You’ve probably heard that it’s cheaper to keep existing customers than to find new ones. And it’s true! According to BIA Advisory, acquiring new customers costs five to 10 times more than selling to a current customer.
So, it’s better to keep the ones you already have. A good customer retention strategy can turn occasional buyers into loyal fans, fostering a cycle of repeat purchases and long-term loyalty.
Let’s explore proven Shopify customer retention strategies, powerful tools, and best practices to help you create a loyal customer base that fuels sustainable growth.
What is Customer Retention?
Customer retention is the practice of keeping your existing customers coming back over time. It shows how well your business meets their needs and keeps them happy.
Customer retention is often measured as a percentage. A high retention rate means your customers are satisfied and want to stay with your business.
Why Does Customer Retention Matter?
Customer retention is a powerful driver of business success. Here’s why
Increasing Cost Efficiency
As the beginning of this article shows, attracting new customers often requires more time, effort, and money than maintaining relationships with existing ones. With customer retention, businesses can lower their customer acquisition costs and boost overall profitability.
Boosting Profits
Harvard Business Review shows that improving retention by just 5% can increase profits by 25% to 95%. Keeping your current customers happy is a better way to grow your business.
Higher Customer Lifetime Value
BIA Advisory research also shows that current customers spend 67% more on average than those new to your business. Loyal customers trust your brand, they love your products, and they're more likely to make repeat purchases.
Encouraging Word-of-Mouth Marketing
Happy customers become your biggest advocates. They'll recommend your store to their friends and family, bringing in new customers organically.
How To Calculate Your Shopify Customer Retention Rate
Customer retention rate (CRR) is a key metric that indicates the effectiveness of your Shopify customer retention activities over a specific period.
Formula
To calculate your Shopify customer retention rate, you can use the following formula:
CRR = [(E – N) / S] × 100
Where:
- E = Number of customers at the end of the period
- N = Number of new customers acquired during the period
- S = Number of customers at the start of the period
Example:
Let’s say your Shopify store has the following customer data over a month:
- S (start): 200 customers
- E (end): 250 customers
- N (new): 80 customers
Applying the formula:
CRR = [(250 – 80) / 200] × 100 = 85%
This means you retained 85% of your existing customers during that month. A higher rate shows that your customers are satisfied and returning to shop with you.
How to Track CRR in Shopify
To calculate CRR accurately, you can use Shopify Cohort Analysis to track customer retention. Here’s how:
- Step 1. Access the Shopify Admin Dashboard.
- Step 2. Click on Analytics > Report.
- Step 3. Access Customer cohort analysis.
- Step 4. In the Metric, click on Customer retention rate.
- Step 5. Change the time frame to view the corresponding customer retention rate for that period.
What Is Considered a Good Customer Retention Rate in Some Industries
Customer retention rates vary significantly across industries, reflecting differences in consumer behavior, product types, and market dynamics. Here are the average benchmarks for some industries:
- Media Companies: 84%
- Professional Services: 84%
- Automotive and Transportation: 83%
- Insurance: 83%
- IT Services: 81%
- Construction and Engineering: 80%
- Financial Services: 78%
- Telecommunications: 78%
- Healthcare: 77%
- IT and Software: 77%
- Banking: 75%
- Consumer Services: 67%
- Retail: 63%
- Hospitality (including Restaurants): 55%
For your Shopify store, aiming for a retention rate that meets or exceeds the average for your specific industry is a good starting point. However, these are just averages.
Your specific CRR goals might be higher or lower, depending on your unique circumstances. The important thing is to track your CRR over time and identify trends. Is your CRR improving? Or is it declining?
Implementing effective customer retention strategies can help you achieve an increasing CRR.
Tracking Retention Beyond CRR: Key Metrics to Watch
In addition to CRR, tracking these metrics will give you a fuller picture of customer retention and business health:
1. Churn Rate
- Definition: Shopify Churn Rate measures the percentage of customers who stop buying from your store over a specific period. It’s the opposite of retention.
- Formula: Churn Rate = (Customers Lost During Period / S) × 100
- Example: If you start with 200 customers (S) and lose 30 monthly, Churn Rate = (30 / 200) × 100 = 15%.
- Importance: A high churn rate may indicate customer dissatisfaction, poor product fit, or ineffective engagement strategies. Lowering churn boosts retention, strengthens customer trust, and enhances profitability.
