Loyal Ecommerce Customers – Just Wishful Thinking?

October 11, 2016

In the world of retail, ecommerce or not, the focus will always be on two main metrics – customer acquisition and customer retention. Customer acquisition is a fancy term for attracting new customers while customer retention is a fancy term for ensuring a customer returns and makes another purchase (or a few).


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Among people who pay attention to retail-related data, it is a well-known fact that attracting a new customer costs five times more than retaining one. And despite this being such a widely-accepted piece of information, most retail companies, both brick and mortar ones and ecommerce ones, still put the majority of their money and attention into attracting new customers instead of keeping the existing ones loyal.


In the case of ecommerce companies, maybe this makes sense? Maybe ecommerce people know something the rest of us don’t? Maybe they know that there is no such thing as ecommerce customer loyalty?


Why Even Bother?


The first question concerning retaining ecommerce customers that needs to be answered is whether there are other reasons to focus on it instead of on attracting new customers. The answer is a very clear and a very resounding Yes.


For instance, a single “retained” ecommerce customer will provide as much revenue for an ecommerce company as 5 to 7 new customers. Or, how about the fact that it is 50% easier to sell something to a returning customer as it is to a new one. On a big picture level, improving your ecommerce store’s customer retention rate by as little as 5% can boost your profitability by anywhere between 25% and 95%. Keep in mind that 5% is a huge deal in customer retention.


It soon becomes very obvious that customer retention is one of the core aspects of running an ecommerce business.


Declining Loyalty


There are a few factors that motivate people to buy online. The first of these is the speed and the convenience of the experience, i.e. not being forced to leave their home. Also, ecommerce stores often offer better prices due to the reduced costs of everyday operation.


And while all of these are fine and dandy, shopping online still has its drawbacks too. For one, even a myriad HD photos can never replace the experience of seeing a product in person. For items such as clothing, not being able to try them on makes it difficult for shoppers to make the final decision.


Due to its novelty, the ecommerce system is also put under a much more powerful magnifying glass. For example, shoppers are very likely to abandon a purchase or even all future dealings with a store if they are not satisfied with loading speeds, customer service or something else. Furthermore, the lack of person-to-person interaction makes it all but impossible for ecommerce companies to provide a truly personal customer experience that can boost customer retention in traditional stores.


As a result of all of this, the percentage of repeat and returning customers is relatively low in the world of ecommerce marketing. According to Adobe’s research from 2012, repeat and returning customers make only 8% of visitors in total. In Europe, this percentage grows to 10%, with Germany leading the way with 20%.


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Can Something Be Done?


The good news is that ecommerce business owners still have plenty of weapons on their disposal when trying to increase their retention rates. The first of these is getting everything in order website-wise and customer service-wise. Considering that customers end their relationship with a business because of poor customer service in 70% cases, it is naïve to believe that this percentage is any smaller with ecommerce stores.


Loyalty programs are another way to reward the returning customers and feel them appreciated. For most companies, loyalty programs are purely web-based, while there are those who have achieved great results with actual physical gifts and rewards. Earlier this year, Greg Wise wrote an excellent article on HubSpot about the power of a simple thank you.


If you want more about retaining customers and building loyalty, a simple search here on Business 2 Community will give you a wealth of insights and tips.


Closing Word


Loyal ecommerce customers may be rare, but they are not exactly mythical creatures that only exist in tales of wishful business writers. By employing a lot of common sense and by taking care of the basics, you can do plenty to boost loyalty in your ecommerce customers.

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Author: Dan Radak


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