How to retain first time customers and turn them into repeat buyers
On various customers we have seen the same thing, consistently and for years now. Repeat and loyal customers make up less than 20% of the total customer base. Retailers with an aggressive acquisition strategy even drop below 10%. Yet, we all know that it is cheaper to market to existing (known) customers than to acquire them new.
According to research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score), increasing customer retention rates by 5% increases profits by 25% to 95%*.
Increasing customer retention rates by 5% increases profits by 25% to 95%.
Over the years at DDretail we have developed several strategies and tactics that make it more likely to turn one-timers into repeat buyers. Retention is important.
But let’s first look at one other important detail that you would need to consider before we dive deeper into this topic.
Opt-in or not opt-in
Since GDPR, the opt-in process for commercial messages, has dropped dramatically across all brands. In some cases, it went from 80% ‘who did not opt out’ to below 20% that opts in. This can be a true headache for obedient marketers. The opt-out means the door to further communication is shut. There are however two message types that allow you to circumnavigate this within certain limits:
- Transactional messages
- Service and information messages
Transactional messages are part of the necessary communication after a purchase or any type of other interaction. These emails offer an opportunity to stay connected with customers, which we will elaborate on further.
Service and information messages are any non-commercial emails that accompany a transaction or a purchase. Apart from useful information about e.g. delivery status or loyalty tier status, these messages can contain other information, including (personalized) promotions that could lead to a second purchase.
So instead of one, the promotional message, like a newsletter, there are two more ways stay in touch with new customers.
Who is your new customer?
It is always a good idea to understand why new customers have a first purchase with you. Were they acquired with an offer ‘too good to be true’, is it out of necessity or could it be an impulse buy? Were they referred to you by someone else? This can help shaping up messaging or promotions that you could make them come back.
Strategy, discount or value-add
The idea here is to not only attract and acquire new customers, but to do that in a way that allows you to stand a better chance in turning them into repeat buyers. First thing that comes to mind is to lure them in with an offer. Discounts might convince someone to purchase something it is not a great basis to start a longer, leave alone loyal customer relationship. Of course, if it is the nature of your business to offer products and services at a discount, this approach is key.
We have seen however that value add offers and services attract a type of customer that is more likely to come back. A value-add offer can consist of points that can be earned if they join your loyalty program. It could be an invitation to a sneak preview of a product, before it becomes publicly available, or getting priority access to customer service. You can introduce a subscription model like Bol.com Select or Amazon Premium, that reduce delivery costs to zero and gives a customer access to selectable delivery timeslots.
You can get creative here and in many potential customers will love this. Coming up with the right mix of discounts and value-add promotions is where true marketers can excel.
Retail is about selling stuff, but many customers also like to contribute. Beyond promotions, you can build a relationship with customers through surveys or by sending relevant and useful information about the product or service they bought. This can happen even years later. Someone who bought a smart television e.g., would probably be happy to receive an email telling him or her that there is a software update available. Someone who bought a case of wine could be helped with information on storing it or with ideas about food pairing. The nature of these messages should be truly informative and engaging and should definitely be inline with the intention of your brand.
The combination of promotions and relevant information will help create a relationship with your new customer and ultimately that is what the R in CRM stands for.
Return to the messaging
Let’s go back to what we initially highlighted, the three different types of messages that we can use build that customer relationship and take you through the opportunities based on a typical e-commerce customer journey.
A customer has finally clicked the Buy button and let’s assume that there is no opt-in. The first thing that goes out a transactional email, SMS or in-app message with a transaction and payment confirmation. If you separate this from a delivery status or tracking email, you now have two messages that you could use to place other relevant messaging. These messages typically have very high open rates so chances are that whatever you put in there will at least meat a pair of eye balls. In our experience promotions in these messages irritate customers easily. They just completed a transaction and now you are asking them to spend even more. It is better to focus on your loyalty program, information sources for the product they just bought, or some entertainment, a link to a Youtube video maybe? If you happen to have a premium subscription service or loyalty program, this is the right moment to point this out. You can show that costs of mailing would have been waived if you would have taken up a membership, including a calculation of what they would have saved. An additional upside of this, is that you can be quite sure that those who do not pick up a membership are more likely to remain a one-time customer.
All other transactional emails, related to the purchase can carry similar content. In the last one, after the product has been successfully delivered and is not returned after a few days, you should not only thank or congratulate the customer once more. Ideally, invite them to participate in a survey, be it something like Trustpilot or your own survey. Or ask the simple question ‘How would you rate our service?’ or measure NPS with the famous ‘How likely is it that you would recommend our services to others?’
The journey does not stop there. From here onwards you should be careful and respect the general rule of thumb that only service emails can be sent, even if there is no opt-in. As I previously mentioned the content of service emails can be inspirational; ‘did you know that you could do this or that with your product?’ or informational, ‘please clean it with a dry cloth, using a non-abrasive cleaning product. The send frequency of these messages should be far apart enough to not generate irritation, they should also stop after three to six months.
And there is more
As I said before, invariably we come across databases with more than 80% one-time buyers and 75% of those are older than a year and inactive in most cases. Some value might remain in these contacts though. If you would apply a re-activation strategy, you might win some of these customers back.
Re-activation strategies can vary from a simple message that your record will be marked inactive if you don’t purchase anything or show a sign of life to a simple survey with some clever questions. Since this is a service email, our recommendation is again to not hard sell anything here or put a promotion forward. Keep it simple and to the point. Anyone that you retrieve this way, often at minimal costs, is a real win. This can also be automated so that it happens systematically in the background.
Your next steps?
Convincing customers to buy again is a subtle art of entering their world with relevant offers and information. Collecting relevant information sources, inspiring customers, or simply thanking them in transactional emails and service emails can stretch your relationship by weeks or months, depending on your product lifecycle. Subscription services and loyalty programs are great sticking points as well. They return value over time in many ways.
And once more, think about Frederick Reichheld’s research: increasing customer retention rates by 5% increases profits by 25% to 95%.