Many Shopify subscription apps can automatically calculate this metric using the same standard methodology. These tools integrate with your store to provide real-time churn analysis, segmenting customers by behavior and flagging those at risk of churning.
2. Average Order Value (AOV)
- Definition: AOV measures the average amount spent per order.
- Formula: AOV = Total Revenue / Number of Orders
- Example: If your store earns $10,000 from 200 orders, AOV = $10,000 / 200 = $50.
- Importance: A higher AOV indicates customers are spending more per transaction, increasing revenue without additional acquisition costs. Retention strategies like upselling, cross-selling, or bundling can drive AOV growth among loyal customers.
Shopify provides AOV directly in the Overview Dashboard. From your Shopify admin, go to Analytics > Dashboard. The AOV metric is displayed for your selected time range (e.g., today, last 30 days).
3. Customer Lifetime Value (CLV)
- Definition: Customer lifetime value Shopify estimates the total revenue a customer will generate over their relationship with your store.
- Formula: CLV = AOV × Average Purchase Frequency × Average Customer Lifespan
- Example: If AOV = $50, customers buy 4 times a year, and stay for 3 years, CLV = $50 × 4 × 3 = $600.
- Importance: CLV reflects the long-term value of retaining customers. A higher CLV justifies investments in retention strategies, such as loyalty programs, personalized marketing, or improved customer service, as it shows the potential return from keeping customers engaged.
Shopify offers CLV insights through Analytics > Reports > Customer cohort analysis. This report groups customers by their first purchase date and tracks repeat purchases, helping you estimate purchase frequency and lifespan. To calculate CLV, combine cohort data with AOV from the Sales report.
However, the steps above involve manual calculations. To streamline the process, consider using apps available on Shopify apps store that automate these tasks for you. Apps like DataDrew Analytics or Lifetimely by AMP automate CLV calculations with advanced segmentation. They predict future CLV based on historical data and integrate with tools like Klaviyo for targeted campaigns.
What Can Affect Your Shopify Customer Retention Rate?
Several factors can influence your customer retention rate, either positively or negatively, namely:
- Customer Experience:
- Website: Fast-loading, easy-to-navigate sites encourage repeat visits.
- Shipping: Affordable and timely delivery builds trust, while delays discourage loyalty.
- Return Policies: Hassle-free returns increase customer confidence.
- Customer Service: Quick, helpful support fosters satisfaction and loyalty.
- Product Quality:
- Meeting Expectations: If your products don’t meet customer expectations in terms of quality, functionality, or value, they’re unlikely to return.
- Product Descriptions and Images: Accurate and compelling product descriptions and high-quality images are crucial for setting clear expectations and avoiding disappointment.
- Competitive Pricing: While price isn’t everything, it’s certainly a factor. Make sure your pricing is competitive within your market and reflects the value you offer.
- Brand Perception:
- Brand Identity: A strong brand identity that resonates with your target audience can foster loyalty and emotional connection.
- Brand Consistency: Maintain consistency in your branding across all touchpoints, from your website and product packaging to your social media presence and customer communication.
- Brand Values: Customers are increasingly drawn to brands that align with their values, whether it’s sustainability, ethical practices, or social responsibility.
- Marketing and Engagement:
- Personalized Communication: Tailored email campaigns, product recommendations, and loyalty rewards make customers feel valued and increase their likelihood of returning.
- Social Media Engagement: Active and meaningful interactions on social platforms help keep your brand top-of-mind.
- Promotions and Discounts: Timely offers and exclusive discounts incentivize repeat purchases and strengthen customer loyalty.
- External Factors: Certain external factors beyond your immediate control can also affect customer retention:
- Competition: If competitors offer better prices, superior products, or a better customer experience, your retention rate might suffer. Keeping an eye on competitors and differentiating your offerings is crucial.
- Economic Conditions: During economic downturns, customers may reduce their discretionary spending, affecting their purchasing frequency. Offering value-based pricing or promoting essential products can help mitigate this risk.
- Seasonality: Some businesses experience seasonal fluctuations in sales. Implementing strategies like off-season promotions can help sustain retention rates year-round.
Proven Strategies, Tactics & Tools to Improve Your Shopify Customer Retention
These proven and actionable strategies can provide a great starting point for brainstorming and developing your own unique approach.
