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Customer Retention. Automated

Why Two Purchases Aren’t Enough

Posted by Enelda Butler on Aug 3, 2015 9:49:20 AM
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According to a recent survey of leading online retailers, respondents reported only 11-20% of their customers have purchased from them three or more times. This threshold is our definition of a retained customer. Retained customers are essential to any online business because they are worth more than one- or two-time purchasers in the long-run based on Customer Lifetime Value (CLV).

CLV is the total dollars flowing from a customer over their entire relationship with a brand. The longer a customer continues the relationship with your brand, the higher the CLV will likely be. In fact, a one-time buyer has an Average Order Value (AOV) of $24.50, but for repeat buyers AOV is significantly higher at $52.50.[1]

Additionally, existing customers are responsible for 41% of revenue, but this group is only 8% of a retailer’s customer base.[2] Less than one-tenth of purchasers are generating nearly half of online retailer revenue, so catering to this customer segment is vital. Not only are existing customers more valuable to your business, they cost less to retain. After all, a customer you keep is a customer that you don’t have to find. Specifically, it costs 6 to 7 times more to gain a new customer than keep an existing one.[3]

Because of these factors, customer retention is essential for retailers. Through data-driven, lifecycle marketing online businesses can convert more one- and two-time buyers into retained customers. A great example of leveraging lifecycle marketing for retention is Long Tie Store, an online retailer that specializes in providing extra-long ties for tall men. Because Long Tie Store’s customers are a niche group to begin with, retention is very important to the success of their business.

One tactic Long Tie Store deployed was to develop a Win-Back campaign to reach churning customers. Using retention scores, latency, and purchase history data, they trigger automated messages to motivate customers to repurchase. Since implementing this Win-Back campaign, their churning customer segment has decreased by 50%. Using data-driven marketing retention emails, Long Tie Store has tripled its number of retained customers in less than one year.

 

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To learn more about Long Tie Store’s lifecycle marketing strategy, including email examples, download the case study.

 

 

 

 

 

 

For other valuable insights about customer retention in the eCommerce industry, read the 2015 Retention Marketing Survey.


[1] https://www.linkedin.com/pulse/20130604134550-284615-15-statistics-that-should-change-the-business-world-but-haven-t

[2] http://success.adobe.com/en/na/programs/digital-index/1209_13926_existing_customers.html

[3] http://www.bain.com/Images/Value_online_customer_loyalty_you_capture.pdf

 

Topics: Customer Retention, Best Practices