Acquisition vs retention
For many marketers, it is a given that it is cheaper to retain existing customers than to acquire new ones, particularly in industries where the lifetime value of a customer is a more significant metric than the profit arising from an individual sale.
There are plenty of stats to back up the importance of retention:
- Globally, the average value of a lost customer is $243.(KISSmetrics).
- The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20% (Marketing Metrics).
For our Cross-Channel Marketing Report 2013, companies and agencies were asked to provide details on their own and their clients’ marketing efforts specifically in the context of acquisition and retention.
- Both companies and agency clients are significantly more likely to be focused on acquisition than retention (44% vs. 16% for companies and 58% vs. 12% for agency clients).
- A substantial number state that they have an equal focus on acquisition and retention with this being the case for 40% of company respondents and 30% of agency clients.
Is your company more focused on acquisition or retention marketing?
So how can companies increase CLV?
The Econsultancy Realities of Online Personalisation Report found that 94% of businesses believe that personalisation ‘is critical to current and future success’.
Furthermore the research found that for two-thirds (66%) of client-side respondents, both improved business performance and customer experience are the main drivers for personalising the website experience.
Amazon is a prime example of how to personalise the web experience with product recommendations. It’s unlikely that any two people will see the same Amazon homepage as the content is tailored based on previous purchase behaviour.
For example, this is the page I see if I visit Amazon anonymously using Chrome’s incognito setting:
But when visiting with all the cookies firing as normal, Amazon shows the customer’s name and the recommendations change to reflect previous behaviour:
Don’t charge for returns
Of course, there are costs involved if you allow free returns, but these costs need to be weighed against the extra conversions it brings, and the potential boost to retention rates.
I bought a £40 lampshade from one retailer a year ago, and had to pay a hefty £10 return fee when I found it didn’t fit. I appreciate the retailer has costs to cover, but this charge put me off looking for another on that site, and would make me think twice about ordering from them again.
Also, as Zappos has found, people who regularly return items can be some of your best customers. It says that clients buying its most expensive shoes have a 50% return rate.
According to Craig Adkins of Zappos:
Our best customers have the highest returns rates,but they are also the ones that spend the most money with us and are our most profitable customers. Zappos’ modus operandi is not to give its purchasers the cheapest footwear on the block, but to give them the best service: hence, a 365-day returns policy, and free two-way shipping.
Fitting tools and virtual wardrobes
This is something that has been adopted by fashion sites, as they attempt to get around the fact that customers cannot try before they buy.
One such example, the Shoefitr app, helped an online footwear retailer to reduce fit-related returns by 23%. Others are variable in quality, but anything which can help customers to find the right fit, or to find outfits that match has the potential to reduce returns.
It’s not just fashion either, MyDeco’s 3D room planner tool helps shoppers to try out room looks before buying furniture:
Give precise delivery times and keep to them
It’s very frustrating for customers to have to wait at home for a package, particularly when delivery windows often extend to several hours.
This problem is compounded when couriers then miss the delivery time and waste the customer’s time.
Allowing people to have items delivered to a work address is one obvious way around this issue, but there are also delivery services that help to negate this problem by texting customers on the shipping date to give a one-hour delivery window.
DPD provides this service for a number of ecommerce retailers, which ensures that the customer does not end up waiting around for hours on end. The courier also sends frequent email updates to keep the customer informed of the delivery and giving them the ability to alter the shipping date or request that the package be left with a neighbour.
Provide multichannel returns
If you’re a multichannel retailer, allowing people to return items bought online to local stores is a must.
This is often due to the separation of web and offline channels, and there are organisational issues which many brands are now dealing with.
Many brands now offer this, though it’s often an issue with mobile phone networks. While O2 allows multichannel returns, Orange has yet to change this policy, instead insisting that returns requests are routed through its telesales team. This is a mistake in my book.
For the brand refusing the return, it’s a missed opportunity to educate customers about a complex product, or to upsell or cross-sell while the customer is in the store.
Customers appreciate the flexibility and convenience of multichannel returns, and will be far more likely to shop with such a retailer in future.
