Customer retention: Why shoppers leave and how to get them back
Kelli Trapnell
·January 12, 2023
Despite your best efforts, sometimes shoppers turn away from your brand after a negative experience.
It may just be a case of a poor match—not every brand is right for every shopper. But in other cases, it’s due to something circumstantial—maybe a faulty product, a bad customer service experience, or a more competitive price elsewhere. Unfortunately, customer churn is happening all too often, especially in such a competitive omnichannel environment.
Don’t panic! Regardless of the size or sector of your business, customer churn is inevitable—but it also doesn’t need to be permanent. The good news is that these shoppers have already been won over by your company before. And now, you have the advantage of brand familiarity and an existing shopper relationship.
With the right strategy, you can get these consumers back in store and buying again.
By the numbers
One of the main challenges when it comes to customer churn is how competitive and crowded the market is. It has never been easier for a shopper to switch to a competitor if they have an unfavorable experience, thanks to the many options available. Looking at the data, it’s clear that many are making that exact choice. A recent PwC study found that nearly one third of shoppers (32%) would stop doing business with a beloved brand after a single bad experience, while Statista reported the churn rate for general retail in 2020 as 25%.
With as many as one in four shoppers jumping ship, this can have a significant impact on the bottom line. Retailers spend substantially on their customer acquisition, in the hopes that these relationships will be long-lasting and profitable. High customer churn rates undermine this initial investment and also point to something inefficient in your business. After all that hard work to bring shoppers into the fold, companies would be wise to also invest in their customer retention strategy.
Why do shoppers leave?
To best understand how to respond to your inactive shoppers, it’s important to identify what made them leave in the first place. Presuming that they had previously been satisfied with your retail offering, there are a few key reasons why shoppers may be turning away.
Some of the most popular causes are issues with a single purchasing experience: the shopper received an incorrect or faulty item, and then had a negative experience with customer service. Regardless of whether the item was broken or simply not what they expected, the standard move is to initiate a refund, an exchange or a replacement.
Too often, this is where the customer experience breaks down.
In other situations, shopper abandonment stems from external pressures: a competitor offering a more compelling price or the shopper no longer needing or wanting that particular service. These circumstances can be harder for a retailer to respond to directly, especially as it’s not always possible to simply drop prices. But it’s worth maintaining a connection with these shoppers—if the problem isn’t with your quality of product, you never know when they might be back.
Taking action
Fundamentally, retailers should pay attention to any recurring incidents of quality control or customer service. Invite feedback whenever a shopper unsubscribes or stops visiting your business, so that you know where the trouble is stemming from.
Whether this is at the manufacturing level or at the personnel level, identifying these problems is the first step to resolving them. Consider updating a product or retraining your staff if these errors are pervasive, to reduce the chance of them happening again.
Of course, quality controls can never be 100%, and some mistakes are inevitable. In these instances, it is critical for your brand to take proactive steps to turn the tide against churn and salvage the relationships. Remember that you’re dealing with people, and genuine efforts to fix a problem can work wonders.
So, what to do? If clients are closing their subscriptions or no longer purchasing as regularly with your brand, due to better prices elsewhere, they could be tempted back with a significant promo code or discount offer. This is more cost-effective than a company-wide price reduction, while still making an impact for your shopper. Remember: These discounts will be most effective if they are specifically tailored to items that your shoppers favor or had been viewing most recently.
If the problem is with product satisfaction, whether it’s a defective item or simply not what the shopper expected, then your response should target returns policies. Many shoppers are understanding that there may be a need for a return and factor this into their purchasing decision.
A TrueShip study found that 60% of shoppers will review the returns policy before heading to the checkout. The actual friction comes from returns policies that feel either too restrictive or too laborious for the shopper.
Retailers should review their existing rules and consider updating them to reflect industry best practices. Automated returns labels included in the shipment or readily available online, and a long returns window (minimum 30 days). Then there are the opportunities for brands to go above and beyond. Using a returns management solution like Loop allows you to generate an immediate exchange online, rather than waiting for the return to be received and processed manually. This speeds up the process significantly and improves the customer’s experience.
Other Loop automation features you can deploy include offering one-time store credit at the point of exchange, for the shopper to use on a replacement purchase. By turning the exchange experience into a shopping experience, you can make the shopper feel like they’re getting a deal, while keeping your sales up. It also eliminates the need to facilitate refunds, which can be a laborious and time-consuming process for both merchant and shopper.
Finally, always communicate these updates to your shoppers, especially those who haven’t purchased from you regularly. Make a point to let them know what has changed and the work you’re doing to improve the customer experience, to tempt them into coming back. Shoppers today value transparency and will appreciate the effort you’re putting in.
Invest in your shoppers today, reap revenue rewards tomorrow
It can be intimidating to approach shoppers who have turned away from your brand. It can also seem like a bad financial decision—why sink more money into a shopper when you’ve likely already spent a substantial amount on their acquisition?
In fact, customer retention is one of the most valuable things you can spend on. A study by Bain & Companyfoundthat “increasing customer retention rates by 5% increases profits by 25% to 95%.” By investing in the returns experience and dedicating more communications to your inactive customer segment, you can tap into an audience that is already familiar with your brand and that has already purchased from you before. This allows for a softer touch and an easier conversion, with real results for your overall revenue.
You may even find yourself cutting back on customer acquisition spend, once your churn rate decreases. It’s a win-win.
Want to reduce your churn rate and boost customer retention through exchanges? Try out a demo of Loop.
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