Elevate the Customer Experience
Improving your customer experience is the foundation of customer retention. Here’s how you can enhance it:
Optimize Your Website Design
Your website is often the first interaction customers have with your brand. A clean, intuitive, and responsive design ensures a seamless shopping experience.
- Tactics & tools
- Make navigation simple with clear menus and categories.
- Optimize for mobile shopping to cater to smartphone users.
- Use high-quality images, a clean layout, and a design that reflects your brand’s aesthetic.
- Optimize your store’s performance to ensure quick loading times.
Shopify offers over 200 themes to help you create a beautiful and user-friendly online store. If you need advanced customization, consider using page builder apps like Pagefly and Shogun, or hire a professional designer.
Shipping
Fast and affordable shipping creates a great post-purchase experience.
- Tactics & tools
- Offer multiple shipping carriers and shipping options, including express
- Offer free shipping for orders over a certain amount.
- Provide clear delivery estimates and tracking information.
You can use Shopify’s built-in shipping features or explore apps like ShipStation or EasyShip for more advanced shipping management. Remember to keep an eye on your inventory and work closely with shipping carriers.
Create a Hassle-Free Return Policy
A flexible and customer-friendly return policy can build trust and confidence.
- Tactics & tools
- Offer a clear and easy-to-understand return policy.
- Make it convenient for customers to return items.
- Allow for mail returns or in-store drop-offs (if applicable).
Shopify apps like Parcel Panel Returns or AfterShip Returns can help streamline your return process.
Implement Omnichannel Experience
Meet customers where they are by offering a consistent experience across all channels.
- Ensure a seamless experience across all channels, whether customers are shopping on your website, mobile app, or social media platforms.
- Connect your Shopify store with your social media channels, email marketing platform and other customer touchpoints.
Build a Strong Brand
A strong brand fosters trust, loyalty, and emotional connection, all of which contribute to customer retention.
Create a Cohesive Brand Identity
Your brand identity should be consistent across your website, packaging, marketing materials, and customer communication.
- Tactics:
- Use a consistent logo, color scheme, and typography across all channels.
- Ensure your tone of voice reflects your brand values. For example, if your brand is eco-friendly, highlight sustainability in your messaging.
- Design an “About Us” page to tell your story and connect emotionally with customers.
- Share your story authentically to resonate with your target audience.
- Highlight your unique value proposition.
- Use storytelling techniques in your website copy, product descriptions, and social media content.
Focus on High-Quality Customer Service
Exceptional service is a cornerstone of strong branding. Customers will associate your brand with how you make them feel.
- Tactics & tools
- Respond promptly to inquiries across email, chat, and social media.
- Offer proactive solutions to customer issues, like refunds or replacements.
- Train your team to use a friendly and professional tone.
These direct interactions are a great way to stand out from the competition. You can also add some “unexpected touches” to your customer service, like a small gift or a handwritten thank you note.
Shopify Inbox is a great tool for chatting with customers in real time right on your website. It uses AI to answer questions instantly, and customers can chat from their computers or phones.
Implement a Loyalty Program
Creating a loyalty program is one of the most effective ways to improve customer retention and boost repeat purchases.
- Choose Your Loyalty Program Style
- Decide what kind of loyalty program based on your customer or industry: point-based, tier, or VIP membership program.
- Reduce barriers to entry so customers can quickly join your loyalty program by using pop-ups, widgets, your sign-up box on your website’s homepage, and check-out
- Offer meaningful rewards that align with customer preferences to keep them motivated: it can be discounts, free products, exclusive experiences, etc.
- Make sure to tailor rewards to individual customer preferences or purchase history.
Creating a loyalty program can be easy. Loyalty apps like Joy can help you create customized points systems, VIP programs, and referral programs, automate the tracking process, and deliver rewards.
Leverage Marketing & Communications
Marketing and communication are key to increasing customer engagement and boosting retention.
Here are some tactics to get you started:
- Email marketing: is a great way to build relationships with your customers. A good way to start is with a follow-up email. Whether they buy something from you or join the loyalty program, send a thank you or welcome email. This shows you appreciate their business.
- Personalized email: Send tailored emails like product recommendations, birthday offers, exclusive deals, or reminders about unused points in loyalty programs.
