We’ve spilled plenty of collective ink examining how the COVID-19 outbreak impacted global commerce.
The virus had plenty of unanticipated consequences. For instance, while eCommerce and sales through remote channels like click-and-collect surged, we saw a corresponding jump in fraud and chargeback activity. That’s just one example; it’s hard to identify any aspect of the global market that wasn’t transformed to some degree by COVID-19.
At this point, it’s more helpful to start segmenting out which changes are just temporary adjustments, and which are more likely to be permanent shifts in how we do business. For instance, consider the way in which marketers allocate shares of their budget.
More Emphasis on Retention
As marketers, we tend to put a lot of emphasis on attracting new buyers. However, the COVID outbreak exposed just how tenuous our supply of new buyers can be. This underscores the importance of keeping customers coming back over time.
Marketers are focused more on retention than ever before. It’s now a primary concern to not just win new customers, but retain existing ones. This is reflected in how marketing teams are allocating their budgets for the remainder of 2020 and into 2021.
According to the latest CommerceNext 2020 Benchmark report, 37% of respondents said they were allocating more of their budget to retention marketing. While acquisition still sees the majority of marketing spend, retention represents a greater share with each passing year.
I believe we should anticipate this being a permanent shift. But, like many other long-term changes to practices impacted by COVID, it is really part of a preexisting trend. While the COVID-19 outbreak accelerated things, the fact remains that a move to shift spending from acquisition to retention was already underway even before the virus first made news.
Rather than creating a need, the virus simply put greater emphasis on a preexisting need. In that way, this shift in favor of retention marketing is actually a positive move.
The Benefits of Retention Marketing
The digital economy is working toward increasing stability with each year. The pool of eCommerce newcomers is shrinking, and those marketers who understand this fact are taking a more balanced spending approach between acquisition and retention. This ultimately pays dividends for savvy marketers who know how to leverage their assets to keep customers coming back over and over.
Generally speaking, it costs five times more to attract a new customer, compared to retaining an old one. This is a long-time rule of thumb for marketers that tends to hold up pretty well.
There are a lot of obstacles to overcome when you try to attract a new buyer. You have to address all the customer’s objections, while also providing just the right kind of experience and balance of interaction to guide the buyer through the sales cycle. At the same time, there’s no guarantee of success.
We’re creatures of habit. It can be hard to win over a new buyer who’s never done business with you before. In contrast, it’s comparatively easy to convince a customer who’s already familiar with your brand, products, and service to make a repeat purchase. That individual already knows and trusts you based on previous experience, so there are far fewer obstacles and pitfalls to overcome in that sales cycle.
As if that weren’t enough, there’s also the fact that repeat customers tend to spend more than first-time buyers. In fact, boosting your customer retention rate by just 5% can increase overall profits anywhere from 25% to an incredible 95%, in some cases.
A Comprehensive Approach to Retention Marketing
Seeing more energy and resources devoted to retention, rather than acquisition, speaks to the longer-term well-being of the eCommerce market. It creates the impression that eCommerce is maturing and stabilizing. We’ll start to see less of the explosive growth we’ve observed in eCommerce in the past, but that’s a product of reaching critical mass in terms of eCommerce saturation.
All that said, even if retaining buyers is a much more cost-effective method of landing sales, we can’t overlook that retention is a more complex and involved matter than acquisition. It goes beyond marketing; every facet of the customer experience can positively or negatively impact whether that buyer ultimately makes a successive purchase.
On average, it takes 12 positive experiences to offset the impact of one negative experience. Nearly four in five buyers say they’ve abandoned a purchase due to a poor customer experience. There are other negative ramifications for poor customer experience to consider as well; for instance, buyers are more prone to dispute sales if they have a negative experience.
If you don’t already, it’s time to start to seeing every facet of your operations as an exercise in marketing. Order fulfillment, merchant policies, customer service: all are important components of the customer-centric approach to doing business that will be crucial to foster retention.
As digital channels mature, it’s going to be harder to win new customers away from their existing preferences. With an emphasis on retention, though, you can play that reality to your advantage.