Why are your existing customers more valuable than new ones?
This article is written in collaboration with Metrilo, an ecommerce analytics, CRM and email platform. Metrilo helps online stores sell more—especially to existing customers.
In e-commerce marketing, the focus always falls on new customer acquisition. Marketers usually aim to increase traffic for more conversions and advertise to get in front of more eyes.
By the way, here’s our comprehensive guide to ecommerce conversion rate optimization to help you convert more visitors into paying customers
Other strategies include using push notifications to catch visitors on site. And all this time, the really valuable customers we as marketers should be focusing on, are the ones who already have ordered from us.
Existing customers are more important than someone who may or may not come back ever again. You already won this person on your side and they are an asset you should try to keep.
So here we explore why existing customers are so important to e-commerce businesses and how you can work with them.
The value of existing customers
Let’s have a detailed look at the benefits of keeping your existing customers close and shopping repeatedly.
Returning customers are happy customers
First and foremost, if a customer shops with you many times, they are obviously satisfied with your products and shopping experience. They are likely to tell friends and family about your brand and spread social media love naturally. This means they do free marketing for you and bring you more customers from their social circle who are very likely to fall into your target audience as well.
What’s more, those happy customers can give you lots of friendly and honest ideas for improvement with a positive sentiment unlike disgruntled customers’ unrealistic expectations. The more invested they are in your brand, the more likely they are to genuinely care about where you are headed so they are the best to ask for feedback.
Let’s not forget that if people like you, you are doing something right. It is that simple—whether it is the product, the service, the prices, or all of these, you have secured a good position to grow from. Imagine if nobody purchased from you a second time! That would mean disaster.
Returning customers bring better ROI
Every customer has a certain cost of acquisition (CAC). However, one-time buyers rarely buy so much that you make a profit on their first and only order. You are stuck with the cost spent.
On the other hand, existing customers make up for this initial spending with every new purchase they make. Coupled with the fact that they tend to spend more (⅓ more on each order), making each order even more profitable.
And the more they like the brand, the more often they are likely to shop. This increases the number of orders per customer to pay off CAC and speeds up the buying cycle.
More orders per customer naturally brings costs down. Given that old customers usually come through free marketing channels such as organic social, direct, SEO and email marketing, you don’t need a huge marketing budget to bring them back in.
By the way, if you want to track your or your competitor’s activity in both organic and paid search as well as evaluate the promotional efforts implemented by you or your rival, you can use SE Ranking’s Competitive Research tool.
Furthermore, when you have money coming in from existing customers, for sure, you can increase your cost of acquisition spending because you will be able to afford it. And that usually means better leads who turn into higher-value customers.
Another thing is that people who have dealt with your company before know how things work, what to expect, what the terms are. They are more likely to pick the right size, for example, because they already are familiar with your brand. So returns, refunds, and cancellations are less likely to happen. The handling and shipping costs—as well as overhead—you put in every order are justified and not wasted with repeat customers.
Impact on cash flow
Having a stable core of returning customers every month can ease your cash flow worries a lot. If loyal customers come back on their own accord, you are only left to work on a part of the revenue needed to cover keeping the lights on. Plus, you can project revenue and expenses more accurately with the solid expectation of returning customers.
Even more so, if you are ever in a position where you need a quick spike in sales, existing customers are the easiest segment to turn to with a promo. And on the reverse, if old customers stop coming back, your revenue and cash flow will take a big hit as according to research, e-commerce brands generate about 60% on average from returning customers.
E-commerce folklore holds that growth comes from investing in increasing traffic. More traffic, they say, brings more sales if you assume the same conversion rate. All is good, but this is not sustainable growth. This strategy requires you to constantly pump money into increasing traffic through ads.
With existing customers, however, you do not have to rely on acquisition for growth. You can grow in revenue without new customers—or at least acquire as many as you can afford without losing money. Old customers don’t put a dent in your marketing budget and can still keep the machine running. And then, when you make a good profit, you can reinvest it in a more aggressive acquisition campaign, or international expansion, or on new product development.
Measuring the impact of customer retention
The value of existing customers can actually be measured. Brand loyalty and retention should be part of your metrics dashboard just like site traffic, conversions and sales. As we saw, they are quite important in the long term if you want your online business to thrive.
E-commerce retention metrics show it all:
- Customer retention rate—what percentage of people shop more than once (a.k.a. How well you manage to make them loyal). Recent data shows that it is 28% on average for e-commerce brands.
- Customer lifetime value—the total sum they spend with your business all-time, benchmark is $168 across e-commerce product categories.
- Number of orders per customer—over 1.8 is good
- The share of revenue coming from repeat customers—as mentioned above, the average is 60%
- Time between orders—the shorter, the better, of course; 102 days is standard
- Customer satisfaction
A more in-depth analysis of your retention efforts to keep existing customers can reveal even more. You can monitor customer behavior over time and see which cohorts are the most engaged, what they buy, how often they come back, and what stimulates them to. These insights will help you plan marketing campaigns that drive loyalty and repeat sales.
Some tactics for keeping existing customers coming back
Once you understand better why and how people stay loyal to your online shop, you can implement specific tactics in your strategy to prevent customer churn, further stimulate retention and multiply the value of a growing number of existing customers.
Here are a few such retention tactics.
Choose your flagship products wisely
Some products drive higher customer loyalty than others. It is wise to promote them as much as possible in order to create a better retention rate. This means featuring those products in visuals, campaigns and giving them to influencers to promote. Thus, the chances of more people getting hooked up is higher.
Concentrate on better marketing channels
Some of your referrers, influencers, discount codes and ads attract people who later turn out more loyal. These are the marketing efforts you need to be repeating. The rest produce disengaged customers and waste your budget.
For instance, to learn how to open up your brand to wider audiences with the help of influencer marketing, make sure to read our complete guide on this topic.
Use feedback for good
No matter good or bad, feedback is important. Try to take into account when making strategic decisions and to answer people’s needs. If they say they want more colors, why not give them that? It can only increase your sales and customer satisfaction. You want them to see that you take them seriously and do your best to live up to expectations. When you improve and say thank you, even the harshest customers may come around and buy again.
Provide VIP customer experience
What is the point of patronizing a business for years and spending a lot of money with them if they don’t recognize you? That is a valid customer point. To make loyals feel really good about shopping with you, you should put in some effort. Create merchandise for your brand and offer it to the most loyal customers for free on special occasions, e.g. customer’s registration anniversary, company’s birthday, etc. Free samples, bigger deals, pre-orders, free expedited shipping and gift wrap, maintenance and spare parts can all be among the perks you offer.
Keep the engagement high
We usually forget about a customer after they make a purchase and it gets delivered. But that is exactly when extra attention can ensure their long-term loyalty. Ask how they find the product; then send them tips on how to use it even better; then, ask for their social media posts using the product; then poll them for new ideas; and so on. Keep them entertained and help them love your product so they come back for more.
Existing customers are the backbone of a financially successful e-commerce business. If you don’t have a core of true fans who shop often, that is a bad signal for the product-market fit, positioning, marketing strategy, and the brand as a whole. It is recommended that you divide your time and efforts between old and new customers to make sure both groups are engaged and well serviced. New customers can turn into repeat ones, but old customers can only churn if you don’t care for them. And that is a financial loss for the business.