Customer Retention Strategies for Dropshippers to Drive Customer Loyalty in 2024

As ecommerce continues to flourish, dropshipping stands out as an effective and valuable business model. Its low overhead costs and ease of setup make it a popular solution for SMEs looking to sell more, more often. However, amidst the convenience and flexibility, dropshippers face unique challenges when it comes to not only attracting new customers but keeping them. This practice is known as customer retention. It’s about creating a process from the start of the customer buying journey to foster communication, trust, and mutual growth.

In this blog, we'll explore effective strategies for building lasting customer relationships in a dropshipping business and increasing your repeat customer rate. From personalising customer interactions to leveraging technology for better service, we'll provide actionable insights to help you transform one-time buyers into repeat customers. Whether you’re just starting out or looking to refine your approach, join us as we uncover the secrets to retaining customers and driving sustainable growth in your dropshipping venture.

The importance of customer retention for dropshipping (and ecommerce stores)

Many dropshipping businesses and other ecommerce startups spend their early days focused on customer acquisition. The reasoning is obvious: you can’t make money without customers. A high customer acquisition rate is also beneficial for sponsorship: it shows investors, influencers and other stakeholders that the business has merit. There’s no doubt that customer acquisition, in these early stages, is incredibly important for businesses. Unfortunately, this is where many dropshipping businesses start and end - at the acquisition stage.

High-quality products and marketing can bring in customers, but after the product has been purchased, there’s nothing to stop them from seeking a cheaper or better alternative. For long-term success, dropshipping businesses must employ and measure customer retention strategies that foster customer loyalty. It’s a key to sustainable growth. According to a study conducted by Bain & Company, employing customer retention strategies can increase profits by 25 per cent to 95 per cent and increase the likelihood of converting an existing customer into a repeat customer by 60 per cent to 70 per cent. Customer retention strategies focus on providing additional features, services or experiences that are valuable to the target audience. This value will keep your brand top of mind when the time comes to follow-up purchases. 

There are many benefits to improving your customer retention rate.

Increased customer lifetime value (CLV/CLTV)

The main goal of customer retention strategies is to increase CLV by keeping them engaged and loyal to the brand over an extended period. This focus maximises the revenue generated from customers acquired and contributes to a more predictable and steady income stream. The probability of selling to an existing customer is between 60-70 per cent, compared to 5-20 per cent for new prospects. Returning customers will also, on average, spend 67 per cent more.

Improved cost efficiency

It costs between 4-10 times more to acquire a new customer than it does to retain one. Not only that, but the smallest increase in customer retention can grow your profits exponentially. Just a 2 per cent increase in retention can have the same effect as decreasing costs by 10 per cent, and a 5 per cent increase can increase profits by over 25 per cent. 

But the savings don’t end with customers. Many customer retention strategies focus on building a brand reputation through improved customer service. This requires ecommerce business owners to examine their existing strategies and identify areas for improvement, such as switching courier services or implementing automation technology to improve resource allocation. This will ultimately improve operational efficiency in terms of both speed and cost.

Reduced churn rate

Retention helps minimise customer churn rate, i.e. the number of customers who stop using a business’s products or services over a given period. Lower churn rates contribute to higher overall customer satisfaction and improved business stability.

More market insights

Retained customers can provide insights into market trends and competitor activity based on their experiences and expectations. They are more likely to provide feedback, opt into first-party data collection, and engage with brands on social media. This information can be invaluable for strategic planning and staying ahead in the market. 

Better brand awareness

By turning existing customers into brand advocates, ecommerce businesses can increase the effectiveness of word-of-mouth marketing, referrals and testimonials. It will also positively impact social media strategies such as user-generated content campaigns, viral marketing campaigns and influencer marketing. 

8 customer retention strategies for your dropshipping business

Customer accounts

Customer accounts allow shoppers to save their customer data for future purchases, encouraging repeat business. This data may include their preferred payment method, shipping addresses, past purchase history, and wishlists for future purchases. Customer accounts have many benefits for retailers - they encourage customers to complete their purchases by streamlining the checkout process, and the data stored can inform further digital marketing strategies. For current customers, these accounts can save time, help track past purchases, and sometimes offer exclusive access to certain products or promotions. However, customer accounts need to be offered strategically. Mandatory account creation is a leading cause of cart abandonment, causing 26 per cent of consumers to drop off their purchases. Ideally, ecommerce businesses should offer a guest checkout option and encourage customers to sign up for an account after their first purchase. 

Personalised and segmented email marketing

Although similar concepts, personalisation and segmentation in email marketing are executed differently.

Segmentation involves dividing an email list into smaller groups or segments based on specific criteria such as demographics, behaviours, psychographics or location. This approach helps target specific audiences with content that is more likely to resonate with them.

