From Passerby to Customer (phase 5: return)

In this article we will discuss the "Returning" phase of the Ecommerce Performance Model. This phase focuses on making sure the customer is satisfied and therefore comes back. We discuss drivers that play a role in customer repeat visits. The article concludes with some examples of performance indicators that occur in the "Returning" phase.

In previous articles within this series, we talked frequently about the importance of partial conversions. Partial conversions trace back to the course of the sales process within the E-commerce Performance Model. This model uses 5 phases for the customer journey:

• Phase 1 - Coming
• Phase 2 - Looking
• Phase 3 - Choosing
• Phase 4 - Buying
• Phase 5 - Returning

Customers come back when they are convinced that they have bought a good product from you that they are satisfied with. Even if the delivered product was not satisfactory you can often retain customers if the handling of the complaint was in order. After all, people do not want to run risks. So if you make sure that your customer can buy without risk, they will soon be prepared to make a follow-up purchase.

Nurture existing customers

The search for new customers is the focus for many online retailers. However, existing customers who re-purchase turn out to be 6 to 7 times cheaper than a new customer. And when you consider that the maxim is that 80% of your future sales come from 20% of your current customer base, I know what I would focus on. But how do you create loyal, returning customers?

Retention

Ensuring that customers return to your site is called retention. What are factors that keep customers coming back to your online store?

• a unique concept
• personal offers
• good promotion on social media
• good shipping service
• a newsletter
• fast communication with the customer

An existing customer has already made a purchase in your web store. Because of this, your customer has already gained trust. He has become enthusiastic about your webshop, product and/or service. Nothing stands in the way of a second sale. Because of this trust a customer is also less focused on the price and will convert faster. By binding customers to you, you will spend less time and money on marketing. And if your customer is very enthusiastic, he might even recommend you to acquaintances.

Satisfied customers come back

If the customer has bought something in your shop and is satisfied with it (think of good delivery time, good price-quality ratio), the customer will be much more likely to recommend your shop to family and friends. He will therefore be much more likely to return to you the next time he wants to order something online.

What can you do to keep customers coming back?

If you make your customer feel like they are getting special treatment, you will receive a piece of loyalty in return. For example, by giving customers the opportunity to be the first to browse the offer, they will feel that they are important to you. But also a personal discount offer, a card or email on the birthday of a customer, can have a positive effect on this.

What to look out for in any case:

• Will the customer not be faced with unexpected costs (e.g. shipping costs not mentioned above)?
• Could they checkout using the payment method of their choice?
• How are the post-order emails set up?
• How are the items ordered packed and what else is in the package?
• Was the customer happy when he received the package?

Invest in your customer service

Customer service is a key factor in customer retention. In a survey by Microsoft, 96% of customers worldwide indicated that customer service was a determining factor in their loyalty to their favorite brands.

And just as good customer service is conducive to your customer retention, poor customer service is disastrous; dissatisfaction with your customer service is more reason for customers to go to the competitor than dissatisfaction with your price or product.

The bottom line is that your customer service should come first. With a number of measures, this is easy to achieve. First of all, make sure you are sufficiently accessible. Therefore, hire staff to answer the phone. You can also offer live chat on your website and respond to all messages you receive via social media, both public and private. Also check your email and contact forms regularly.

(Return) Service (Automation)

As a webshop owner you can ensure that a dissatisfied customer will become a satisfied customer again. When the customer indicates that the received product is not satisfactory for some reason, you can take action. A replacement product or money back are common methods. If this all goes smoothly and the customer is satisfied, he will still return the next time.

The product that was not to the customer's satisfaction is returned. Provide a return sticker with an address and clear instructions with the package. This makes it easy for the customer to return the product.

Record complaints and returns structurally (for example, in the Vtiger CRM service system ). This can promote correct and timely handling. In addition, statistics provide insight into frequently occurring complaints or problems, which can significantly reduce the number of returns.

Common problems can be automatically published as "Frequently Asked Questions" on the web store so that the number of contact moments can be reduced. See our crm solution for Magento.

A good example of efficient complaint handling is the company Picnic. Nowadays, at Picnic supermarket, you can report a product that is not good yourself in the app. You can then choose whether you want your money back or to receive the product for free. No hassle, no difficult questions. It's already annoying enough that a product is not in order. You don't want to bother your customer with an endless return procedure.

Reward loyalty, start a loyalty program

Loyalty programs offer a host of benefits. They encourage customers to come back and make follow-up purchases from you in exchange for loyalty points that they can redeem for free samples, discounts or even complete products.

You can base your loyalty program entirely on the amount your customer spends, driving up the average purchase value.

You can even go a step further and give extra points for social shares and referrals. And because customers that you bring in through a referral program have a 37% higher retention rate than customers that you have won in other ways, this is a win-win situation for all parties.

• See also the Shopping Points module for Magento

Devise a scheme where you reward the returning customer for coming back. For example, free shipping on the third order or a savings program where points are saved with each purchase that entitles you to a discount or a free product.

Analyze your customers

Build a database of information about your customers. Who they are, what they have bought, any complaints they have had and make sure you can do something with this data. If possible, buy software that allows you to collect this data and that, for example, allows you to follow the behavior of visitors to your website. This gives you a lot of insight into their interests and you can anticipate on that.

Use customer accounts

Allowing your customers to create an account is an excellent customer retention strategy. Your POS system can help you do this, allowing your customers to sign up and store their personal data, payment information and view previous orders.

The easier it is for customers to buy from you, the more likely they are to actually do so.

Work with personalized discounts and offers

A personalized approach is key if you want to increase retention rates. Work on the basis of segmented marketing, with which you send your customers relevant messages at the right time.

