Mar 1, 2023

Customer Retention Strategy: How to Boost Key Metrics with a Loyalty Program

Kai Jensen
March 1, 2023 offers eCommerce merchants tools for customer retention, including influencer marketing, customer advocacy, insights, and automated campaigns for sustainable growth.


A good customer retention strategy can transform your eCommerce business. With a focus on retention, you can build a loyal customer base that brings consistent revenue. You can also reduce ad spend through cost effective acquisition.

All this contributes to a healthier bottom line. 

To plan your strategy, you’ll need to understand and track key retention metrics. You’ll then need to use the data you collect to inform retention initiatives. 

This post looks at what those metrics are. It tells you how and why to measure them, and how to get your numbers up with a well designed loyalty program.

What is Customer Retention?

Customer retention means repeat business. It's when an existing customer buys from you again and again, instead of switching to a competitor. At least on paper anyway. 

But in practice, it’s much more than that. It’s about keeping customers engaged, satisfied and loyal over an extended period of time. 

In this context, customer retention is a strategy. In other words, the methods you use to strengthen customer relationships.

It involves initiatives like loyalty programs, personalized communication, and proactive support. All the things that keep customers coming back for more. 

Why is Customer Retention Important?

Customer retention is key to sustainable growth. While acquisition is of course a must, traditional methods are costly. This is particularly true if the acquired customer never returns.  

Retention, meanwhile, is cost effective and brings long term profitability.

This is because existing customers know and trust your brand. If you can build on that trust, and keep them engaged, they’ll shop with you more often. And they'll spend more when they do. 

To put some stats to it, customer retention data gathered by Invesp tells us:

  • Customer acquisition costs five times as much as customer retention.
  • The probability of selling to an existing customer is 60 - 70%. For new customers it's 5 - 20%.
  • Existing customers are 50% more likely to try new products and spend 31% more than new customers.
  • Increasing customer retention rates by 5% can increase profits by 25 - 95%.

Then there's the benefit of brand advocacy. Studies show 86% of loyal customers will recommend a brand to friends and family. 

That means huge potential for organic growth through word of mouth.

Customer Retention Metrics: What to Measure and Why

The most important metric here is customer retention itself. This is the percentage of customers you keep over a specific period.

To measure this, first select a timeframe. Monthly and quarterly intervals are common here.

Next, apply the customer retention rate formula:

Customer Retention Metric

The average customer retention rate in eCommerce is around 38%.

But it’s not the only measure of success. You’ll also want to know things like how much those customers are spending and how often they buy.

With data on these metrics, you can better assess the health of your retention strategy. You'll also get a clearer picture of value and ROI. 

Churn Rate

Retention rates focus on customers you keep over a given period. Churn rates are the opposite. They look at the customers you’re losing.

It’s important to track this metric as it gives a deeper understanding of your customer base. For example, you may have high retention rates in one segment, but high churn rates elsewhere. 

When you understand this, you can tweak your retention efforts to suit each customer type. 

Customer Churn Rate Calculator

Repeat Customer Rate

The repeat customer rate is the percentage of customers who make two or more purchases with you. Again, you measure this over a given timeframe.

This metric can tell you more about your retention initiatives. For example, repeat customer rates might climb after a specific marketing campaign.

When you understand what works, you can do more of the same. 

Repeat Customer Rate

Purchase Frequency Rate

This metric gives insights into how often customers are buying from you. 

It helps you understand engagement levels and trends in buying behavior. For example, you may have high retention rates but low purchase frequency.

If this is the case, look to encourage more regular spending. 

Purchase Frequency Rate

Average Order Value

Average order value (AOV) is the average amount spent by customers in a single transaction. 

The higher the AOV, the higher the value of each retained customer. You can maximize this with personalized recommendations or product bundles. Strategic cross and upselling also helps.

Customer Lifetime Value

Finally, look at customer lifetime value (CLV). This is an estimate of how much revenue a customer will bring over their relationship with you.

Through this metric, you can identify those most profitable to your business. Use VIP retention initiatives to strengthen those bonds.

