The ecommerce retention matrix
Updated: Dec 28, 2020
One of my most popular posts I have done on customer retention is the article I wrote for Shopify on 5 tactics to increase your customer retention rate. Before I go into the details of what you can do I introduced a concept that I call the eCommerce Retention Matrix.
The eCommerce Retention Matrix is a visual way to break down a few concepts that let any brand discover the right retention tactics and strategy for the unique products they sell.
In this post, I am going to give you a full break down of how to use that retention matrix and discover the best retention marketing strategies for your brand.
Before I get too far along, I should let you know that there is a video version of this lesson available to anyone with a Skillshare account - Introduction to Retention Marketing.
The Basics of the Retention Matrix
The tactics you choose to help you maximize the value of your existing customer base will vary greatly depending on where what you sell falls on the matrix. Let’s do a quick overview of what we are looking at.
The goal is for you to place what you sell in one of the quadrants so we can discuss specific retention tactics for you.
The Y-Axis = Item Value
Along the Y-axis we have item value. If you sell multiple types of items, use your average order value (AOV) to decide if you should be the top half or bottom half of the matrix. To make things easier, let’s say that the line that divides the top and bottom halves is $50 USD.
The X-Axis = Purchase Frequency
Along the X-axis we have purchase frequency. This is how often someone is willing/able to shop with you and purchase what you sell. I’m not going to go into detail on how to find what your purchase frequency is in this post but you can check out this deep dive I wrote on the Smile.io Blog.
To make this exercise as easy as possible let’s say that the line that divides the left and right is 2 or more purchases per year.
Retention Marketing Can Be Applied Anywhere on the Matrix
It’s tempting to think “my items are too expensive, or they are not bought in a repeat way, so retention marketing won’t work for me.” While retention marketing is easier in some quadrants of the retention matrix, retention marketing can be effective in all four quadrants.
If your items fall in the bottom right quadrant, you should be investing in retention marketing … yesterday. It’s a home run but retention marketing is really easy on the right side of the matrix.
The quadrants on the left are a bit trickier, but if you can get retention marketing working the impact is HUGE.
Let's start on the right side.
Right Side of the Retention Matrix
Bottom Right Quadrant
There are two go-to tactics in this quadrant.
A points-based loyalty program
Subscriptions
Points Program - Because these items are purchased so frequently and don’t cost much, many shoppers end up purchasing habitually. You don’t need to convince them to buy a second or third time… you need to convince them to stay with you. A points program that rewards for different actions (beyond just purchasing) will keep shoppers engaged. Holding a points balance will also act as a switching barrier when shoppers are considering your competitors.
Subscription Products - The repeat nature of these products make them a great fit for subscriptions. You don’t need to operate with a full subscription model though. You can simply have subscription variants as your offer for a second purchase, or use bundles to create better product experiences for your customers.
Aaron Quinn does an amazing job explaining the benefits in this episode of The Exchange:
Top Right Quadrant
My go-to tactic for anyone who is in this quadrant is a VIP program.
Before you say those don't work… I highly recommend checking out our recent post on why most VIP programs fail. You do need to build it the right way to be successful.
If you structure your program properly and give the right amount of value, you will be able to create a loyal community of customers who will shop from you again and again.
Left Side of the Retention Matrix
This is where most people think retention marketing isn’t effective. Trust me it still is, you just have to be more creative and targeted with how you approach it. There are no shortcuts on this side of the matrix, you will need to commit to see the results.
Both Quadrants
The key to this side of the matrix is you need to get every person who makes a purchase to spread your brand through their community, or… find products that you can offer alongside your core offering.
These additional products will help you increase AOV and boost customer lifetime value. If you only have products that fall on this side of the matrix, you will have a very hard time keeping a good LTV:CAC balance selling online.
That is why I recommend that you add to your product offering and give current customers a way to share your brand.
Peripheral Products - Products that can be used alongside the original purchase. If you sell instruments, these would be the products that go into maintenance and care. Extra strings, cleaners, new keys. By offering these products you give shoppers a reason to come back to you in the future.
Complimentary Products - Products that aren’t used on the original purchase but can be used with it to create a better customer experience. An easy example of this would be shampoo and conditioner, or shoes and socks. The idea here is that if someone loves the original product they can be convinced to try the complimentary one.
Referral Program - Acquiring a customer is expensive, so why not leverage the ones you already have. With a referral program, you can get customers who already have experienced and loved your product to tell others. It may not make sense for them to purchase from you again, but they can get their friends.
Repeat Purchase Email - People may not make a repeat purchase often, but they still do. It’s important for brands on this side of the retention matrix to always be tracking time between purchases. When you know how long someone goes between purchases you can create the most effective email follow-ups possible. You are able to get a timely email to them right as they are making a repeat purchase decision.
Choosing Your Retention Tactics
The matrix is meant to be a guide to help you choose the tactics that will work for you. Evey brand and product is unique and the best way to find the right mix of tactics is to talk through those details. This is meant to be a starting point for anyone that is getting into retention marketing for ecommerce.
If you want to go deeper on the matrix or the tactics you should be using, schedule a consultation call with Spark Retention. There is never a charge for that first call.
The Key Takeaways
The above was a lot, I get it! That is why I always include the key takeaways for you to grab at a glimpse.
The retention matrix is the foundation to start retention marketing
Place your brand on the matrix
Select tactics based on where you fall
Talk to Spark for specific tactics for your brand