Finding and keeping customers is a basic business challenge. But the keeping part of the proposition is what Web retailers are just now focusing on.
The motivation is clear: Repeat customers spend more than first-timers or one-timers, and it costs more to acquire a new customer than to maintain the ones you have. Now the emphasis is on building strategies into sites that will keep customers coming back again and again. But investments in technology and analysis tools toward this end must go hand in hand with an overall marketing strategy to be truly effective.
When Web talk turned fervently to e-commerce about 18 months ago, phrases like "delivering a highly personalised and intuitive shopping experience," "conducting business in Internet time," and "building mind share through a multimedium advertising strategy" were certain to pepper any conversation on the subject. Though tough to decipher, the message buried in the buzzwords was that online retailers were ready to do anything and everything, bottom line be damned, to make sure consumers knew who they were and to get those consumers to their sites.
Well, don't look now, but to quote the great Bob Dylan, "The times they are a-changin'." Multi-million-dollar Super Bowl ads and nutty Harry Potter promotions may go the way of Green Stamps as the market clamps down on e-tailers of all stripes -- even the mighty Amazon.com -- and asks for proof that money will, at some point, be made. And as it turns out, the best way to make money, even in the new economy, is with a downright old-fashioned idea: Build and maintain a loyal and long-term customer base.
The reason this quaint notion has resurfaced is that it costs money -- and lots of it -- to acquire new customers. According to a recent report from McKinsey, an international consulting and research firm, e-commerce companies spent as much as US$250 last year to acquire a single customer yet made only about US$24.50 on each deal.
As expensive as that first date can be, a loyal customer makes good on the initial investment over and over. A study by consulting firm Bain and found that repeat customers at ten popular retail sites, including Gap Online, spend 57 percent more (per purchase) than first-time customers -- and twice as much as those making their very first online purchases. The study also found that return shoppers were much more adventurous in trying out new products or new categories, as long as they were buying from a company they knew and trusted.
"For most businesses, the shortest, most direct route to profitability is by holding on to customers, plain and simple," says Don Peppers, a partner at Peppers & Rogers Group and coauthor (with his colleague Martha Rogers) of several books on the subject of one-to-one marketing and customer-centric business strategies. "Likewise, the capital market realises that the long-term customer base is what will, in the end, give a Web business its value."
And that's why the world of Web shopping is at last realizing that just because everybody knows your name doesn't mean everybody will buy your stuff. The result is a sea change in both business strategies and infrastructure, as companies start to combine systematic and sensible marketing techniques with breakthrough technologies in an attempt to follow their customers into the black.
