Why Email is the #1 Customer Retention Tool

Too many of us are missing the boat. We are so focused on finding new customers, growing our lists, getting more traffic, and finding more followers that we neglect a fortune’s worth of business right under our noses: Our existing customers. 

This applies to both B2B and B2C businesses. It applies to freelancers, bloggers, ecommerce sites, SAAS companies and even local shops. It applies to everybody. If you want more profits, the single best group to go get them from is your current customers.

It’s easier to sell more to your current customers than it is to go out and find more new customers. Doubt it? Consider this study of ecommerce sites done by RJ Metrics published just last month. It’s a B2C example, but it’s also a lesson for all of us.

The chart below, pulled from the studies’ results, shows how likely someone is to make another purchase after their second to tenth purchase. As you can see, there’s a 32% chance your first time customers will order a second time.

Now, do you have a 32% conversion rate for new customers on your website? Probably not. Do you get a 32% conversion rate from promotional emails to your new subscribers, from your social media, or from your SEO traffic? Probably not again. And yet, sitting there, on your computer, you have a list of customers that you could get a 32% conversion rate from: Your buyers list.

According to the study, 32% is only the starting point. Get them to order that second time and they’re 53% likely to place a third order. Get them to place even more orders, and you roll that one-time prospect into someone who has an 83% likihood to order from you again by the time they’ve placed that 10^th order.

Great huh? There’s clearly every reason to give your existing customers, especially your first time buyers, quite a bit more of your marketing love. But how? Ends up somebody just recently answered that. Not too long ago Gigaom Research did a survey asking marketers which tactic they liked best for customer retention. And the winner was…

Email!

Chart is from Figure 6 of Gigaom Research’s Report “Workhorses and Dark Horses – Digital Tactics for Customer Acquisition”

I realize some of you might think we might be biased about how awesome email is, given that we’re an email marketing company. Well, maybe you’re right. But there’s a truckload of data supporting our bias. And when it comes to retention marketing, we can make a particularly strong case of why email is #1.

So why is email so good at retention? Well, it’s for most of the reasons that makes email effective for any other kind of marketing. But just looking at it from the context of retention, here’s why email rocks.

It’s extremely affordable

Even a small-scale email program can communicate with its customers for a fraction of a penny per email. That makes for a super-high return on investment. Compare it to retargeting ad budgets, much less print advertising or ppc advertising. Many pay per click keywords cost $10 or more per click. With email marketing and even a 10% click-through rate, you can get clicks for less than a penny each. Try to get that on AdWords these days.

It’s personalized

You can send emails to customers based on past purchases. Or their birthday. Or their gender, their geography, their browsing habits or however long it’s been since they placed an order. Heck, you can even send to them based on which links they’ve clicked in your emails.

You can customize the emails they get at a level that would make a direct mail marketer green with envy. Even online display ads can’t come close to the level of customization and personalization that email can offer.

It’s timely

The formula that ruled old-school direct marketing for decades was recency/frequency/monetary, also known as RFM analysis. It refers to the three attributes that make people most likely to buy: How recently they just bought from you (recency), how often they buy from you (frequency) and how much they’ve spent (monetary).

For this particular point about timeliness, we’re interested in being able to optimize our marketing based on how recently someone bought. The shorter a time that is, the more likely they are to buy from you again. Email marketing lets you send them something special and enticing about a week after their order. You’ll get about three times the orders if you send those  second promotions promptly than if you wait and mail months later.

It’s the preferred channel for commercial messages

You’ve seen this chart before in other posts, but I love it so much I have to include it again. People want to get their promotional messages in their inbox. Really. MarketingSherpa asked them “In which of the following ways, if any, would you prefer companies to communicate with you?” This is how they answered:

How 2,057 American adults responded to the question, “In which of the following ways, if any, would you prefer companies to communicate with you?” Respondents were asked to select all choices that applied. Survey was run from January 21 to 23, 2015.

It’s easy to use

You don’t need advanced coding skills or a lot of training to create nice, effective emails. And if you do run into any snags, your email service provider is standing by to help (we’re available 24/7 via chat or email).

Look at how well email did in Ascend2’s December 2014 survey of which digital marketing tactics were most effective and most difficult. Email came in first for effectiveness, and last for difficulty. Does it get any better than that?

Email is easy to test

We’ve written a lot about the benefits of testing your emails here. We’ll keep writing about it. Whether you use the features in your GetResponse account or you use a third party tool for testing, we urge you to try it out.

Testing is not only easy, it’s also almost free, and with email you can get your results back extremely fast. That means you can run more tests, and thus have more opportunities for improvement.

Five types of customer retention emails

Okay, okay. So we’ve sung the praises of email to the rafters. You get it. Now, how do you actually go about using this magical marketing technique?

Glad you asked. These five types of emails are proven retention drivers:

1) Cart abandonment emails.

You will have to hook up your site’s shopping cart software with GetResponse for this to work, but it’s usually not too hard. Our systems sync with Zoho, Shopify, Sugar, BigCommerce, PayPal, Google Checkout, Amazon Payments and ClickBank, among others. Many of our larger clients use cart abandonment emails and get great results with them.

2) Purchase follow up emails.

The most common purchase follow up emails you’ll see are for customer feedback requests. This one Drs Foster and Smith sent me is a good example.

You can also send a follow up email suggesting similar products, or products (or services) that someone might need after they’ve started using what they initially bought.

Or you can just send them a support email that shows them how to use what they bought. Or an email that asks if they need any help. Of course, there’s also the classic upsell email, tempting your buyer into getting the next level up of service. Information products, in particular, benefit from the follow up “do you need any help” emails. Often they’re an opportunity to sell one-on-one consulting work.

3) Welcome emails.

Yup – you can start the retention efforts even before your customers have ever bought anything. Welcome emails work because they strike while the iron is hot, at the time when your new subscriber is most interested in your company. Ideal content for a welcome email might be your best-selling products, or your most popular content.

Several studies have not only shown that welcome emails get extremely high engagement rates, but that they contribute to long-term open, click and purchase rates. The welcome email is one of your best opportunities to start making a long-term, high-value, repeat customer out of new subscribers. Don’t miss the boat.

4) Reactivation campaigns.

These can be used to re-activate past buyers as well as to re-activate lapsed subscribers. Either way, don’t expect miracles from your reactivation campaigns – if you get 10% of your reactivation list to respond, you’ve done great.

Despite the low response rates, it is still very worthwhile to try to get these people back, especially if they once were buyers. Years ago, when I was working at a book catalog, we would send reactivation emails that promoted inventory we wanted to get rid of. Not only were the items on sale, but they were at fire sale prices. It was a triple win – we got 25% click-through rates on a regular basis, we won back well more than 10% of the lapsed customers, and we made space in the warehouse. A good deal, indeed!

5) Your standard ole weekly newsletter – with helpful, relevant content.

Sometimes, retention just means staying in touch. So just keep “talking” to your prospects. Send them great emails tailored to their interests. Offer them exclusive content that’s worth their very precious time. These are all great ways of building your relationship with them, and that’s the very acme of retention marketing. Stay top of mind and you’ve got a shot at staying top of wallet, too.

Want extra credit? Segment and personalize your emails based on each subscriber’s clicks.

Back to you

What email marketing techniques are you using to keep your existing buyers or subscribers engaged? What other kinds of retention marketing emails are you thinking of sending? Tell us about your ideas in the comments.