Approach your customers with well-timed discounts and offers for products that clearly resonate with them based on their previous purchases. This can be done with almost any email software, so see what your customers like and use discounts to persuade them to buy more.

• See our Marketing automation solution for Magento

Activate your customers via email

To keep your customers coming back, you can make sure that your customers who have already ordered several times give a certain discount on several items once in a while, this way it remains attractive for the customers to keep ordering.

Do you approach your customers to remind them of your existence and encourage them to buy from you again?

Always work with automated email campaigns for abandoned shopping carts, specifically designed to persuade truly interested customers.

Also, use personalized, segmented email campaigns based on your customers' previous purchases. For example, send reminders for a follow-up purchase if it's a subscription product, or show customers products that match their previous purchases.

• See our Email Marketing Automation solution for Magento

Search "partners-in-crime"

Finally, another possibility to get new customers but - more importantly - to keep your customers coming back: seek contact with other webshop owners who offer products that complement your offer. Of course not direct competitors (that would not be smart). But if you sell organic cheeses, for example, you can make contact with an online wine store. In this case, send a flyer or premium of this webshop along with the order and make sure that the wine store does the same with its shipments. Your existing customers will be curious about the wine store and possibly order something there. With their order they will receive something from your store and so the circle is complete.

What it all really boils down to is the following: Value your customers and make sure they know you value them, and the repeat purchases will naturally follow.

Automatic profiling

Tagging customers for segmentation and marketing, standardizing visual merchandising, streamlining tracking and reporting, and stopping high-risk orders. With each workflow, the goal is the same: simplify tasks.

Customer loyalty: automatically tag valuable customers for segmentation and notify customer service to send a personalized thank you message, or apply discounts or specialized shipping rules to customers with email addresses or tags such as 'Loyalty Member'.

• Order tagging: tag limited shipping zones and hold payments from customers who attempt to ship to those locations. Alert employees to offer customers store credit that they can spend on their next purchase or a refund.
• Customer preferences: show and hide payment options based on customer criteria such as order history, location and device.
• Loyalty tracks your customers and their engagement (purchases, adding to wish list, submitting a review, etc.).
• Channel Preferences: Identify, tag and segment customers who buy through specific sales channels, such as Amazon, Facebook, Pinterest and more.
• Onsite personalization based on preferences and interests
• Programmatic buying preferences and interests are used to personalize online advertising
• Direct mail based on recent online surfing behavior

And then the key figures

Your retention rate is an important statistic, but it is certainly not the only one. There are three additional metrics that are interesting when evaluating your customer retention and the value of your current customers: the percentage of returning customers, the purchase frequency and the average purchase value.

Retention rate

Your retention rate tells you what percentage of your customers you retain (i.e., what percentage of customers return) in a given period. The retention rate is the counterpart of attrition, the number of customers you lose in a given period.

• The number of customers at the start of a period (S)
• The number of customers at the end of that period (E)
• The number of new customers you gained during the same period (N)

(( E - N ) / S) x100

What is a good retention rate?

In an ideal world, every customer comes back again and again, and you have a retention rate that is as close to 100% as possible.Unfortunately, this is rarely the case, and that's okay. What constitutes a "good" retention rate varies by industry, product, and form of business.

According to a 2017 report by Hubspot, the standard retention rate for all industries hovers around 20%. Research shows that the average retention rate for e-commerce is somewhere around 30%.

Remember, these numbers are just reference values. Of course you want the highest possible retention rate, but first and foremost it is important to make a profit and keep customers happy. Of course, there are several strategies you can employ to reduce costs and increase retention rates.

Percentage of returning customers

The returning customer rate, the name says it all, tells you what percentage of your existing customers have returned for a new purchase. Of course you want lots of new customers too, but a high number of returning customers, like a good retention rate, is proof that you're doing something right, that customers are satisfied and that they choose to shop with you more often.

You can calculate your percentage of returning customers with the following formula:

Returning customers / Total number of customers

Purchase frequency

Purchase frequency tells you how often your customers come back to buy from you. This is an important factor in calculating customer value and in estimating the value of different niches within your target groups.

Suppose you sell laundry detergent. You may have noticed that a target group of single young professionals buys only one bottle a year; they live alone and take their clothes mainly to the dry cleaner. But a family with two children, for example, buys two bottles a month.

You can calculate purchase frequency with the following formula:

Total number of orders within a period / Total number of customers within a period

Of course, you can also calculate this per customer and then target a marketing campaign to customers with a specific frequency per month.

Total number of orders within a period (from 1 customer) / number of months

Average purchase value

A third crucial factor in determining customer value is average purchase value, a figure that you should not overlook. It tells you the average financial value of the purchases your customers make.

Let's take another look at your online deli. Some groups of customers buy from you only twice a year, but they immediately buy luxury, long-life products with a total value of more than € 150. Those customers are probably more valuable than the customers who buy from you four times a year, but only spend € 15 each time.

The formula for average purchase value is as follows:

Total sales value within a period / Number of orders within a period

Summary

In this article, we discussed the fifth and final stage of the customer journey of the E-commerce Performance Model for:

• interpreting the term retention
• the measures you can take to get customers to return to their homes
• how to profile
• what are useful figures to know

Below is an overview of articles by phase in the E-commerce Performance Model:

• From passerby to customer : coming
• From passer-by to customer : watch
• From passer-by to customer : choosing
• From passer-by to customer : buy
• From passer-by to customer : coming back

Also interested in the critical performance indicators for web shops and where you use them within your customer journey? Perhaps you already use performance indicators, but do they measure the right things for your webshop? Feel free to contact us to discuss this.