Forward-thinking D2C brands now embrace a customer-centric approach, prioritising retention alongside acquisition
CLTV to CAC ratio of 3 or higher is considered healthy and can be achieved only with high quality retention strategy
So, how can D2C brands shift their focus from acquisition to retention? Here are some key strategies to consider.
In India’s crowded D2C landscape, customer acquisition has long been the prime focus for brands battling for market space and longevity. However, the sobering truth is that acquiring new customers can cost up to 5 times more than retaining existing ones. Remarkably, a mere 5% increase in customer retention can boost profits by a staggering 95% (Bain & Company).
While brands relentlessly pursue that coveted first purchase through targeted ads, landing pages and conversion funnels, customer acquisition is a leaky bucket. Overemphasising acquisition is a recipe for a haemorrhaging bottom line. The tide is shifting, with increasing conversations around customer retention.
Forward-thinking D2C brands now embrace a customer-centric approach, prioritising retention alongside acquisition. They acknowledge that loyal customers are the lifeblood of their brand, recognising the importance of solving for retention within their organisations.
Why Retention Matters More Than Ever?
The magic happens on the 2nd purchase. Today’s consumers are bombarded with choices and brand loyalty cannot be taken for granted. This, coupled with rising customer acquisition costs (CAC), creates a precarious situation for D2C brands solely focussed on acquiring new customers.
Imagine your brand spends $100 to acquire a customer who makes a one-time purchase of $50. In a purely acquisition-centric model, for every customer acquired, it’s another $100 spent, without the guarantee of that customer’s purchase even covering the CAC (much less turning a profit). The real magic happens only with every subsequent purchase of a previously acquired customer.
With a retained customer, the possibilities are endless. With effective retention strategies, you can nurture brand loyalty, encourage upselling and cross-selling and ultimately increase customer lifetime value (CLTV).
Infact, CLTV : CAC is an important metric all brands need to chase. CLTV to CAC ratio of 3 or higher is considered healthy and can be achieved only with high quality retention strategy. In short, a retained customer is a gift that keeps on giving! This, in turn, allows you to invest more in providing a superior customer experience, further solidifying brand loyalty and creating a virtuous cycle of growth.
Building A Customer-Centric Retention Strategy
So, how can D2C brands shift their focus from acquisition to retention? Here are some key strategies to consider:
Personalisation Is King
Today’s consumers expect a tailored experience. Leverage customer data to personalise product recommendations, offers and communication. Go beyond basic demographics and understand individual preferences and purchase history. This is possible using hyper segmentation while building the communication plan. For Example, MyGlamm saw 135% uplift in purchases by users who got personalised communication.
Loyalty Programs That Motivate
Reward repeat customers with loyalty programs that offer exclusive benefits such as discounts, early access to new products and personalised rewards.
Content As A Conversational Tool
Create high-quality, informative content that goes beyond product promotion. Establish yourself as a thought leader within your industry and build trust with your audience.
Community Building
Foster a sense of community around your brand. Encourage customer interaction through social media, user-generated content initiatives and exclusive online communities. For example, Sephora’s Beauty Insider Community has forums, galleries for sharing makeup looks, review sections and even features exclusive content and early access to sales for its members.
Seamless Customer Experience
Optimise your website and mobile app for a frictionless purchase journey. Make customer support readily available and prioritise fast, efficient resolution of inquiries.
The Power Of “Thank You”
Never underestimate the power of a simple “thank you.” Show your customers you appreciate their business with personalised thank-you messages after purchases or interactions with customer service.
The Feedback Loop
Actively solicit customer feedback through surveys, social media interactions and email campaigns. Use this feedback to continuously improve your products, services and overall customer experience.
The shift towards a retention-centric mindset is not just an imperative for D2C brands, but one that is necessary for any brand across any sector that has its sights set on sustainable growth and profitability.
A recent report titled ‘State of Careers in Retention Marketing’, which is a reflection of an industry-wide shift towards retention marketing for profitability. From a sector perspective, the report suggests that a majority of the respondents belonged to the ecommerce and D2C sector (35.8%), but the data also shows that other industries like ed-tech, BFSI and media & entertainment, are also gradually veering towards it with 17.9%, 10.5%, 8.4% respectively.
Additionally, it was found that retention marketers are some of the most early investments they make in the team.
In an increasingly crowded and competitive landscape, the brands that prioritise cultivating long-lasting customer relationships will be the ones that thrive. By implementing personalised experiences, rewarding loyalty programs, engaging content strategies, community building initiatives and seamless customer experiences, D2C brands can create a loyal customer base that serves as a bedrock for long-term success.
Retention is no longer an afterthought; it is the foundation upon which the future of direct-to-consumer brands will be built.
