Returned customers, often referred to as repeat customers, are critical to the sustainability and growth of an ecommerce business. Tracking and monitoring this metric provides insight into customer satisfaction and the effectiveness of retention strategies.
The importance of cultivating a loyal customer base cannot be overstated; not only do they bring in repeat revenue, but they also serve as brand advocates, helping to attract new customers at a lower acquisition cost.
Key Takeaways
- Definition: Returned customers are those who have made more than one purchase on an e-commerce platform in a given time period.
- Calculation: The metric is derived by tallying the number of customers who made a repeat purchase within the specified timeframe.
- Strategic Importance: Returned customers indicate a high level of customer satisfaction and are often more profitable than new customers. Their repeat business also indicates successful customer retention strategies.
- Optimization Strategies: Strategies: Increasing the number of repeat customers can be achieved through methods such as loyalty programs, personalized marketing, and post-purchase follow-up.
- Limitations: While indicating loyalty, this metric doesn’t distinguish between return frequencies, ignores spend amounts, can be influenced by incentives, doesn’t always signify satisfaction, requires longer timeframes for accuracy, doesn’t differentiate between product categories, might overshadow acquisition focus, doesn’t hint at referral behavior, and needs additional metrics for context.
- Complementary Metrics: Returned customer rate should be evaluated alongside metrics such as customer lifetime value (CLV), net promoter score (NPS), and customer churn rate for a holistic understanding of customer loyalty and satisfaction.
Why does Returned customers matter for your business?
The value of a returned customer is manifold for an ecommerce enterprise:
- Cost Efficiency: As often stated, acquiring a new customer can be up to ten times more expensive than retaining an existing one. Returned customers reduce this cost and amplify profitability.
- Predictable Revenue Stream: Repeat customers offer a more predictable revenue stream. They tend to buy more frequently and can be relied upon for consistent revenue.
- Trust and Brand Advocacy: Their repeated business signals trust in the brand. Additionally, loyal customers often act as brand ambassadors, spreading positive word-of-mouth, and referring new customers.
- Feedback Loop: Returned customers provide valuable feedback, enabling businesses to refine their offerings and customer service approach.
- Upselling Opportunities: Existing customers are more receptive to upselling and cross-selling efforts, further enhancing the revenue potential.
How to calculate Returned customers ?
Explanation of the formula:
- By summing up the customers who have made more than one purchase during the specified timeframe, businesses gain a clearer understanding of their loyal customer base and the effectiveness of their retention efforts.
Example Scenario
Let’s say during a particular month:
- Your ecommerce store saw 1,000 unique customer transactions.
- Out of these, 250 customers had made purchases in previous months.
Based on this data:
- Returned Customers = 250
This signifies that out of 1,000 transactions, 250 were from customers who had shopped at the store before, indicating a strong base of repeat customers.
Tips and recommendations for increasing Returned customers
Increasing the number of repeat customers depends on delivering exceptional customer experiences, cultivating trust, and recognizing loyalty:
Implementing Loyalty Programs
Loyalty programs are a proven way to retain customers and encourage repeat purchases. These initiatives can be structured in a variety of ways, including point accumulation, membership benefits, or exclusive rewards. Customers earn points with each purchase, which can be redeemed for discounts, freebies, or special services in the future. Exclusive rewards can include early access to new product launches or special sales. This not only encourages repeat purchases, but also creates a sense of belonging and appreciation among your customers.
Personalized marketing
Today’s customers expect personalized experiences. Analyze your customers’ purchase history, browsing behavior, and preferences to tailor your marketing messages. Personalized emails can significantly increase open and click-through rates. In addition, offering product recommendations based on past purchases or browsing behavior can encourage customers to make additional purchases. This level of customization makes customers feel understood and valued, which is likely to lead to repeat business.
