In 2020, the e-commerce market has accelerated. Online shopping in the United States saw a decade-long growth in the three months to April 2020. And it was a similar story in every region of the world as lockdowns hit and consumer habits have changed.
For the first time, many customers turned to digital channels to find products they had previously purchased offline.
Stats roundup: the impact of Covid-19 on e-commerce
With these shifts in consumer habits in mind, it might seem like getting new digital converts is the answer to expanding a business today. Customer acquisition is certainly still a high priority for many brands, but returning shoppers are now more valuable than they have ever been, and the benefits associated with these consumers should not be overlooked.
Customer Nurturing is a long-term strategy. It’s about ensuring that your products, services and experiences are so good that those who have shopped with you before will come back again and again for years to come.
So why is it important to nurture customers?
Acquiring new customers is becoming more and more difficult. Research of Profitwell found that customer acquisition costs (CAC) increased by around 60% in the half-decade to 2019.
With advertisers dramatically increasing the proportion of their marketing spend online, there is now much more competition for available inventory. Additionally, Google and social platforms such as Facebook, Instagram and TikTok are increasingly focused on keeping users on their channels and clicking on paid ads, rather than brand and retailer content appearing. in flows organically.
That means marketers need to spend more on ads and content to convert increasingly ad-fatigued consumers. And with increasingly high CACs, the biggest brands, with the biggest budgets, are the ones who succeed in winning over new customers.
The pandemic has highlighted this
Globally, we’ve seen online leaders like Amazon rapidly shift funds to target in-demand products through paid search (not to mention a staggering number 74% of American consumers would have started their product searches on Amazon in the first place).
Here in the UK, major supermarkets were able to step up their delivery and collection services almost overnight when the first Covid-19 lockdown hit. But for some product lines, it’s nearly impossible to compete with industry leaders when it comes to acquiring new customers at scale.
With CAC costs and fierce competition from market leaders, plus Google’s impending move away from third-party cookies, we can really begin to see why nurturing the customers you already have is so important.
So how do brands build customer loyalty?
Consumers increasingly expect more of the brands they buy from, and there are a myriad of factors that can influence whether a visitor or occasional shopper becomes a repeat customer, including practicalities (“the basics”) such as an attractive product range, the availability of convenient payment and delivery options, and the visibility of social proof and customer reviews.
US e-commerce data Anadot shows that competitive pricing is the main reason for choosing one retailer over another among 57% of consumers. But site usability is almost as important, with 53% saying an “easy-to-use website” will increase the likelihood of them making a purchase.
Regardless of the original purchase driver, the key to profitable retention – bringing customers back to make subsequent purchases, without having to reacquire them through paid channels – lies in leveraging owned channels.
Proprietary channels + personalization = a winning loyalty formula
Personalized messaging and content consider psychographics (actual user behavior when interacting with your digital touchpoints) as well as the user’s more direct interest in specific products and services.
This ensures that your customers see what they want to see, whether it’s offers, promotions, engaging content, when and where they want to see it.
We know that consumers increasingly expect experiences that are tailored to them. Last year, Selling power found that 66% of customers expect brands to “understand their unique needs and expectations.” Before that, Epsilon found that up to 80% of consumers are more likely to make a purchase from a brand that delivers personalized experiences.
But there is data that directly draws a line between better personalization and customer growth.
According to Invest56% of online shoppers are more likely to return to a website that recommends relevant products, while SmarterHQ found that those who buy more often find personalization more useful. Brand loyalty among millennials, in particular, increases by 28% if personalized communications are used.
In short, if you deploy personalized experiences, both on-site and in inboxes, you nurture those customer relationships and increase the chances of those buyers coming back again and again.
Leverage data to understand long-term customer value
Developing customer lifetime value (CLTV) has traditionally looked at demographics and past purchases. This approach provided a rather crude result. But with companies increasingly capturing first-party data and having greater access to predictive analytics tools, CLTV can be predicted with greater accuracy.
According to CMO Consulting, “LTV can help marketers justify spending on marketing campaigns targeting particular customer segments.” Their Humanize and analyze relationships to drive revenue, retention and returns The report also states, “LTV can show that these groups will generate the most sales over their lifetime.”
This approach is vital for brands looking to nurture relationships with their existing buyers. This means they can invest with precision to attract and engage with their most valuable customers:
- They can target and promote the offers those buyers really want to see.
- Existing high-spending customers may be the first to hear about exclusive products that really interest them.
- And brands can ensure their buying journey is optimized on the channels they really love using.
But the report also warns that the end goal for brands shouldn’t be to optimize their CLTV simply to extract maximum revenue every time customers return.
The best practice here is to ensure that the customer experience during and after purchase keeps consumers coming back to you in the future, as well as improving the chances of them becoming your brand advocates across the board. line.
Use data to better target segments within your existing customer base
A campaign powered by performance marketing engine Wunderkind and Tinyclues for the major skincare brand Clarins was looking to optimize the brand’s ability to target certain customers within its existing database.
The campaign initially relied on Wunderkind’s Identity Network technology to grow Clarins’ email subscriber list fivefold. With an enriched CRM database, the brand then deployed Tinyclues’ audience and targeting tools to understand which customers would be most receptive to seasonal Christmas messaging around Clarins’ new Spa at Home collection.
Customers not interested in specific seasonal products would not be contacted about the promotion, while those who were likely to be receptive received the relevant messages. It was a huge success – with an 83% increase in conversions as a result.
According to Benoit Bouteille, vice president of customer experience at Tinyclues, the best signals are found in proprietary datasets. “Implicit signals — those that don’t indicate explicit intent like past purchases or website visits — are actually the strongest indicators that a customer is in the market for a product at any given time,” he said. “Using owned demographic, transactional, behavioral, web and search data, marketers can create Lookalike Audiences based on who has purchased similar products.”
The case study highlights that brands using their first-party data to optimize personalized experiences and nurture relationships with their existing customers are poised to make big gains in an increasingly digital and increasingly competitive environment.
A better understanding of the long-term value of your customers
Here are five takeaways to shift your mindset from acquisition to development:
- Acquiring new customers will always be vital for brands, but returning customers, who already know and understand your brand, are just as, if not more, vital to long-term business success.
- Customers want and value personalized experiences. They’re more likely to come back and be loyal to your brand if you tailor the experience to their needs.
- CLTV is essential for customer development. This means you can truly understand which customers are most likely to have high long-term value and which ones are worth investing in.
- The lesson with CLTV is not to (immediately) extract value. Businesses need to ask themselves how they can improve the customer experience so that consumers want to come back and be brand advocates. The financial returns will follow.
- Campaigns by brands such as Clarins (operating in the fiercely competitive beauty vertical) are already seeing success here – using implicit signals to segment and target existing customers who are most likely to be receptive to special offers.