Personalisation goes a step further, tailoring emails to individual recipients based on data collected about them. It involves injecting personalised elements into emails that speak directly to the recipient, making the content feel custom-made. This can include using their name in the subject line, tailoring content based on past behaviour, or sending emails at a specific time for maximum engagement.

Both segmentation and personalisation are powerful tools in email marketing. By segmenting the audience, marketers can ensure that the content is relevant to specific groups. Personalisation enhances this relevance further by adapting the message to individual preferences and behaviours, often leading to higher engagement rates and better campaign performance.

Automation

Automation is a valuable tool for resource-intensive strategies such as personalisation, email marketing and market segmentation. Ecommerce businesses use automation to perform repetitive or mundane tasks with minimal human assistance, allowing them to allocate resources more effectively. Automation can be used to:

• Manage inventory: Automation can update inventory levels in real-time, optimise picking and packing, and prevent overstock or stockouts.

• Predict customer behaviour: Use automation to aggregate customer feedback, track purchasing behaviour and predict trends. 

• Streamline customer support: Using chatbots or other automated systems, automation can deliver quick and easy answers to common customer queries and direct more complex queries to the correct customer service agents, along with relevant customer data.

• Personalise marketing at scale: Automation tools can use customer data to personalise communications at scale with templates, increase the average order value with dynamic upselling or cross-selling, and offer exclusive discounts tailored to every customer’s preference.

• Automatically engage: Instantly send emails or display pop-ups in response to a time-sensitive trigger such as abandoning a cart, extended browsing times, sending a contact request or completing a CTA.

By automating these activities, dropshipping businesses can reduce costs without sacrificing efficiency. According to research from McKinsey, around two-thirds of companies that have piloted automation technology have reported improvements in quality control, employee and customer satisfaction, and reduced expenses.

Loyalty programs and incentives

A customer loyalty program is an inexpensive customer retention strategy and an excellent way to stand out against competitors. Loyalty programs offer compelling rewards and incentives for repeat business, fostering a sense of appreciation and value among loyal customers. Additionally, loyalty programs often personalise rewards and communications, enhancing the customer's online shopping experience and strengthening their emotional attachment to the brand, which is crucial for long-term loyalty and retention. 

Loyalty programs can take many forms that differ in terms of benefits and outcomes. Here are some loyalty programs that you can implement to retain customers.

Point-based programs

A point-based program rewards customers with loyalty points based on each transaction or engagement activity. These points can then be redeemed for discounts, products or other rewards. This method encourages repeat purchases as customers accumulate points towards loyalty rewards.

Tiered loyalty programs

In a tiered program, customers progress through different levels of loyalty benefits based on their spending or engagement. As customers reach higher tiers, they unlock more valuable rewards and perks. This type of loyalty program motivates customer engagement and purchase frequency by rewarding customers more significantly as their loyalty deepens.

Cashback rewards

In a cashback reward program, customers receive a percentage of their purchase amount back in the form of cash or credit towards a future purchase. This incentivises future purchases, compared to discount codes, which reduce the product price upfront.

Paid loyalty programs

Some loyalty programs require an upfront fee or offer a subscription service that grants members access to special benefits unavailable to non-paying members. These benefits may include free shipping, exclusive access to products or upcoming sales, special discounts, or other premium services.

Delivering the unexpected (value-adds)

Exceed customer expectations by adding value to your products. In ecommerce, “value-add” refers to specific improvements or additional features added to products or services that increase their monetary value. Value-added products are attractive to businesses because they can be sold at a higher price, and they are attractive to customers because they provide benefits they wouldn’t receive from competitors. Common types of value-added products and services include:

• Providing educational content in the form of blogs, articles or tutorials.

• Offering extended warranties or other forms of coverage.

• Offering product customisation.

• Providing extensive after-sales service.

• Including extras with purchases, such as free products or guides. 

Excellent online shopping experience

Ecommerce changed the way we shop. It has given consumers more control over their purchasing, allowing them to shop quickly and conveniently from anywhere. Despite this convenience, customers continue to prefer brick-and-mortar stores. The tangible shopping experience provided by these physical stores currently outranks online stores, with 73 per cent of Australian customers still preferring to shop in-store. Providing an excellent shopping experience is crucial for online stores in competition with brick-and-mortar stores. Thankfully, there are easy solutions that will help your brand own the online shopping space.

Easy-to-navigate website

Site visitors are more likely to complete a purchase or other desired action when they can quickly and easily find the products or information they are looking for. If your website is hard to navigate, customers are more likely to get confused or frustrated, leading to high bounce rates and low customer satisfaction. You can improve site navigation by following these established best practices.

Fast site speed

Site speed is one of the top killers when it comes to conversions. 82 per cent of consumers say that site speed directly impacts their purchasing decisions, and as little as a 1-second delay can reduce customer satisfaction by as high as 16 per cent. The average site speed is 3.21 seconds, but conversions are 3 times higher for ecommerce sites that load in 1 second or less. You can measure your site speed for free using PageSpeed Insights. 

