How We Think About Customer Retention
For e-commerce businesses, customer retention works almost completely differently than it does for stores with a “brick and mortar” presence. Brick and mortar businesses enjoy a simple advantage that others can’t replicate: they have a tangible, physical location. The secret lies in the fact that in-person businesses have a much easier job when it comes to earning mindshare with their customers.
What Does it Mean to Have “Mindshare”?
Mindshare is the ability of a business to engage with their customers to an extent such that the customer remembers the business when it comes time to make an additional purchase.
We’ll use a hypothetical local jewelry store owner named Julie to explain. Julie’s Jewelry (see what we did there?) is located in a highly-trafficked area of a large suburban town. Dave, a resident of the town who had bought something from the store a couple of years ago, walks in one day and asks to look at a few items. Julie happily shows him some of her latest inventory, and after 15 minutes Dave has become a repeat customers.
Sounds simple, right? We’re so used to buying and selling goods this way that it’s easy to glance over the relatively complex process that led to Julie earning incremental business from Dave.
Many of the drivers behind Dave’s second purchase can be attributed to the fact that Julie’s Jewelry has a physical location. Dave didn’t simply wake up one day, remember that he had purchased two years ago, and decide to go purchase again. Instead, Julie’s Jewelry gradually earned mindshare with Dave in the period between purchases.
Mindshare can be earned in a variety of ways; Dave could have walked by the store on the way to his favorite restaurant, he and Julie could be part of overlapping social circles, he could have seen the store showcased at a local art fair, etc.
In essence, Dave’s repeat purchase was the last step in what is actually a much longer process – a process which happens organically when it’s conducted in person. Our perspective is that the process is comprised of three steps:
- Dave remained engaged with Julie’s Jewelry (even though he hadn’t purchased in a couple of years) by seeing and hearing about the store around town
- Dave learned about the store’s latest product offerings – this could have been when he walked by the store and peered in the window, it could have been through an ad in the local paper, etc.
- After completing the first two steps, Dave then purchased for a second time.
More generally speaking, we call this process the “Repeat Purchase Pathway”:
Ok, so now we’ve broken out the buying process…for brick and mortar businesses that is. Phew. Now let’s use that same process to explain why customer retention is so much more difficult for businesses that operate online.
In particular, successfully engaging with customers (step 1 in the Repeat Purchase Pathway) is much more difficult for online businesses. For example, if Julie chose to operate her business out of her home with an e-commerce store instead of paying for a physical location in a busy area, Dave might have found Julie’s Jewelry through a Google search and purchased from her the first time around. However, after a couple of years, the chances of him recalling the store when it came time to make the next purchase decision are much lower. Earning and maintaining mindshare is much more difficult for e-commerce businesses.
Think about it: Dave wouldn’t have walked by the store at all. Chances are he wouldn’t have spoken with his friends about it. To make it even more difficult, Julie would likely find herself up against tens of thousands of online jewelry stores, all of which clamor for Dave’s attention when he opens his computer to make his second purchase. Without the continuous stream of information that Dave received in the brick and mortar setting, it’s safe to say that Julie’s chances of earning any additional purchases from Dave would have been much lower (all else being equal).
The good news is that not all hope is lost when it comes to customer retention for online businesses. Instead, there are simply different tools that online merchants must use to engage, inform, and earn repeat purchases from their customers. Moreover, it is still critical that customers follow the same pathway – just as they do for physical stores.
Many of the tools designed to help online merchants need already exist today. The only problem is that separately, they can be time-consuming to use properly, and many of them are only useful if the business can first persuade the customer to “opt in” – quite the challenge when there are so many other businesses competing for the opt in.
A perfect example of one of these tools is the Facebook like. A meaningful number of Facebook likes on a company’s Page make a potential buyer feel more comfortable purchasing. More importantly though, they allow a business to engage with each of their followers. Put differently, it’s the closest an online business can come to replicating the level of engagement that’s created when a consumer passes by a local store each day.
How Does All of This Relate to Swell Rewards?
Our intentions have always been to make our campaigns automated and customizable for merchants. Furthermore, as we prioritize, design, and release new campaign options, our goal is for each one to help merchants incentivize their customers to follow a step on the Repeat Purchase Pathway.
We designed the infographic below to illustrate how the campaigns we’re developing are closely aligned to the Pathway. One of our foundational beliefs is that investing to encourage a customer to “like” a Facebook page or subscribe to a newsletter pays off in the form of a much higher repeat purchase rate (and lifetime value of each customer).
The campaigns that we’re building aren’t simply a disjointed set of marketing tools which merchants might find useful. Instead, we’re a one-stop shop for comprehensive customer retention.
Of course, many of these campaigns are only feasible thanks to our single set of points, which we discuss in more detail in an earlier blog post. Without a single set of points, many of our engagement-focused campaigns in particular wouldn’t be cost-effective.
Up until this point, we’ve treated brick and mortar and e-commerce businesses completely separately. In reality though, not only are the lines often more blurred – many businesses have an omnichannel presence today – but nearly all of our campaign options are applicable to any business with an online presence, regardless of whether they sell their goods online.
Customer retention strategies for brick and mortar businesses are more complex than we made them out to be in the Julie’s Jewelry example. These types of businesses can’t simply rely on foot traffic to grab consumers’ attention – it’s also important for businesses to have a social media presence, a newsletter, etc. Utilizing Swell Rewards campaigns, these businesses have another mechanism by which to encourage engagement and learning prior to in-store purchasing.
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