- SMS Marketing: SMS campaigns can deliver time-sensitive messages such as order updates, flash sales, and personalized reminders.
- Retargeting ads: It can help re-engage customers who haven’t made a purchase recently by reminding them of products they viewed or offering incentives to return.
Shopify tools like Klaviyo allow businesses to automate personalized email marketing, while Yotpo enables the collection and display of customer reviews, which can build trust and encourage repeat purchases.
Foster a Community
Building a community around your brand creates loyal customers who feel connected to your business on a deeper level. A strong community fosters trust, engagement, and long-term retention. Here’s how you can foster a community for your Shopify store, along with the tools to make it easier:
- Create a Private Social Media Group or Online Forum: Encourage your customers to join a space where they can interact, share experiences, and discuss your products.
- Leverage User-Generated Content (UGC): Get your customers involved by encouraging them to share photos, reviews, and testimonials.
- Exclusive Membership: Consider creating an exclusive community for your most loyal customers or VIP members, offering them special perks and access to insider information.
- In-Person Events: If you have a physical store or the resources, host in-person events like workshops, product demonstrations, or meet-and-greets.
- Virtual Events: Host online events like webinars, Q&A sessions, or virtual workshops to engage with your audience remotely.
- Contests and Challenges: Encourage customers to create and share content related to your brand through contests and challenges.
2 Case Studies with Stella Customer Retention Strategies
All Birds
Allbirds, a sustainable Shopify footwear brand, has built a strong base of loyal customers by focusing on two key elements: storytelling and superior product quality. How the brand implements its customer retention strategy:
- Sustainability: Allbirds is deeply committed to sustainability. Its products are made from eco-friendly materials like merino wool and eucalyptus tree fiber, which resonates with environmentally conscious consumers and fosters a strong sense of brand loyalty.
- Community Building: Allbirds has cultivated a strong online community through social media and its website. They encourage customers to share their experiences with the brand, provide feedback on products, and participate in discussions about sustainability.
- Customer experience: Allbirds optimized its Shopify website for simplicity and accessibility. It features clean navigation and fast-loading pages that create a seamless shopping experience. Additionally, Allbirds’ omnichannel presence ensures a cohesive experience across their website, retail stores, and social media platforms.
- Personalized email campaigns: Allbird keeps customers engaged by sharing product updates, eco-focused initiatives, and exclusive offers.
Results Achieved:
Allbirds’ focus on a premium customer experience has translated into a fiercely loyal customer base. Its retention strategies have contributed to strong repeat purchase rates and customer advocacy, helping the brand maintain a leading position in the sustainable fashion market.
This unique approach has not only grown their customer lifetime value but also enhanced their brand reputation globally.
Vinamilk
Vinamilk, Vietnam’s largest dairy company, has effectively used Joy Loyalty to build a robust retention strategy through a successful loyalty program that leverages technology and gamification.
- Omnichannel Approach: Vinamilk’s loyalty program seamlessly integrates across various channels, including its mobile app, website, and in-store activations. This allows customers to earn and redeem points through multiple touchpoints.
- Points-Based Loyalty System: Customers earn points for every purchase, which can be redeemed for discounts, exclusive products, or tier upgrades. This motivates frequent purchases and strengthens long-term relationships.
- Gamification and Engagement: Its loyalty mobile app incorporates gamification elements, such as interactive games, quizzes, and contests, to make the loyalty experience more fun and engaging.
- Personalized Rewards: Vinamilk offers personalized rewards and recommendations based on customer preferences and purchase history.
Results Achieved:
- Increased Customer Engagement: Their mobile app has seen high adoption rates and active user engagement, with over 315 thousand members enrolled in one year and over 30 million customer engagements.
- Improved Customer Retention: Their loyalty program has contributed to increased customer retention and repeat purchase rates, as seen in 2 billion points rewarded and redeemed.
- Stronger Brand Loyalty: Vinamilk has built a loyal following of customers who actively participate in their program and engage with the brand.
Bottom Line
Now you know everything about Shopify customer retention and 5 strategies that work every time. You can start implementing the strategies and tactics we’ve explored!
Remember, building a loyal customer base is an ongoing journey, not a destination. It’s about consistently providing value, exceeding expectations, and nurturing those customer relationships.
