The Keys to Growing Your E-commerce Company Aren’t What You Think

AVASK MarketingBusiness News

A guest blog by PostPilot

Acquiring new customers can be a real rush. It means your e-commerce business is working. Your customer acquisition strategy is effective.

But it doesn’t mean that your brand is growing over the long term, or that it’s growing in a way that is sustainable (i.e. profitable). In fact, if you’re focusing on customer acquisition at the expense of keeping customers around, then you could be riding your success into the ground.

New customers may drive sales, but customer retention drives profits. That’s because marketing to existing customers can cost a fraction of what it does to convince newbies to give you a try.

Having a great product, an eye-catching brand and a savvy social media strategy is just the beginning. If you want to build a brand that will stand the test of time—and the scrutiny of a potential acquirer—you need a smart plan for customer retention.

Why Retention is Essential

Let’s dig into the reasons it’s so important to invest in keeping your customers around.

Retention feeds your customer lifetime value (CLV or LTV), which is an underlying indicator of the health of your business. CLV is the total amount of money a customer spends on your products over the span of their relationship with you.

A higher average CLV generally means that you have happy, loyal customers—and often, higher profits. A lower average CLV can indicate that you have a lot of customer churn. You may even be losing money on your typical customer, if your customer acquisition cost (CAC) is higher than your CLV.

To calculate your CLV, you need three metrics:

  • The average value of an order
  • The number of times your customer buys each year
  • How long you expect your customer relationship to last

Let’s say your brand sells supplements. The LTV for someone who does triathlons might look like this:

$50 (average order value) x 4 (orders per year) x 4 (years) = $800

On other other hand, the LTV for a customer who is into diet trends might look like this:

$50 (average order value) x 2 (orders per year) x 1 (years) = $100

If you have to pay an average of $100 to acquire each new customer, it’s clear that you’re losing money on the trendsters. It’s also clear focusing on customer retention can seriously boost your profits.

There are a couple of phenomena that don’t get captured in these calculations. First, research has shown that loyal customers actually increase their spending over time. Second, customers who like your brand will spread the word to friends and family, allowing you to gain new customers without spending more money.

In other words, the better you get at retaining customers, the faster you can grow your business.

6 Smart Strategies for Increasing Customer Retention

There’s no single silver bullet for keeping customers around. But it’s clear that making a good product and then hoping for return business is not a recipe for success. And, there are strategies that have been proven to work across categories.

1. Provide Excellent Customer Service

In today’s highly competitive e-commerce landscape, customer service is more important than ever. According to a study by American Express, 70% of Americans say they’ll spend more to work with a company that has top-notch customer service.  Additionally, 33% say that they would consider switching to a competitor after just one negative customer service experience. If you want customers to stick around, you need to be responsive to their issues.

Try to avert problems in the first place. Provide clear, accurate and detailed product information on your site, so customers can make informed purchasing decisions without having to contact you. Make sure your shipping system is fast and reliable, and communicate clearly with customers about delivery dates, so their expectations are realistic.

If customers do need help, they’ll want to be able to reach you quickly and easily. Offer multiple channels of communication, including email, phone, chat, and social media. Make sure your team is available during regular business hours at least, and implement a system that ensures they respond promptly to customer inquiries.

No matter how great your products are, there will always be customers who want to return or exchange them. Providing easy returns and refunds helps build trust. Communicate your return policies clearly on your website. In the era of Amazon, when customers are increasingly used to fast and free returns, offering complimentary returns can incentivize them to buy.

Listening to customer feedback can help you improve your products and services. Just as important, it makes customers feel heard. Encourage them to leave reviews and ratings, and respond to negative feedback in a professional and empathetic way.

2. Implement Loyalty and Referral Programs

Loyalty programs reward customers for purchasing; referral programs compensate them for bringing new customers into the fold. When well executed, both can help strengthen and extend your relationships with customers.

Choosing the right rewards is key to the success of your programs. Rewards should be valuable enough to motivate customers to participate, but not so expensive that they erode your profit margins. Popular rewards include discounts, free shipping, and exclusive access to new products. For referral programs, incentives could include discounts for the referrer and the person they refer, or free products or services.

The easier it is for customers to join and use your loyalty or referral program, the more likely they are to participate. Make sure your program is easy to understand and track . Consider offering multiple ways to participate, such as through your website, email, or social media.

