Understanding Customer Loyalty Using Customer Retention Analysis

To develop a successful business today, you need to rely on customer loyalty. The business world, especially e-commerce, is flooded with competitors. And the difference between “successful” and “forgotten” may just be keeping that core of loyal customers to your user base.

Communication with your customers is not just about selling a product. It is crucial how you approach them, how you interact with them in the long run, how you treat them as an essential part of your business. Customer retention is much easier if you treat your customers right.

This is why you need to ensure that your marketing efforts are aimed at the right direction. In order to be successful, you need a clear message towards every individual customer. In addition, this message has to be efficient and effective. Both a catalyst and a virtual friend to the consumer.

Customer retention analysis as an indicator of customer loyalty

We spoke with our friends at metrilo a pretty cool customer retention platform about Customer retention analysis which applies statistical techniques to understand how long will a customer stay with your business. Knowing about this metric can increase both customer acquisition and customer retention campaigns, but more important, it gives you an idea about the core of your loyal customers.

Once you identify a cohort of users and run an analysis on them, you can clearly see which ones are going to stick and which ones are not. Depending on various factors, you will be able to distinguish what drives loyalty towards your e-commerce business.

It will rarely be just a product. Loyal customers search for individual care, excellent customer support, and an overall special experience. If your company can offer these, you will most likely keep them. It’s easier said than done, but this is why we have customer retention analysis.

The two ways of customer retention analysis

To get a grasp of customer loyalty, you need to know how many of your customers stay with you. After a thorough analysis, you will know exactly why and how they keep buying from you. And why, in some cases, they drift away from your e-commerce store.

There are two main approaches to accomplish this. They can be used for any type of business, as the calculations are simple, but present a clear picture of your customer base. With this in mind, let’s look at them both.

Periodic Survival Analysis

With this method, we track and monitor the activity levels of a designated customer over a set period of time. Since we speak of e-commerce business, our period will most likely be 3-6 months. With enough data, we can establish a percentage of active, loyal customers, who visit your store often enough to be noticed.

It is quite simple to understand customer loyalty through analysis. Imagine that a customer A has visited your online store five times in the last seven days. This can be a result of your amazing products or your immaculate behavior towards the customer. Or, in the best case, both.

However, you can’t judge a customer’s long-time behavior based on a weekly analysis. If customer A has visited your website over sixty times in the last six months, this is a statement of repetitiveness. An unsatisfied customer wouldn’t visit your store more than two times.

Customer loyalty as a basis for customer retention

Once you get a good look at a designated cohort of users, you can evaluate the percentage of sticking, loyal customers. The psychological approach towards your data will show you where does your customer core lie. Because nobody sticks to an e-commerce business just for the sake of it. The competition is endless, so a customer can easily replace you if they are not satisfied.

Furthermore, using the periodic survival method, we get an actual look at every customer’s action during a period of time. You can see if they browse, purchase, or just pass by your site. It is key to understand that an active customer may not be browsing your site every day. And this doesn’t make them a deserter.

Retrospective Survival Analysis

This method lies in the assumption that every customer is active until they are not. E-commerce business usually waits up to 6-8 months of inactivity to claim a customer “inactive”. It strongly depends on what you sell, but this is a universal period of time.

When looking at a cohort, you can distinguish which users visit your store daily, weekly, or monthly. To be a loyal customer doesn’t mean to buy a single item every day, but to be consistent. Search for a customer base, which visits your time in a frequent manner over months. This is a key point to finding your loyal customers.

With the second method, you can actually understand when a customer has “left” you. If you manage to do this, you may identify the reason why they did it. Was it a product, bad customer support, or something else?

With the retrospective survival analysis, you will get a better picture of how you lose customers. With enough information, you will be able to determine what you are doing wrong and work to change it. Every e-commerce relies heavily on customer retention, and you shouldn’t be an exception.

Customer retention based on customer loyalty

You don’t need to be a marketing expert to understand customer loyalty. As in many aspects of life, loyalty derives from a well-made, positive relationship. If you take the time to nurture your existing clients, you won’t be needing to invest in customer acquisition all the time.

If your e-commerce business offers quality products, you will have a lot of buyers. If your company cares about your customers, you will gain not only one-time buyers but repeated customers. Just like the fans of a football club – if they like what they see and feel, they will stick with the team. In this case – your team.

All methods of analyzing customer retention offer different perspectives on your customer base. You can choose a favorite, or you can combine them. In any way, you need to do such research to understand how do you manage to keep or lose a client.

If you spot your weaknesses, you will be in a better position to fix them. And avoid them in the future. Customer loyalty is simple if you take the time to look into it. Take care of your clients, and they will show their gratitude to you. A truly loyal customer is a priceless asset in the world of e-commerce.

I'm a Young Energetic Blogger and Digital Marketing Expert. When not at work, Love to play Games.


Related Stories