Customer Lifetime Value

How to Boost Customer Retention with a Loyalty Program

Now you know what your customer retention rates are, you can look to improve. A loyalty program is a valuable asset here. These initiatives encourage repeat sales by rewarding customers for shopping with you.

But that’s only the start.

If you’re strategic, you can also improve metrics like AOV and CLV. Here’s how.

Customize Your Program

Tailor your loyalty program to fit buyer behavior. This means designing incentives your customers find motivating.

For example, you might have a product category that's particularly popular with your audience. If so, you can offer targeted rewards or discounts on those items.

By designing your program this way, you increase the chances of engagement. As a result, you’ll see an improvement in metrics like purchase frequency and CLV.

With, you can assign different point values to different products. You can also customize rewards, with options like fixed amount or percentage discounts. 

Use a Tiered Loyalty Program

A tiered program rewards customers based on their engagement level. The more they shop with you, the higher they climb through the tiers. As they do, they unlock exclusive perks and benefits. 

Use a Tiered Loyalty Program

By introducing tiers, you encourage customers to increase their spending over time. This has a positive impact on metrics like AOV and CLV.

As with our points program, loyalty tiers are customizable. This makes it easy to design a tier system that suits both you and your customer base.

Use Loyalty Data for Personalization

A loyalty program is a great source of customer data. It tells you about their behavior, preferences and past purchases. Use this to segment your audience. 

You can then create tailored experiences based on what you know about each segment.   

This might include targeted offers and promotions, or personalized product recommendations. Again, these will help drive metrics like purchase frequency and AOV.

To make the most of your loyalty data, check out our integration with Klaviyo

Turn Loyalty into Brand Advocacy

We know loyal customers are more likely to recommend your brand, so use this to your advantage. There are a couple of effective ways to do this. 

The first is to leverage referral marketing. This involves rewarding existing customers for successful referrals. Most brands also offer an introductory reward to the referred customer.

The second is affiliate marketing. Here, you work with loyal customers with large social media followings. These brand advocates promote your products through their social feeds. In return, they receive a payment for every successful sale.

Both techniques expose you to an audience you might not reach otherwise. This type of acquisition tends to lead to repeat purchases, so you’ll also reduce churn rates. 

Incentivize Feedback for Continuous Improvement

Finally, use your loyalty program to encourage customer feedback. It’s a great way to gather more data on satisfaction levels and pain points. 

With, you can reward customers for both surveys and reviews. This helps you see your business from a customer perspective. You can then use this insight to improve products, services, and customer experience.

By doing so, you show you value customer opinion. You also build a stronger brand that meets their needs and expectations. As a result, you’ll see improved retention metrics and long term loyalty.

Case Study: How SHEKO Achieves Cost-Effective Retention Through Referral Marketing

Health and nutrition brand SHEKO turned to to solve a common problem. The rising cost of acquisition.  

It needed to keep a healthy customer base and secure new custom through brand advocacy. To achieve this, it launched a referral program through the platform. 

It's all automated through our Klaviyo integration. Existing customers get a personal link via email to share with friends and family. If a referral leads to a sale, both parties get a reward. 

Case Study: How SHEKO Achieves Cost-Effective Retention Through Referral Marketing

Through clear performance data, the team is able to track campaign success. 

Shortly after launching, SHEKO was averaging 20 referrals per month. It estimates the CLV on these referred customers to be twice that of a normal customer.   

Referral marketing has proved successful for SHEKO. Its increased conversion rates, boosted retention, and improved customer lifetime value.

Boost Your Customer Retention Rates with

Customer retention is something every brand should focus on. But remember, it's about more than repeat custom. It's about maximizing value by improving metrics like purchase frequency, AOV and CLV.

It’s also about expansion, and using loyalty to combat rising acquisition costs.

With, you can create personalized loyalty programs that drive retention. You can also use affiliate and referral marketing to increase brand exposure.

Take control of your retention efforts today. Check out our rolling monthly price plans or book a live demo.