Would you like to attract customers and would like to achieve this goal as cost-effectively as possible? One of the most sustainable ways to improve your customer acquisition costs is customer retention. Because the customers you already have are the most profitable. Therefore, it is worth investing time and effort to keep them!
Of course, customer acquisition is important because you can't get a regular customer if they don't make a purchase for the first time. The problem, however, is that the average e-commerce store spends more than 80% of its marketing budget on acquisition, putting customer loyalty on the back burner.
Although this method of budgeting is common, it doesn't seem useful as 41% of an e-commerce store's revenue is generated by just 8% of its customers. This 8% consists of your regular customers — which makes it clear that they are extremely profitable!
In this post, we'll list 5 reasons why you should focus on returning customers.
By definition, a returning customer is a website visitor who has made at least two purchases. However, as the number of purchases increases, so does the probability that a customer will buy from you again.
After a purchase, there is a 27% chance that the customer will return to your store. If they've managed to get the customer to make a second or third purchase, the chance of making another purchase is already 54%.
But even though it's so important to encourage customers to make further purchases, you shouldn't be too aggressive. For example, you should be careful with discounts, as benefits that are too early raise expectations among customers: they always want discounts.
Instead, we recommend using sustainable engagement tools to encourage customers to return to your website.
While e-commerce conversion rates fluctuate and vary by industry, most experts estimate the average conversion rate to be 1% to 3%.
According to Paul Farris', on the other hand, the conversion rate of regular customers is 60% to 70%. Another study from Adobe shows that a customer who has already made a purchase from your store twice is 9 times more likely to convert than a first-time buyer.
That means the more repeat customers you have, the less you have to spend on conversion tactics, such as offers for abandoned shopping carts.
Not only do repeat customers buy more frequently, they also have a higher average order value than first-time buyers.
The most loyal 10% of your customers spend three times as much per order as the bottom 90% and the top 1% of your customers spend five times as much as the bottom 99%.
It also plays a role in how long a customer has been shopping with you. A study by Bain & Company found that clothing customers buy 67% more per order after spending 30 months with a company.
Most e-commerce retailers generate the majority of their revenue during a particularly busy season. If you sell swimsuits, you'll experience a spike in March or April. If you sell costumes, you'll spend the most in October. However, the time with the highest turnover for most retailers is the period between Black Friday, Cyber Monday and Christmas.
The increase in sales is due, on the one hand, to increased demand, which leads to more potential buyers, and on the other hand, to the fact that people buy more during this time. According to Adobe, the average buyer spends 17% more per transaction during the holiday season. However, regular customers of your store even spend 25% more per transaction during high season.
Regular customers are not only more valuable when shopping, they also offer you enormous marketing potential. A regular customer serves your business in the form of word of mouth, which is considered one of the best advertisements.
According to Bain & Company, the number of people a customer refers to your website increases with the number of purchases it makes. Every time a customer makes a purchase, they feel more comfortable with you and are more willing to make a positive recommendation.
In addition, after 10 purchases, buyers recommend 50% more people to a store than a one-time buyer. Regular customers thus increase the profitability of a store by attracting more customers.
This recommendation process can be further strengthened by promoting referral through points as part of a loyalty program — it is one of the strongest loyalty tools.
Returning customers are important!
Increasing the profitability of your business starts with the customers you already have. Regular customers not only spend more money in your store more often, but they also help attract new customers. This also makes them an important tool for acquiring customers. Concentrating on customer loyalty therefore makes sense in many ways and should not be neglected!
