There are a couple questions that every ecommerce store is trying to have a great answers to, “How do I get more customers?” and “How do I grow sales?”. Many ecommerce merchants think that these are the same question, but they’re not. They’re missing a very important piece of the puzzle which is customer retention, and growing the lifetime value (LTV) of the customers they are already servicing. It costs five times more to acquire brand new customers than it does to retain an existing customer. That is a HUGE difference, so while of course you cant ignore new customer acquisition altogether it calls into question what is a healthy balance between focus when addressing the two.
Let’s explore some thoughts around both Customer Acquisition and Customer Retention, and how to create a healthy balance between the two to create a very healthy ecommerce business.
Ecommerce Customer Lifetime Value (LTV)
The first thing we need to set a foundation on is an understanding of Customer Lifetime Value (LTV). The Lifetime Value (LTV) of a customer and its relationship with how much it takes to acquire a customer is the lifeblood of a business. This is the foundation of any healthy business, whether the business realizes it or whether they just end up in it because “it’s just working”. As a general rule, your Lifetime Value of a customer, how much they’ll spend with you over the long term…..needs to be 3x more than the cost that it took to acquire that customer in the first place. If its lower than that, you’ll likely end up feeling business pressures and if that ratio doesn’t get to a healthy place it won’t be a surprise to anyone if you’re out of business. So, understanding this relationship between customer acquisition and how much they spend is critical to understanding if your business is healthy or not (and also may shed light on whether you’re consistently feeling strapped or whether you’re living in a cloud where everything seems peachy and you’re living in abundance).
New Ecommerce Customer Acquisition
The benefits of new customer acquisition is obvious, you get brand new revenue from new people and it appears to be the fastest way to hit your short term revenue goals. There has never been a time in history that its been easier to reach your target market through social media and other channels. Gone are the days where you need to sit at the counter of a retail store and wait for somebody to walk into your store, digital marketing and ecommerce stores allow you to get your products in front of a global audience and efficiently fulfill those sales. Even with these new channels, you need to discover what channels are relevant for the products you sell…and make sure that your marketing costs stay in check with the lifetime value to sustain that magic ratio mentioned above…or better yet….improve that ratio.
If you have an ecommerce business and doing business, its likely you already have a decent foundation here….so we’ll just highlight a couple tips and methods here to assist with New Customer Acquisition.
- Link Regargeting: Its likely you’re already doing traditional retargeting of your audience (if not, see next bullet point)…but something to explore is “newer” services that allow you to accomplish Link Retargeting. If you’re not crazy about getting your social media feeds super active in sharing content relevant to your target market, it may be because its a huge effort to write original content and then understand whether your audience will actually engage it or not. You can take a step towards that, by simply following all of the industry news and content that is created by great sources…and then share those on your social media feeds consistently. Then…simply by clicking on a link to that content created by amazing article writers, etc….you can capture who clicked and add them to an “Audience”…where then you can have your advertising show up to them as they’re browing the internet, through social feeds, etc. This is a great way to engage your target market and grow a large list of potential customers.
- Retargeting Website Visitors: Again, this is likely already being done which is why I’m adding this last…but in case you’re not….when you get somebody to visit your website you can have advertising services like Google, Facebook, Twitter, etc. add that visitor to an “Audience” and then you can create campaigns which will get your advertising in that person’s face as they browse the internet or through their social network feeds. If you’re not doing this now, you need to be…since retargeting ads are on average MUCH cheaper than getting the visitor to your website in the first place…and you already know they have some level of interest in your products. You can even show them products they’ve actually viewed on your website.
If you have any questions about how to accomplish the above goals, we can help point you in the right direction so feel fee to Contact Us and we can guide you with services and partner agencies that can help you out here.