Streamlined checkout process

It’s important to keep your checkout process as fast and hassle-free as possible. A streamlined checkout can help increase customer satisfaction, reduce cart abandonment, and improve customer retention rates. One-click checkout, guest checkout options and multiple payment options are just some ways you can streamline the checkout process. 

Trust signals and social proof

Trust has a significant effect on customer retention, especially when it comes to data protection and ecommerce fraud. To alleviate consumer concerns, businesses can place trust signals on their website. Trust signals are cues or elements on a website that reassure visitors of the site’s credibility, security, and trustworthiness. These can include security badges, trust seals, and SSL certificates, but they also include having clear policies, easy contact information and a professional-looking website. Social proof is another powerful trust signal that can improve conversions and increase customer retention. 9 in 10 customers trust the recommendations of their friends and family over other advertising, and around 50 per cent of millennials trust influencer recommendations.

Optimise for mobile

It’s estimated that 98.1 per cent of Internet users are accessing the Internet via mobile, and 62 per cent of all retail sales will occur on mobile by 2027. This is why ecommerce businesses need to optimise their websites for mobile users. Mobile optimisation has multiple benefits in 2024. Mobile optimisation improves site speed, reduces load time, and provides a layout suitable for touch-based navigation, resulting in a smoother browsing experience and reduced bounce rates. Because Google practises mobile-first indexing, optimising your site for mobile also contributes to SEO, improving your organic search traffic and rankings. In an increasingly mobile-centric world, mobile optimisation is essential.

Community building via social media

Online communities are digital spaces where users can interact with one another and share common experiences or interests. Community building across social media channels is a powerful strategy for improving customer retention, and an important strategy for sustainable and profitable growth.  By creating a space where customers can interact, share experiences, and offer feedback, businesses can cultivate a vibrant community that not only supports its members but also enhances their attachment to the brand. Engaging communities provide brands with valuable insights into customer preferences and pain points, allowing for better service adjustments and innovations. Additionally, members can benefit from peer advice and support, leading to higher levels of customer satisfaction and further strengthening a loyal customer base. Community-driven content and discussions can also lead to organic word-of-mouth marketing and feed viral campaigns, reducing marketing and acquisition costs. Ultimately, online community building translates into a richer customer experience, fostering a network of brand advocates who are invested in the brand’s success and more likely to remain loyal over time. 90 per cent of social media users follow at least one brand - that brand could be yours.

Good old customer service

Excellent customer service is a core component of retail and an essential part of customer retention. Customers overwhelmingly choose exceptional customer service over price. Not only are customers willing to pay up to a 16 per cent premium on products for a superior customer experience, but they are 63 per cent more open to sharing personal data for a product or service they truly value. A poor customer experience, in comparison, can lose a business between 6-20 customers. 89 per cent of consumers stopped purchasing from at least one company after a bad customer service experience in 2022, and 84 per cent of consumers who have a bad experience will share it with other consumers, creating a snowball effect that can damage your reputation. Thankfully, there are many ways to create a great customer service experience in 2024.

Quick responses

34 per cent of consumers expect a first-contact resolution to their problems, and 48 per cent expect a response to online reviews within 24 hours. It may seem daunting to track down and respond to every review, but dropshipping businesses can take advantage of social media and customer relationship management (CRM) tools to monitor brand engagement and customer feedback, automate responses, and funnel complaints and queries to the appropriate customer service representative. Live chat and chatbot options are also fantastic fast tools, particularly when it comes to frequently asked questions. 69 per cent of consumers are willing to use a virtual chat option for an instant response to their queries.

Comprehensive FAQs and self-service options

Create a detailed and easy-to-navigate FAQ section or knowledge base where customers can quickly find answers to their questions without needing to wait for a response. Including video tutorials, step-by-step guides, and troubleshooting tips can enhance this self-service experience.

Omnichannel support

Offer consistent and seamless support across various platforms (like email, social media, live chat, and phone). Customers appreciate the flexibility to contact support through their preferred channels. Ensure the experience is unified across these channels, so customers don't have to repeat information.

Proactive support

Anticipate common issues and reach out to customers before they encounter problems. Always communicate openly with your customers about any issues that may impact them, such as delays or product availability problems. After resolving a customer’s issue, follow up to ensure that they are satisfied with the solution and to see if there are any additional ways you can assist. 

Summary

Customer retention often takes the back seat in ecommerce, but it is just as important as customer acquisition and often more affordable. Effective customer retention strategies for dropshipping offer current customers additional value that rivals the competition. You can add value in many ways, whether through high-quality products, positive customer experiences, or streamlined processes. However, if you choose to stand out, with our retention strategies, you’ll be able to sustainably grow and scale your dropshipping business.