As the battle for online spending heats-up, most e-tailers are focusing their energies on attracting customers. What many forget, however, is that the real path to e-business success is customer retention. ZDNet Australia offers these expert tips on growing a loyal user base.

Interaction with your customers, whether in an online or offline environment, is a 4-step process: reach, acquire, convert,retain.

For a Web site, reaching potential customers involves branding and exposure within target markets (banner advertising for example).

Acquiring involves getting these potential customers to come to your Web site. Converting requires them to interact with the site (buying a product, signing up for a newsletter etc.) and retaining these customers involves them coming back to the Web site and interacting once more.

Each of the 4 steps is fundamental to the success of your Web site. However, all too often, a business will either forget, or not pay enough attention, to step no. 4 (retention), to the detriment of the bottom line.

Many studies have shown that the cost of retaining customers is less than the cost of acquiring new ones, regardless of the channels used by the business (Measuring the Success of your Web site - Hurol Inan 2002). This is especially true for an online business, where there are many factors that can influence conversion (security, privacy). Therefore, once we have a customer, it is so important to do everything we can to retain them.

However, before you focus on new methods of increasing retention rates within your customer database, it is important to consider the following question: When is a customer retained?

A Web site that sells house insurance may consider this to be one order a year, however a Web site that retails groceries may consider a customer retained only if they are ordering once a week.

Which category does your Web site fall into? How often do you want your customers to interact with your Web site?

Having defined customer retention in relation to your own Web site, you should then look at ways of encouraging a higher percentage of your customers to fall into this category. What can be done?

The first step to take is to remain in contact with all existing customers. This may sound very simple, but it is too often overlooked. You must keep the Web site in the minds of all your customers, so that when it becomes time to purchase again (birthdays, weddings, Christmas, software updates etc.) it is always your Web site that is clicked on first, not your competitors'.

When visitors first purchase from your Web site, give them the ability to subscribe themselves to a mailing list. This mailing list may involve, for instance, sending out online newsletters once a month, informing customers of new products, special deals, or updated content on the Web site. This may not lead to repeat purchases every month, but it will keep your Web sites' address in your customers e-mail inbox.

As Christmas, or other seasonal periods, approach, you could increase the frequency of the newsletters, or adjust the tone, focussing more on selling than branding techniques.

It is important to remember to allow customers to indicate they want to be added to your mailing list, not just automatically place them there. Even though strictly speaking this is legal (as long as you allow customers the ability to opt out of future mail-outs when their first online newsletter arrives), it is unethical, and runs very close to spamming. It will also reflect badly upon how you value the relationship with your customers, and their privacy, and may be more detrimental to improving customer retention than helpful.

Another method of improving customer retention is to offer your customers' genuine incentives to come back to your Web site and purchase again. One method of doing so is to make all first-time customers -members" of the site, and reward them with member discounts. This may entail 10% of all future purchases, or free shipping for all items next time they purchase. Simply provide all customers with a members' log-in and password to use next time they access the site, and outline to them all the benefits of membership.

You should also closely study the relationship between your products, customers and the level of repeat purchasing. Do certain groups/demographics return to the site and purchase more often? Do particular products lead to more repeat purchasing? Knowing the answers to these questions will allow you to adjust your target markets and products in accordance with increasing levels of customer retention.

For example, if product A leads to a higher rate of repeat purchasing than Product B (all things being equal), then adjust your site and marketing structure to ensure more first-time customers are purchasing product A than B.

In certain circumstances, you may retail products on the Web site which have a distinct lifecycle (eg Insurance). In these situations, it is imperative that you contact all customers when the lifecycle is coming to an end, again to put your company back in their minds. However, once again, request permission to do so at the initial sale of the product, otherwise you run the risk of your customers considering your actions intrusive and invading their privacy.

Most businesses are always very focussed upon expanding their customer database, constantly trying new and innovative marketing and sales techniques. This is far too often done at the expense of retaining existing customers. Concentrating upon customer retention, incorporating some of the techniques listed above, will lead to improved bottom-line figures for your Web site, and business.

] Mark Fradkin is client services manager at Flotsam, a Melbourne-based online strategy consultancy. You can contact him by e-mail at mark@flotsam.com.au or visit Flotsam online at www.flotsam.com.au.

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