With customer loyalty at an all-time low, there has never been a greater need for eCommerce marketers to deliver repeat customers. Before we talk about how, I want to highlight why it is so important.
The start-up software world is miles away from the ecommerce market, but they share a common problem – getting customers to come back and purchase again. Companies that can’t do this, at worst go out of business, and at best stay stagnant. Let’s look, for example, at a business that is bringing in $3,000,000 a year of new business, with a renewal rate is 85%, standard for the software industry. In the beginning, the growth will look exciting. Growth rates of 30% to 80% over the first 3 years will be masking a very serious problem, a slow march towards stagnation. In the chart below you can see this illustrated.
Notice by the end the “Renewals Lost” number almost matches the “New Business” number. This company starts fast, but by not changing renewal fundamentals it heads quickly toward no growth. Companies generally begin to focus on customer repurchase way too late, only after they see overall growth slowing down. If companies put more effort towards retention at inception, even if the gains are initially small, they will be healthier and more profitable over time.
Chances are your company is falling in this trap. Statistics show that businesses spend 5-10 times more trying to attract new customers than trying to keep existing ones. Combine that with the fact that returning customers purchase 67% more than new ones and it’s time for a change. Let me suggest three ways your business can keep customers coming back.
Think Mass Customization Across Multiple Channels
The term “mass customization” is more commonly used in a manufacturing supply chain, but it has broad application to marketers. The general idea is using technology to mass-produce an individually customized service. In marketing most people know this as customer segmentation, but we suggest taking it a step further. The goal of every marketer is to create the right message for the right audience. The more deeply you can segment customers into unique groups, creating custom messaging and business process, the more successful you will be at bringing people back to purchase again. Some of the most sophisticated companies are manually segmenting customers across each individual channel, which is the extra step. The more you can personalize your efforts across each your sales and marketing channels the better off your business will be.
Measure and Manage Lifetime Customer Value (LTV)
Many companies think exclusively in terms of transaction values. While transaction statistics are very valuable, lifetime value of customer is much more effective to measure and manage. This data allows to you focus on long-term customer relationships, set accurate policies around customer satisfaction, and improve the process of getting customers back in the door. While there are lots of methods out there for measuring LTV, the simplest formula I have seen is:
(Average Order Value) x (Number of Repeat Sales in a Year) x (Average Retention in Years)
If you are looking for more complexity, just search “Lifetime Customer Value” and you will get all the complexity you want.
Develop a Customer Journey Map
Understanding and mapping in painstaking detail how customers hear about your product, test your product, purchase your product, engage with you after purchase, and reengage on their next purchase is key to improving your customer interaction. Companies that invest in journey mapping report finding holes in the customer experience that need to be improved. While there are many articles about journey mapping best practices, I have found the best way to go about it is mapping the full customer experience in a way that is meaningful to you and the people in your company using your own nomenclature.
Now go out there and get those customers back!