The costs of customer loyalty

The standard advice around customers is that it's cheaper to convince an existing customer to buy again than to acquire a new customer.

Like most standard advice, it's true for some stores and false for others.

You need to measure it to be sure.

Loyalty and retention comes with associated costs. From the loyalty discounts to communication costs to management and creative work, expenses can add up. Especially wages and labor expenses.

Just as you have budgets around the cost of acquiring a customer, you should have budgets around acquiring another order from an existing customer. Your better segments of customers could have more budget than your lower-quality segments, but that's an advanced topic for another day.

Don't be afraid to stop retention campaigns that aren't profitable. Not all customer loyalty is worth the costs.

Typically Shopify store with low Repeat Purchase Rates as measured by Repeat Customer Insights struggle with customer loyalty costs. If a low percentage of customers reorder, that limits the budget and will force store to use low/no-cost retention strategies.

Eric Davis