Post-purchase follow-ups
Post-purchase follow-up is a critical part of customer retention. Reach out to customers after they’ve made a purchase to ask them about their experience. Were they satisfied with the product? Was delivery prompt? Did they find the product as they expected? This open line of communication shows customers that you value their feedback and are committed to improving their shopping experience. Responding quickly to any questions or concerns can turn a potentially negative experience into a positive one, encouraging the customer to return.
Offer exclusive discounts
Customers love to feel special. Offering exclusive discounts to your loyal customers can make them feel appreciated and encourage them to continue doing business with you. Early access to sales or special discounts on popular items can also increase customer loyalty and boost sales. These exclusive offers not only encourage repeat purchases, but also strengthen your relationship with the customer, increasing the likelihood that they will become long-term, repeat customers.
Improve customer service
Exceptional customer service can turn a first-time buyer into a lifetime customer. A responsive, efficient, and courteous customer service team can significantly impact a customer’s perception of your brand. Make sure your team is trained to handle inquiries promptly and professionally. Also, consider implementing a multi-channel support system that includes phone, email, social media, and live chat options to accommodate different customer preferences. The easier it is for customers to reach you, the more likely they are to remain loyal.
Examples of use
Membership Programs
- Scenario: An ecommerce fashion brand observes that customers who join their membership program tend to make repeat purchases more often than non-members.
- Use Case Application: The brand could enhance the benefits of the membership program, offering members early access to sales, exclusive product drops, or additional loyalty points. By emphasizing the perks of membership, they encourage more customers to join, subsequently increasing the number of repeat purchases.
Referral Programs
- Scenario: An online gourmet food store finds that customers referred by friends tend to make repeat purchases.
- Use Case Application: To capitalize on this, the store could introduce a referral program where both the referrer and the referred get a discount on their next purchase. This encourages existing customers to bring in new ones and also promotes repeat purchases.
Personalized Email Campaigns
- Scenario: A DTC beauty brand observes that customers who engage with their personalized email campaigns tend to come back and make another purchase.
- Use Case Application: By increasing the frequency of personalized emails and tailoring product recommendations based on past purchases, the brand can further entice customers to return and shop again.
Limited-time Offers
- Scenario: An online bookstore finds that limited-time offers on bestsellers lead to a surge in repeat purchases.
- Use Case Application: By regularly introducing limited-time offers and notifying customers about them, the bookstore can consistently drive repeat business.
Customer Feedback Surveys
- Scenario: An online fitness equipment store learns from customer feedback surveys that some customers didn’t return because they found the product assembly instructions confusing.
- Use Case Application: By revamping their instruction manuals and even introducing video guides, the store addresses a pain point, increasing the likelihood of repeat business.
Returned customers SMART goal example
Specific – Increase the number of returned customers by 30% (from 1,000 to 1,300 customers per month).
Measurable – The number of returned customers will be tracked monthly and compared to the same month of the previous year.
Achievable – Yes, by enhancing customer service, introducing loyalty programs, and offering exclusive deals to existing customers.
Relevant – Yes. This goal aligns with the business’s strategy to foster long-term customer relationships and boost recurring revenue.
Timed – Within one year of implementing the new customer retention strategies.
Limitations of using Returned customers
Using the metric of “Returned Customers” (those who return to make subsequent purchases) is critical for e-commerce businesses as it indicates customer loyalty and satisfaction. However, relying solely on this metric can provide an incomplete picture. Here are the limitations of using returned customers for analysis:
- Doesn’t Distinguish Between Frequent and Infrequent Returners: Simply knowing a customer has returned doesn’t indicate how often they do so. A customer who returns twice a year may be lumped in the same category as one who returns monthly, yet their value is vastly different.
- No Insight into Spend Amount: Just because a customer returns doesn’t mean they are spending much. A returning customer making minimal purchases isn’t as valuable as a one-time customer making a larger purchase.
- Can Be Influenced by Incentives: If customers are returning because of aggressive promotions or discounts, it might not indicate genuine loyalty. It’s possible they’re just capitalizing on deals and may not return without similar incentives in the future.
