Seek Repeat Customers to Drive Ecommerce Profits

Growing a successful ecommerce business may depend on earning repeat business from a relatively small number of loyal shoppers, according to a new report.

The top 1 percent of a normal ecommerce retailer’s customers will invest up to the bottom 50 percent over time, based on the 2014 Ecommerce Benchmark Report from data analysis firm RJMetrics.

Looking beyond just the top 1 percent, an internet retailer’s best customers will invest about 30 times as much as a typical customer in the long term, implying that advertising strategies, at least to some online retail companies, should be more concerned with encouraging lasting shopper associations with high-value clients, as opposed to attempting to entice anonymous masses of new shoppers.

Loyal Customers Spend More in Two Ways

As the statistics above suggest, having a loyal shopper that returns again and again, creates a greater value customer over a number of months or even years. This enhanced lifetime customer value is the first of at least two ways that faithful shoppers can be better to get an ecommerce company than single-visit shoppers.

The next way that loyal customers can be valuable is in average order value. To put it differently, loyal shoppers do not only spend more over time, they also spend more each time they shop.

The RJMetrics report estimated that the average purchase value for the bottom 90 percent of shoppers is about $54. A loyal shopper at the top ten percent of a merchant’s active clients will generally pay $163 per purchase, based on RJMetrics, or more than three times as much as the average shopper. In the end, a top 1 percent customer will spend about $267 per trip, which is over five times as much as an ordinary shopper.

This RJMetrics data published this month normally agrees with a similar study that Adobe conducted last year. In its analysis, The ROI of Marketing to Present Online Customers, Adobe estimated that a returning shopper that makes another purchase will spend around three times as much on the next trip as a single-visit shopper. Likewise, what the Adobe study called”replicate” shoppers, who reunite three or more times, will normally spend about five times as much per trip as a recently acquired shopper.

Repeat Shoppers Are Inclined to Cost Less to Service

Additionally, there are strong indications that loyal, repeat shoppers may cost less to support.

“Repeat revenue is better than revenue from new clients, hands down,” the RJMetrics report stated. “Existing customers are cheaper to market to and the revenue is more predictable.”

To make this point consider the relative cost of sending a targeted email to present shoppers versus financing a pay-per-click effort or employing a search-engine-optimization expert. The former may cost pennies, while the latter could cost hundreds or even thousands.

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Implications for Ecommerce Marketing

The significance of loyal, repeat shoppers has consequences for ecommerce advertising.

“Returning and repeat buyers create a disproportionately large share of earnings for online retailers,” Adobe said in its analysis. “Despite this fact, but nearly all retail digital advertising budgets are spent on media that doesn’t effectively target these more productive customer segments.

Retailers can achieve tremendous revenue gains by altering their advertising budgets to better target these consumer segments,” Adobe said.

Practically speaking, this may indicate that some online retailers may wish to spend less on marketing tactics that aim at single-visit shopping behaviours, diverting advertising dollars to strategies capable of generating long term shopping associations.

Especially, this may mean investing fewer dollars and cents in SEO, which is otherwise experiencing diminishing returns in the face of rapid search engine algorithm changes and changes in consumer behaviour; PPC; or perhaps banner ads.

More resources could be devoted to articles marketing, developing text or email lists, creating useful mobile applications, incorporating game principles to loyalty programs, encouraging subscription buying, remarketing, group purchasing, or providing better client service, such as personalization and product cross and upselling.

The specific context in which a company is working will affect marketing strategies and tactics even where the notion of targeting long-term clients is concerned. For instance, a new ecommerce company will have to attract clients before it can engage those clients long term. Nonetheless, even a new venture may want marketing plans in place to keep shoppers from the very start, given that doing this might be a strong indicator of success.