Last updated: The e-commerce customer experience is evolving retail

The e-commerce customer experience is evolving retail

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If you don’t think the e-commerce customer experience is important, consider the following: The entire system of online retail today is build around one goal: Capture demand and convert to order as soon as possible.

This approach is entirely appropriate if your goal is to acquire as many new customers as possible. The cost of acquisition, however, is growing and it’s increasingly difficult to generate meaningful ROI via paid advertising or drive traffic via Google or Facebook. At the same time, new business models that leverage mobile, subscription and other related paradigms attract more and more shoppers, making it even more costly to reach new customers. So what can an e-commerce retailer do?

The e-commerce customer experience: How much is your customer worth?

One approach would be to re-focus acquisition strategy based on the Customer Lifetime Value or CLV. According to the 2015 RJ Metrics Benchmark report, a new e-commerce customer is worth, on average, $154 in their first year. This number varies by type of retail. For instance, the categories of housewares, food and drugs tend to be above this average.

What is more interesting is that only 32 percent of these new customers are likely to make a second purchase in their first year. The report also reveals that the top 1 percent of customers are worth 18 times more than the average customer, which equals about $2,772.

Armed with this information, an e-tailer can easily calculate ROI on programs targeting new customers vs. programs targeting your biggest fans—the top 5 percent. Many retailers will discover that a laser focus on retaining customers and finding ways to maximize CLV will yield a better return. Instead of spending the bulk of your resources acquiring new customers, the better approach would be to find a balanced way to invest in coaxing customers into becoming loyal, repeat buyers.

The challenge is that the majority of new customers—sometimes 80 percent or more—typically do not make a second purchase within the first year of becoming a customer. They had a need, they fulfilled it and they are not interested in engaging in long-term relationship with the brand. So what is the solution to this?

Marketers need to identify those most likely to buy again and encourage a second purchase as soon as possible. In some cases this will be easy, and in others it will take a more pro-active approach. The first step is to assess your e-commerce platform to ensure you have the right tools to segment new customer data in a fast and meaningful way. 

Another important aspect of the e-commerce customer experience is timing. The first 30 to 90 days after initial purchase are the most important. This is when a new customer is most likely to make a repeat purchase. Reaching out in that timeframe and providing adequate incentives for repeat business is the best approach.

Know what your customer wants

Building shopper profiles is another proven approach for increasing CLV. Who is your customer, why and how are purchasing and using your products. The goal is to present your customer with an offer they are very likely to accept. Even basic information like gender or age can help drive repeat buying behavior.

For instance the conventional wisdom is that women drive trends, since they control up to 80 percent of household spending. However, when it comes to e-commerce, men drive nearly as much spending online as women and are more likely to make a purchase on a mobile device. Furthermore, Millennials between the ages of 18 and 34 spend more money online than any other age group. Despite having relatively lower income as a whole, this age group will spend an average of $2,000 annually on e-commerce. In addition, the typical online shopper has a higher-than-average income.

Pay attention to Millennials when planning e-commerce customer experience

The CLV approach is of particular importance when targeting the savviest shoppers—Millennials. As native digital citizens, the are powerful consumers who grew up with social media, mobile devices and online shopping. Their 2015 spending power is estimated to be between $1-trillion and $2.45-trillion. By 2018, Millennials are expected to have the most spending power of any generation. By 2025, three out of four workers globally will be age 18-34. All of this is crucially important to marketers.

Based on data and engagement innovation, successful retailers will develop experience-driven commerce strategies for this influential group. Experience-driven means not only that the experience will be seamless across digital channels, but that the digital and the physical experience will converge. Ultimately, people will not remember how they chose your product or where they bought it, but they will remember how it made them feel.

 This post was written by Vlad Zachary, Director of Omni-Channel Commerce at Upshot Commerce.

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