Ecommerce Customer Retention
Customer retention speaks to how well you’re providing the products that you’re selling and the quality of those products. If you sell a unique product, the product is great and they continue to want to purchase more from you….you will likely retain that customer over a long period of time. If you’re offering exceptional customer service and you’re considered a thought leader, where the experience in shopping on your online store is just a much better experience than other stores….you’re likely to retain those customers and keep them coming back. The longer you can retain customers, the more they’re likely to purchase from you, and therefor it increases their lifetime value. This not only helps ensure that your business reaches the 3:1 ratio we spoke of before…but if you do it very well you can likely exceed that ratio and create a very comfortable and healthy business where you love your customers, your customers love you….and everybody is thriving in a mutually beneficial relationship.
Sounds great, doesn’t it? Here are a couple tips on how to get there:
- The Products: Obviously selling great products that your customers are going to have a great experience with is the foundation here. If you sell unique products that people love (and ideally repeat purchase), and then have other products in your offering that supplies for the needs of that same audience….as long as they continue to have great experiences with your products they should keep coming back for more. Don’t ignore that you’re dealing with a competitive environment as well, but as long as you can supply great products at a competitive price…you’re building a great foundation for customers that keep coming back fore more.
- The Customer Experience: You can have a great product, but if your customer ordering and delivery process isn’t up to speed with a customer’s expectations….and they can get things delivered notably faster through another provider…there is a good chance you may lose them to somewhere else. The good news is that there are all kinds of services like Shipstation and others that allow you, even as a very small provider, to have top notch turnaround/shipping that competes with the best of them.
- Service & Support: What can distinguish between you and the huge corporations sometimes is the fact that you combine what is listed above with that old fashioned fact that you care and are more closely connected with ensuring your customer has a great experience. All other things being equal, are you or your direct employees more motivated to shower your customers with amazing customer service than a person sitting in a cubicle working for somebody else, and about 5-6 management levels down (or more) from the actual owners of the business? I would assume the answer is yes, so make it happen. Ensure that YOU are the thought leader and expert behind the products that you sell…and you freely share that information in a way that us super helpful to existing customers and potential customers. Make the experience not only painless, but actually insightful where the customer walks away thinking “they are all-stars”. They’re more likely to come back for more.
Retaining Customers & Acquiring New Customers Simultaneously
There are ways to do both of these things in the same breath, and in ways that can actually reduce your costs at the same time. As your customers are going to your product pages and getting details around that product to see if they want to purchase, both new customers and those who have previously ordered….there are questions that they have which they’d like answered before they pull the trigger on the purchase. For both of these groups, give them an easy way to ask those questions about the product and get a great answer from your team.
If you’re using the right ecommerce product page Q&A software, they should also be building a knowledge base of product-specific Q&A content as time goes on….so that you only need to answer a question once..and then every time its asked again down the road it pulls up your previous answer where that customer gets services instantly and simply goes on to purchase. Answerbase customers see up to a 60% reduction in repeated questions as those are managed automatically which reduces costs and then up to 75% of customer questions turn into a new conversion from this process.
Finally, that content that your posting is VERY VERY VERY valuable for search engines. The same questions that your customers are asking on your product pages….are the same (or very similar) to questions they’re asking on Google (and other search engines) when looking for products like those that you sell….so if your Q&A software is doing its job its managing this SEO benefit as well. Answerbase creates a new landing page for relevant Q&A from your product question interaction….and that has lead to year over year organic traffic growth in the ecommerce merchants we service. Here is what one customer had to say:
Answerbase has doubled the overall traffic to our ecommerce site, and increased our organic search traffic by four times! – Ron from Epestsupply
When it comes to Lifetime Value of those new customers coming through that process, we’ve also seen that new ecommerce customers acquired through Answerbase are up to 6x more valuable than those coming from Facebook and up to 2x more valuable than customers coming from Google as a whole to the ecommerce stores we service. This goes a long way as you look to retain more existing customers, attract new customers, and grow the Lifetime Value of our average customer over time.
We hope things post has been helpful for ecommerce store, feel free to Contact Us with any questions and we’ll look to provide helpful consultation to help your ecommerce business thrive.
You can also start a free trial of Answerbase today if you’d like to add Q&A to your product pages, or upgrade to a more efficient use of that Q&A content.