Acquiring customers may be Job One for many e-tailmarketers. But only those e-tailers that convert newcustomers into loyal ones will thrive over the long term.
“Customer acquisition only really happens with arepeat purchase, not a first-time, heavily discountedpurchase,” Forrester Research analyst James Crawfordtold the E-Commerce Times.
Bellwether companies like Amazon.com (Nasdaq: AMZN),EBay (Nasdaq: EBAY), Best Buy (NYSE: BBY) and Expedia (Nasdaq: EXPE) use targeted remarketing campaigns andsite personalization to drive repeat purchases, according to analysts.
That said, e-tailers must deliver consistent andreliable service over time to lock in a devotedcustomer base.
“It is critical to get order fulfillment and a usablesite design in place first,” Giga Information Groupanalyst Andrew Bartels told the E-Commerce Times.”Then personalization and outbound e-marketing can[retain customers].”
Have Fares, Will Travel
Online retailers that do not provide a satisfactoryshopping experience will fail to convert site visitorsinto buyers and buyers into loyal customers, according toYankee Group analyst Paul Ritter.
For its part, online travel heavyweight Expediacultivates relationships with frequent travelersthrough personalized e-mail.
“We have a number of ways we reach out to existingcustomers,” Expedia marketing manager ChristinaKozloff told the E-Commerce Times. “Fare Trackere-mails include the lowest published rates forcustomers’ preferred flight routes, as well as ourlatest travel deals.”
By increasingly tapping into its repeat customer base, Expediaachieved fourth-quarter gross profits of US$56 million,up 102 percent year-over-year.
Repeat Performance
As evidenced by Expedia’s latest financial reports,e-tailers that build faithful customer bases may enjoylower sales costs and shorter paths to profitability.
Existing online customers respond to e-mail campaignsand product promotions about four or five times more readilythan do new customers, according to Giga’s Bartels. Not surprisingly,the cost of selling to a repeat customer is typicallyjust one-quarter of the cost of selling to a new customer.
Therefore, to maximize returns on marketinginvestments, e-tailers must earn shoppers’ trust andallegiance.
“Merchants that have average revenue percustomer that is less than or equal totheir average customer acquisition cost must increasethe amount customers spend [online] and reduce thechurn rate of existing customers,” said Ritter.
For instance, defunct e-tailers EToys.com, Pets.comand PlanetRx.com all incurred excessive customeracquisition costs and met their demise partly because of their failure to profit from repeat customers,according to Ritter.
Start with Service
On the other end of the spectrum, thriving e-tail giant Amazon.com relies on personalizedproduct recommendations and improved shopping tools tolure customers back to its site.
“The ‘1-Click Ordering’ feature provides customers with acompelling reason to return to Amazon for futurepurchases,” Ritter wrote in a recent report. “Itminimizes the hassle of reentering personal and creditcard information.”
But, as Amazon illustrates, basic deliverables likeorder fulfillment, customer service and usable sitedesign must buttress e-mail marketing and sitepersonalization efforts in order to meet customerretention goals, argued Bartels.
Indeed, superior customer service may be the mostcost-effective — yet underutilized — way for e-tailers toattract repeat business and trigger word-of-mouthmarketing, Forrester’s Crawford added.
Come Back Soon
E-tailers that are struggling to retain customers should make surethey offer a tangible and sustainable valueproposition before launching promotions, Crawford said.And to deliver value, companies must cater toconsumers’ evolving shopping patterns.
“The best thing a retailer can do to ensure repeatbusiness is to make its site capable of sustaining amulti-visit purchase,” Crawford noted. “Customersbuying high-ticket items will not only shop around,they will also come back to the same site repeatedlyto research the purchase.”
Retailers like Best Buy — which allows customers tostore pending purchases instead of emptying theirshopping carts when they leave the site — will pocket these multi-visitcustomers, according to Crawford.
“Store any repeat-customer profile information youcan, and offer to keep payment information,” Gartnerresearch director Geri Spieler advised e-tailersin a recent report. “Allow the customer to keeppurchasing lists and reminder data, and offer benefitsfor repeat shoppers to keep them coming back.”
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Using the Web for sales is not different from doing business in traditional means . . . profitable sales come from “second sales” — add-ons, repeats, sales by referral. Why? Because the costs associated with acquiring the sale are greatly dimished and this is money that goes to the bottom line. Hence, retaining customers means gaining customers and sales.
Alan J. Zell, Ambassador Of Selling
Winner of the Murray Award for Outstanding Achievement in Sales & Marketing
Chairman, PNW Sales & Marketing Group
[email protected]