Why eCommerce Customer Retention Is The #1 KPI To Look At

Peloton blew it. 

Due to the pandemic, people were locked in their houses, and wanted to work out (some of them) — the only answer, get a Peloton, and they did! Sales exploded by almost 200%, and this small, beloved brand was suddenly thrust to the masses—a huge win for anyone who invested in Peloton. Fast forward two years, and it’s all come crashing down.

Every year, we see brands explode in popularity, with companies spending millions, or even billions of dollars to attract new customers, only to see their revenue and stock prices plummet as a direct result of failing to scale the right way.

The truth that the best companies understand is that their existing users are, and always will be, their most valuable customers—and when you lose sight of that, results can be devastating.

To understand what happened to Peloton, we need to look at why companies believe growth is the end-all-be-all, how to scale sustainably, and what really matters—us.

Growth at All Costs: The Great Gamble

Peloton’s was the first at-home fitness bike and by 2012, it had grown a cult following of die-hard brand loyalists that would shout their love for their bike to anyone that would listen.

So by 2020 when the world hit the historic pause, Peloton and their enthusiastic instructors seemed destined to stream their way into the hearts and minds of millions of users set to try their bike for the first time. 

Despite some questionable advertising choices along the way, Peloton’s reached record high sales in 2020 with sales spiking 172% compared to the previous year.

But they forgot one thing—their customers. 

In one instance, after a customer ordered their first Peloton, it showed up with a broken screen, and after days spent trying to talk to their customer management team, this very annoyed customer finally got through and they agreed to send me… I mean, this customer… a new screen.

Three days later, not only did said customer get one screen, but THREE new screens that he didn’t have anywhere to store.

When the service tech installed the working screen, he told the customer that he couldn’t take the broken or extra screens, that they needed to be driven to the Peloton store and dropped off in person – what?!

You want me to take the screens that you sent me, because my brand new one didn’t work, and drive them back to the store myself when you literally work for them and are likely driving back to that very location right now??

Ok, the customer was me… but this was not an isolated incident—just look at some Reddit threads and you can see the loyalty score has shifted dramatically away from the once beloved brand.

What happened as a result, all those gains came crashing down at a much steeper rate than the rest of the market.

And they aren’t the first company to take a serious hit for playing this game. Netflix, Wish, Blue Apron, and many others also felt the squeeze of balancing growth, sustainability, and profitability.

So why do businesses keep insisting that revenue is the most important KPI to look at on their quarterly reports?

In today’s market, there is intense pressure to grow quickly and become profitable or risk going under. Investors are tightening their purse-strings and only opening them for clean returns on their investments. 

Before investors will even give you a minute of their time, businesses have to show:

• A solid business plan
• Product-market fit
• What you market size is
• Proof that customers actually want their product
• What makes you different from your competitors
• Cult following / traction
• Show investor’s what’s in it for them (exit strategy)

It took Peloton five years and over 5,000 rejections before investors finally came around. In that time, Peloton focused on building its customer base and fostering that relationship. In other words, they struck a balance between retention and acquisition.

It was at that moment, they really had it all: Loyal customers and money to grow. But with investors on board, seeing the market conditions rapidly changing in their favor, they needed to scale—and FAST.

And the fastest way to drive more revenue is to acquire new customers.

Build up and up and up… but the higher you build – the windier it gets, and without solid foundation… You can see where I am going here.

Businesses forget what got them there, Peloton included. It becomes “too costly” to care about each and every customer the way you used to, so instead you end up with a factory just churning out product after product, treating customers like numbers.

They end up losing their brand loyalists, disappointing new customers that were promised an incredible experience, and shipping three screens to people who just wanted a single working one!

But what should companies like Peloton do if they want to succeed? Let’s look at where the customers truly matter most.

How to Scale Like the Four Seasons

When it comes to customer service, look no further than the Four Seasons luxury hotel suites.

Four Seasons has built a reputation for best-in-class service for their customers over the years because they think of everything you could need, when you might need it.

When you arrive, you are greeted with a welcome crew with drinks and hot (or cold) towels, depending on the weather. Valets, daily chocolates, personalized messages from the cleaning service… everything you could imagine when you think about what a $4,000 dollar a night hotel stay might feel like.

But you don’t need to spend a fortune to treat your customers like the Four Seasons, you just need to understand them and treat them with respect.

If you ship a broken product, put systems in place to fix the issue, and minimize the burden on the customer—don’t… ok, ok, I won’t go there again…

Can’t help it… Don’t tell them they need to drive the broken parts back to the store themselves!

You need to understand your customer, and their journey, building in thoughtful touch points during, and after they become a customer.

Something as simple as an abandon cart campaign giving them an extra chance with maybe a sweet deal to make the decision a little easier, or a post-sale personalized package welcoming them to your brand family.

If you have a good retention strategy in place, you can connect with your customer at the right time, and likely create more future purchases, and invaluable referrals through word-of-mouth. Everybody wins and everybody is happy.

Unlike what most investors believe these days, investing in customer retention is investing in customer acquisition.

Build Better Experiences With Patch 

As technology advances, your marketing strategies and techniques need to adapt to make sure your clients come back for more! 

We offer an unparalleled suite of solutions tailored toward customer retention and loyalty. 

Our platform enables you to segment your customers based on their demographics and purchase behaviors. Qualitative data will help you improve marketing campaigns by using targeted automations for an improved customer experience.

Additionally, we are one of the only platforms on the market that have a built-in loyalty rewards program.

From email blasts and SMS campaigns to automated journey mapping, we have all the retention tools and metrics you need in one unified system. 

Here’s a quick video of everything we have to offer:

Don’t get lost in the crowd. Schedule a demo and see how you can optimize your customer experience and build brand loyalists.