Retaining your customers is a lot less expensive than getting new ones.
So how do you keep them coming back for more?
By Melissa Campanelli
Entrpreneur Magazine, January 2004
E-tailers, like brick-and-mortar businesses, should always strive for repeat business from customers. After all, statistics say it costs five to 10 times more to find new customers than it does to keep the ones you already have.
Jeremy Shepherd, founder of $3 million e-commerce site PearlParadise.com in Santa Monica, California, understands the importance of return customers to his jewelry business. "We've been working hard to build relationships with repeat customers," says Shepherd, 30. "Repeat customers are our best customers. They buy more than new customers."
So if you've been neglecting this important aspect of your e-business, now's a great time to start developing that strong foundation of repeat customers.
PearlParadise.com encourages repeat business with its "Pearl Points" program. With each order, a customer receives one or several "Pearl Points" coupon cards, depending on the amount of money spent. Each card is worth 10 points, and each point is worth $1.
Using an opt-in customer database, PearlParadise.com has also found success offering special sales to its repeat customers. "These are sales for special pieces that I may have received for an incredible deal at a farm," says Shepherd. "Instead of offering a deal that is obviously too good to be true to the general public, I send an e-mail message out to [customers on] our opt-in list, tell them how many products we have, and send a link to a hidden page accessible only by that e-mail." Shepherd offered this type of special offer last Mother's Day and sold out of nearly 100 pearl strands within a matter of hours.
Just 10 percent of PearlParadise.com's customers are currently repeat customers, but that number has grown 75 percent in the past year. According to Shepherd, his goal is to increase the proportion of his company's return customers to 50 percent in the near future.
Tyler Smith, 30-year-old partner and co-founder of Web development and online retail firm Niche Retail LLC in Troy, Michigan, agrees that offering coupons-in his case, via opt-in e-newsletters-is another great strategy. "This is our main source of return customers, so of [our] return customers, probably 80 percent are using coupons," explains Smith, whose $2 million business operates 12 specialty Web sites such as BabyPacks.com, JoggingStroller.com and SpareBed.com.
Targeting Your Best Customers
WineGlobe, a wine and spirits e-tailer in San Mateo, California, with 2003 sales of $2.5 million, also periodically sends e-mail promotions to opt-in customers. But the company goes further by creating a system that ranks patrons as "A," "B," "C" or "D" customers. WineGlobe then sends different promotions and specials to customers based on their ranking.
So-called "A" customers, for example, are the most loyal to the company and may get e-mails about items they've shown interest in or about special wines WineGlobe receives only for a limited time. "D" customers, however, are typical transaction-based customers who have demonstrated little or no loyalty to WineGlobe. This group receives e-mail messages with more generic offerings or e-mail coupons.
According to Manu Rekhi, founder of WineGlobe, the company tries hard to move its customers up the loyalty ladder. "Hopefully, through the coupons and generic e-mail promotions, 'D' customers might start buying more than their usual pattern," Rekhi, 28, says. "If so, we move them over to 'B' or 'C' customers."
WineGlobe also spurs repeat busi-ness with its wine club, for which customers sign up to receive a bottle of wine every month. These customers also receive free shipping and automatically become "A" customers in the segmented database. According to Rekhi, the wine club is a quick, effective way to get more return customers, as they are locked in for at least six months. WineGlobe's techniques appear to be effective-38 to 40 percent of its customers are repeat customers.
Treating Them Right
Rainer Lagemann, owner and co-founder of The Magazine, a modern European furniture store and e-tailer in Berkeley, California, believes the best way to get repeat customers is to offer excellent, personalized customer service the very first time they come around to your site. "Our customers receive personal attention, so they know exactly what they will receive before any product is shipped, including how it will be packed and crated. So there are no surprises," says Lagemann, 44, whose business brought in sales of $2.5 million in 2003.
WineGlobe's customer service program assigns an employee to each "A" customer. This employee then makes a point of "calling them to find out what their exact needs are and delivering [that] to them," says Rekhi.
Niche Retail's strategy is to offer live help via online chatting, allowing customers and visitors to instantly communicate with company representatives. "The goal is to be customer-friendly," explains Smith. "We've found these pro-communication features mean a lot to the customer." PearlParadise.com makes customers feel special by sending handwritten notes and "Pearl Points" cards to customers who refer new customers to the Web site. Exceptionally good customers receive handwritten thank-you notes, along with a piece of pearl jewelry they haven't purchased before. "The goodwill that comes out of this is tremendous," says Shepherd. "We pay special attention to all of our customers, but to very good customers, we'll go out of our way to keep them happy."
Using these kinds of strategies will do more than just get customers coming back for more. Those same customers will likely tell their friends about your Web site, thus generating referrals and new customers at a low acquisition cost. What could be better?