How Can Technology Improve Customer Retention?

How Can Technology Improve Customer Retention?
  • Research has found that online businesses need to build strong customer relationships to generate superior long-term profits.

  • Customers want personalized loyalty programs that have unique marketing, offers, and rewards based on the person’s interests.

  • A loyalty management system (LMS) is critical for any business looking to launch a loyalty program.

  • Businesses should also use an intelligent pricing engine that simplifies pricing and promotions to offer the best deals to customers.

In the world of customer life-cycle economics, one of the most important objectives for online businesses must be to improve e-commerce customer retention. Companies place a lot of emphasis on attracting and acquiring new customers, but keeping the right customers for as long as possible is perhaps the most valuable strategy that many businesses fail to prioritize.

Frederick Reichheld (the inventor of the net promoter score) and Phil Schefter of Bain & Company and Earl Sasser of Harvard Business School analyzed the costs and revenues derived from serving customers over their entire purchasing life cycle. They found that increasing customer retention rates by 5% increased profits by a whopping 25% to 95%.

A decade after their original study, they applied the same methodology to several e-commerce sectors to analyze customer life-cycle economics. They also found “classic loyalty economics at work.” Businesses incurred early losses (from high acquisition costs) before turning the tide and eventually generating the bulk of their profits over the long term.

After seeing many of the same themes play out across years of research, the authors concluded that their original thesis still held true: companies doing business online needed to achieve superior customer loyalty to generate superior long-term profits.

Improving E-Commerce Customer Retention in 2022

Although many of the same principles apply today, the e-commerce environment has changed dramatically since the 90s and early 2000s. Customer retention is challenging as technology makes it easier than ever for consumers to shop for different brands. Technology, however, has also given brands new tools for building lasting relationships with their customers.

Build relationships with a modern loyalty program

The customer experience is critical to the success of any organization, which is why putting the customers’ needs first drives ROI for all e-commerce businesses. But perhaps the best strategy for building relationships and strengthening customer retention is to launch a modern loyalty program.

Traditionally, incentive-filled loyalty programs have been great ways to reward customers for brand engagement, especially programs that emphasize maintaining the brand relationship over the long term.


For example, simple points-based rewards programs allow customers to accumulate points, which leads to discounted or free items. Besides point-based rewards, other types of programs are effective too. Cash-back, tiered, and fee-based rewards are just some of the strategies companies use to improve retention.

However, loyalty programs are evolving alongside e-commerce technology. Today, customers expect loyalty programs to be personalized like the rest of their shopping experience. This means unique marketing, offers, and rewards based on the person’s interests.

A great example of this evolution is Starbucks. Back in 2008, Starbucks based its loyalty program on the old-fashioned punch card, which rewarded loyal customers for their in-store purchases and encouraged them to keep going back. But instead of paper cards, customers could register their Starbucks gift cards online to earn benefits, including a free birthday beverage.

Over the years, this loyalty program evolved and achieved many milestones as customers’ wants and needs changed. Today, Starbucks is the undisputed leader in customer loyalty, with 53% of all store sales driven by their Starbucks Rewards program powered by their best-in-class mobile app.

Turn customers into members

A loyalty management system (LMS) is a form of customer retention technology that gives brands a flexible solution for managing their loyalty programs. The software gives you a single view of your customers and allows you to create personalized rewards. With all customer data in one place, you can better understand who your customers are and how they’ve engaged with your brand.

Note: Loyalty entails more than just driving repeat purchases. Loyalty is customers who are willing to pay more for your products. It also produces brand advocates that make an effort to share your brand with others. Member is designed with this in mind and allows you to create referral codes and exclusive products and events. These features motivate your best customers to spread the word, further fueling your growth.

Use pricing and promotions to boost member loyalty

Everyone loves a good deal. Therefore, one of the most effective methods of improving customer retention is by offering exclusive deals to existing customers. A 2018 survey by coupon marketplace RetailMeNot found that:

  • Nearly all consumers (94%) search for a deal or offer when shopping online.
  • Nearly all consumers (93%) would make a repeat purchase with a retailer that offered good discounts
  • Almost half (48%) will avoid brands that do not provide offers
  • 67% of consumers have made a purchase they weren’t originally planning to make solely based on finding a coupon or discount

However, while providing exclusive deals and discounts are a great way to engage customers along the shopping journey, drive more sales, and boost customer loyalty, too many deals or prices that are too low can also harm your brand’s perceived value.

That’s why developing a strong e-commerce pricing strategy that’s powered by an intelligent pricing engine like fabric Offers can help you simplify pricing and promotions. For example, fabric Offers can help businesses:

  • Improve average order value and conversions
  • Schedule time-bound discounts for marketing campaigns
  • Configure complex discounts based on SKU, cart value, quantity, and bundle or kit purchase discounts
  • Enable promotion stacking or accumulative discounts
  • Offer fixed-value or percentage discounts
  • Create and accept single-use and stackable coupon codes for cart-level discounts

Bottom line: by utilizing modern pricing engine software, you can deliver personalized offers to the right customers, at the right prices, at the right times, while retaining complete control over every aspect of pricing, coupons, and promotions.


With the evolution of customer loyalty in e-commerce, modern technologies like loyalty management software and an intelligent pricing engine can help you vastly improve customer retention and improve ROI over the long term. Businesses that invest in these capabilities will set themselves apart from the competition and also make themselves more prepared to adapt to the ever-changing wants and needs of today’s customers.

If you want to learn more about how fabric’s products and services can help improve customer loyalty and build your brand, get in touch with us today.

Topics: Commerce
Editorial Team

Digital content editorial team @ fabric.

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