Surpass customer expectations
Amazon already has extremely high standards for customer service and frequently comes out on top in consumer satisfaction surveys.
Much of this success is down to the fact that it always fulfils orders on time and generally beats its own estimated delivery date.
Offering loyal customers some kind of reward or exclusive content is an extremely powerful way of strengthening brand affinity.
This can be as little as responding to a tweet from a customer who has just received an order, or something as elaborate as creating an exclusive club for people who love the brand.
ASOS actually uses both these tactics and recently launched #AccessAllASOS which gives members exclusive access to news and events.
The details are a bit vague, but it’s just enough to pique the interest of loyal customers and encourage them to apply for membership.
Excellent customer service
A study by Zendesk found that consumers rank quality (88%) and customer service (72%) as the two biggest drivers of loyalty.
The same study also shows that when forced to identify the best way that a company can build customer loyalty, the top requirement (34%) was to provide exceptional customer service 24/7.
It should be noted that Zendesk sells customer service software, but even so the findings are quite compelling.
The challenge for brands is to come up with a consistent multichannel approach to customer service, incorporating email, social and a call centre.
In a bid to reduce costs many companies make it extremely difficult for customers to actually speak to someone on the phone and instead force people to get in contact via email or a web form.
This is often not the preferred option and damages the overall customer experience, which is unlikely to breed customer loyalty.
Social media is an increasingly popular customer service channel and it’s common for brands to operate a Twitter feed dedicated to resolving customer queries.
Get the packaging right
Not all retailers have complete control over the delivery process, but they can ensure that the packaging has that ‘wow factor’.
For example, Birchbox, a company that offers monthly subscription boxes of cosmetic samples, delivers a personalized selection with a beautifully written letter in a branded box made out of Birch trees.
Many customers are so obsessed with receiving their latest Birchbox that they even post a YouTube video every time they receive a package, unraveling their latest Birchbox with their fans.
A great way of increasing customer loyalty and increasing advocacy.
You could also add little extras and surprises, a tactic used by Glasses Direct. According to its founder Jamie Murray Wells:
We have always relied upon word of mouth recommendations from customers, so we add little gifts to orders, provide a little extra service, and try to surprise and delight our customers. This is the best form of marketing for us.
Persuade customers to register
Registration can be a pain, but if retailers can persuade customers to register without making it a barrier to purchase, then there are huge benefits in terms of retention.
They can track orders, receive special offers and, most importantly, repeat purchases are easier if delivery and payment details are saved.
Improve email customer service
According to recent stats, email is the preferred customer service channel for 44% of consumers.
However, email customer service is often poor, or non-existent. Some companies don’t offer it, and those that do often offer very slow response times.
Offer useful apps/utilities
Making customers’ lives easier is a great way to improve retention and increase CLV.
For example, mobile banking apps frees customers from the need to call into branches or take to the telephone for most common transactions. It saves them time, and thus enhances their lives in a small way.
Indeed, a recent Bain report (PDF) on customer loyalty in banking found that mobile and online banking are the areas most likely to ‘delight’ customers and therefore increase their loyalty and make them more likely to recommend a particular retail bank.
If a customer has just made their first purchase, this is a good time to follow up with a welcome email and some up and cross sell suggestions.
Reward your most valuable customers
At JUMP 2012, NET-A-PORTER head of marketing Neil Bridgeman talked about the attention it gives to its most valuable customers, it’s EIPS (extremely important people).
These EIPs “represent an inordinate amount of revenue”, and as such they’re very well taken care of. Here’s how:
- Orders from EIPs are picked, packed and despatched first.
- They are assigned personal shoppers and invited into the London office for wardrobe planning.
- They get first choice of new products (some of which are very limited).
- They receive personalised lookbooks and see exclusive previews and presentations.
- EIPs have personal shoppers.
- EIPs have products bought specifically for them by the buying team.
Offer exclusive deals for social followers
Luxury flash-sale site Gilt Groupe has been offering exclusive sales to Facebook fans. This gives people a real reason to keep coming back, and to use the brand’s Facebook store.
Also, these social fans are most likely to be advocates of the brand.