Direct

As business owners and marketing professionals, we have keenly felt the impact of rising costs associated with acquiring new customers. While Apple’s iOS 14.5 update, which allowed users to opt out of app tracking, has played a role in this increasing trend, it is important to recognize that the challenges of customer acquisition existed long before this update. In 2021, only a small percentage of iPhone users, ranging from 5 per cent to 15 per cent, opted in for app tracking. This shift has certainly affected customer acquisition costs (CAC), but the truth of the matter is that even prior to Apple’s move, securing new customers through paid media had been on a steep incline. Back in 2018, HubSpot revealed that 65 per cent of consumers lacked trust in advertising, and 71 per cent felt sceptical about sponsored ads on social media. Furthermore, industry data shows that CAC has surged by 60 per cent over the past five years.

The fiercely competitive landscape is driven by a convergence of factors. Technological advancements have made it easier than ever for businesses to enter the online selling space, resulting in a significant increase in digital clutter across virtually every product category. The pandemic years forced consumers to heavily rely on online transactions for both essential and luxury items, leading to a surge in e-commerce adoption. From toilet paper to flowers, popcorn to fresh fish and cars, consumers turned to online shopping, reshaping the way we buy. While this presented an opportunity for our industry, it also intensified competition and made customer loyalty harder to attain. With an abundance of choices, companies now face the challenge of working diligently to retain their customers’ loyalty in this dynamic landscape. Regrettably, many companies wait until the escalating costs of acquisition force them to consider retention strategies, when in reality, devising retention strategies should be an inherent component of their go-to-market strategy. In the pursuit of profitability, it is crucial to recognize that customer retention holds equal weight to customer acquisition. While acquisition is important for expanding your customer base, retaining existing customers secures a steady revenue stream and reduces the costs associated with acquiring new customers. Loyal customers are more likely to make repeat purchases, refer others to your business, and have a higher average order value. By fostering long-term relationships and delivering exceptional customer experiences, you can create a loyal customer base that acts as a foundation for sustainable growth.

How do you create a loyal customer base? It sounds obvious but make sure your product works! It is essential to ensure that your product or service meets customers’ expectations and solves their problems. Delivering on your promises is key to building trust and retaining customers. A case in point is a D2C beauty brand I worked with, which experienced significant acquisition numbers across multiple media channels but struggled with low retention rates. The issue was that the core SKU promised more than it delivered leading to efficacy problems. By adjusting the product promise, improving formulations, and implementing a robust retention plan, we saw a 46 per cent increase in retention rates. Initially we had fewer new customers, but LTV increased which led to increases in profitability.

To build long-lasting and meaningful relationships with your customers, it is important to segment them based on their unique attributes, i.e. don’t treat them all the same. Customer segmentation enables you to create targeted and personalised marketing

campaigns that directly address your customers’ pain points and desires. To make the most of this strategy, access to accurate data is essential, and validating and verifying your data ensures its reliability. With the right data in hand, you can make smarter decisions and develop marketing campaigns that truly resonate with your audience, driving engagement, and boosting revenues.

To ensure a truly wonderful and personalised experience for your customers, it is crucial to have a deep understanding of who they are. The more you know about your customers, the better equipped you are to cater to their needs and exceed their expectations. That’s why gathering relevant data points about your customers should be a top priority.

Start by collecting key demographic information such as age, gender, and location. This will help you segment your customer base and tailor your offerings to specific groups. Additionally, dive into their purchase history to uncover their preferences and identify potential cross-selling or upselling opportunities. Don’t stop there – pay attention to their browsing behaviour and interactions with your website or app. This valuable data can reveal their interests, preferences, and intent. By tracking their journey, you can identify pain points and optimize their experience.

To gather this valuable customer data, implement tactics that ensure you collect information directly from them. Place well-designed forms at various touchpoints throughout their interaction with your brand. Whether it’s during the sign-up process, after a purchase, or when they provide feedback, these forms become your gateway to gathering important insights.

Consider venturing into the realm of subscription and membership programs that go beyond the mere presence of a lacklustre “subscribe and save” button. Subscription marketing offers a compelling strategy for achieving sustainable growth and maximising profitability, especially when aligned with the right product-market fit. It’s like injecting a surge of vitality into your business, propelling it towards new heights of success. By enticing customers with a curated experience and exclusive perks, you create a mutually beneficial relationship that keeps them coming back for more.

Achieving profitability in e-commerce hinges on maintaining a harmonious equilibrium between acquisition and retention strategies. While acquiring new customers expands your customer base, customer retention fuels sustainable growth and reduces costs. By implementing personalised experiences, delivering exceptional customer service, leveraging loyalty programs, fostering engagement, and continuously optimising your approach, you can strike the perfect balance that propels your e-commerce business towards long-term profitability. Remember, success lies in recognising that acquisition and retention are two sides of the same coin, and their equal weight is the cornerstone of profitability in the digital landscape.

Priya, is an expert in maximising customer acquisition, nurturing loyalty, and generating recurring revenue for eCommerce businesses. Click to connect and discuss strategies.


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