Loyalty programs require some upfront investment, but they can pay off in lifetime value.

3. Expand Product Capabilities

Expanding your product capabilities gives your existing customers fresh opportunities to engage with your brand.

A product development plan that is tailored towards the needs of your customers can ensure your business is meeting the demands of the current market and providing consistent value for your customers. By ensuring your products develop alongside your customers’ increasing needs, you can make them feel heard and valued – and they will be more inclined to repurchase your products.

Similarly, launching new products with your current customer base in mind is a fantastic way to keep them engaged with your business. By using research and surveys, you can develop precisely the kind of products your customers want to buy and launch your new product into a ready-made market.

4. Offer a Personalized Customer Experience

Personalization has become a key differentiator for e-commerce companies in today’s competitive marketplace, as customers look for more tailored interactions with brands. According to a study by Accenture, 56% of consumers are more likely to be loyal to a company that recognizes them by name, recommends products based on past purchases, or knows their purchase history.

Consider customizing the shopping experience to make it feel more connected to each customer. That might include personalized product listings, customized search results, and personalized messaging. That not only increases the sense of connection with the customer—in practical terms, if you spotlight products they will like, they’ll be more inclined to buy them.

At the most basic level, make sure that your messaging—through email, SMS, direct mail, and other channels—addresses customers by name. Research shows that personalization increases engagement. As Dale Carnegie aptly put it, “A person’s name is to that person the sweetest and most important sound in any language.”

5. Use Direct Mail

Customers are busier and more inundated with marketing messages than ever before. Banner ads, social ads, broadcast ads, marketing emails—there’s so much noise, many people are tuning out.

How do you get the attention of modern customers? With an old-fashioned channel: direct mail.

Email is a go-to channel for communicating with customers. But it has big disadvantages, especially when it comes to retaining customers. Some of your customers will decline to sign up for your list. Others will unsubscribe or (assuming your messages get past email filters) ignore you.

Direct mail, on the other hand, has a practically perfect open rate and gets a tangible expression of your brand into customers’ homes. Research has shown that people actually like opening their physical mailbox, trust the messages they receive, and are more likely to act on physical mail than on digital messaging. According to the 2018 DMA Response Rate Report, direct mail has a 9% response rate, compared to just 1% for email and social media.

Platforms like PostPilot have reinvented direct mail to meet the needs of e-commerce businesses. Their postcards and Cardalogs feature 1-to-1 personalization, and can be tracked, automated, and integrated into your existing marketing flows. 

Postcards are a powerful way to keep customers informed about sales, new products, and reward programs. Use them to thank VIPs or remind loyal customers to restock their favorite products. They’re fast, they’re easy, and they work.

6. Invest in Your VIPs

It’s reality: Some customers are better than others. And a smart business will focus on keeping the very best ones around for as long as possible.

Wait a second, you may be thinking—if they already love my brand, isn’t my job done?

Yes and no. You’ve clearly done some things right if customers keep coming back without a lot of encouragement. But losing those customers out of neglect can really cost you.


Keep those super-VIP shoppers engaged with your brand with regular communications and shows of appreciation. Create special offers just for them. Thank them at the end of the year, or when they place an order over a certain size, or send a new customer your way.

If you’ve already let some of your VIPs lapsed, it’s not too late. Many brands—including surfer-founded Laird Superfood—have found that personalized postcards are a potent way to remind past customers about your brand. They’ve been able to bring customers back, get a return on their campaign, and keep them around for long-term profits.

Customer Retention Strategy Opens Opportunities to Grow

A good customer retention strategy offers great opportunities to grow. According to research from Harvard Business School, customer retention rates that increase by 5% can increase a company’s profits by 25-95%.

Good customer retention is also an indicator that your product is meeting market demand. It can also lead to better customer acquisition through word of mouth marketing and lead to more revenue in the long run from repeat purchases.

Conclusion

Winning over new customers can be challenging and expensive. To keep your business growing and healthy over the long-term, you need to make the most out of that investment and keep customers around.

PostPilot is the go-to platform for unlocking the power of direct mail for e-commerce brands. Its postcards and catalogs are earning brands huge returns on winback, holiday, and even prospecting campaigns. And its concierge service will handle everything from design to segmenting to stamp-licking. Keep customers coming back and try PostPilot risk-free today.