Customer Loyalty

Customer Retention and Customer Loyalty are cousins.

1. You can have low retention rates and high loyalty ... if you buy a product that you only need every 3-4 years, you might come back and buy from the company every 3-4 years but you'll come back to the company immediately because you love/trust their products (the iPhone comes to mind).
2. You can have high retention rates and low loyalty ... you might get gas at the local Chevron but also get gas at three other area gas stations.

Most of the ecommerce brands you support have customers with a +/- 25% to 35% annual retention rate. For you, it's terribly hard to generate loyal buyers, and worse, creating a silly loyalty program doesn't move the needle because your merchandise assortment is too limited (small) to foster the number of purchases required to harvest loyal buyers.

If you had the data to graph the relationship, you'd see that loyal buyers grow exponentially as rebuy/retention rates increase linearly. By having an assortment that fosters multiple purchases per year, you accelerate the number of customers who become "loyal".

For my clients, I use a predicted 60% rebuy rate as my level for a customer being "loyal". At that point, the customer prints money for your brand ... the customer is very profitable!

On average, it takes about five (5) purchases before a customer becomes "loyal" across my e-commerce clients. Generate 100 new customers and after 2-3 years you might be lucky to have five of the cohort become loyal ... and most of 'em won't stay loyal.

As I've previously stated, if you want loyal customers, acquire a lot of customers. After you acquire a lot of customers, develop the customers in the first three months following a first purchase. The three-month window after a first purchase is far more important at generating loyal buyers than trying to get a 60% loyal rebuy-rate buyer to increase to 65%.

Money is wasted on loyalty efforts (at low rebuy rate brands) when the money could easily be spent on acquisition and the first three months following a first purchase. But you already knew that.