- Doesn’t Capture Overall Satisfaction: Returning to make a purchase doesn’t necessarily mean a customer had a wholly positive experience. They might have unresolved issues or latent dissatisfaction that could affect long-term loyalty.
- Requires a Longer Timeframe for Accurate Analysis: The metric of returned customers needs time to accumulate and be significant. Newer businesses or those with shorter track records might find it challenging to gain meaningful insights from this metric early on.
- Doesn’t Differentiate Between Product Categories: If a customer returns to purchase in a different category, it doesn’t necessarily mean they were satisfied with their initial product. They might be giving the brand another chance or exploring a different product line.
- Potentially Masks Acquisition Issues: A focus on returned customers can divert attention from the acquisition of new customers. A healthy balance of acquiring new customers and retaining existing ones is crucial for growth.
- Does Not Indicate Referral Behavior: While a customer may return, it doesn’t provide insights into whether they are promoting the brand or products to others, a behavior which can be even more valuable than the purchases they make themselves.
- Lacks Context Without Additional Metrics: Like AOV, returned customers as a metric lacks depth without other accompanying metrics. Understanding the reasons for their return, their behaviors, and preferences are just as critical.
In summary, while tracking returned customers is an important metric for ecommerce businesses to understand their performance and customer loyalty, it shouldn’t be viewed in isolation. It must be combined with other metrics and qualitative insights to provide a complete view of the business landscape and guide strategic decisions.
KPIs and metrics relevant to Returned customers
- Customer Churn Rate: This metric highlights the percentage of customers who stop doing business or interacting with a company over a specific time frame. A high churn rate in contrast with a low number of returned customers can indicate dissatisfaction or competition outpacing your value proposition.
- Net Promoter Score (NPS): This is a measure of customer satisfaction and loyalty. A higher NPS often correlates with a higher number of returned customers, as satisfied customers are more likely to make repeat purchases.
- Customer Acquisition Cost (CAC): This KPI reveals the cost associated with acquiring a new customer. By comparing CAC to the number of returned customers, businesses can assess if their investments in marketing and acquisition are yielding long-term customer relationships.
- Customer Engagement Rate: Measuring the depth of a customer’s interaction with a brand or product. Higher engagement often leads to higher retention and more returned customers.
- Average Time Between Purchases: This metric gives insights into how frequently customers are returning to make another purchase. A shorter time indicates higher customer loyalty and satisfaction.
By evaluating “Returned Customers” alongside these KPIs, your business can gain a holistic view of its customer relationship dynamics and identify areas of opportunity or concern.
Final thoughts
Returning customers are the backbone of a successful e-commerce business. By monitoring this metric and implementing strategies to drive repeat business, companies can ensure sustainable growth and profitability. As the saying goes, “It’s not about making a sale, it’s about making a customer.
Returned customers FAQ
What are Returned Customers?
Returned Customers refer to individuals who have made more than one purchase from a business or brand, indicating repeat business and customer loyalty.
Why are Returned Customers crucial for my business?
Returned Customers often represent a stable source of revenue and typically have a higher lifetime value. They’re more likely to refer others and can be cheaper to market to than acquiring new customers. Their repeat business validates the quality of a product or service.
How can I increase the number of Returned Customers?
Strategies such as loyalty programs, personalized marketing, excellent customer service, and exclusive offers for existing customers can boost customer retention and repeat purchases.
Are there any other metrics related to Returned Customers?
Yes, metrics like Customer Retention Rate, Customer Churn Rate, and Net Promoter Score (NPS) can offer complementary insights to Returned Customers, providing an in-depth understanding of customer loyalty and satisfaction.
If I have a high number of Returned Customers, does it mean my business is thriving?
A high number of Returned Customers is generally a positive indicator of customer satisfaction. However, it’s essential to evaluate it alongside other metrics, such as acquisition costs, overall sales volume, and customer feedback, to determine the overall health and profitability of the business.