Attracting customers is super difficult. Getting them to buy, is even more difficult. In ecommerce, you are likely living in 80-90% new visit rates and 70-80% bounce rates, all ending with a paltry 2-3% conversion rate. If you are doing better than that, congratulations, you are bucking the averages or in very specific categories. Either way, you are leaving a ton of revenue behind.
How do you unlock more revenue without spending more in this tough environment? By focusing on repeat customers and not throwing money at digital marketing. The cost to acquire a customer (CAC) is super expensive, so why not focus on driving repeat customers? The discount cost to do so is far less than the CAC of a new customer, plus loyalty drives life-time-value up and you also get the ancillary referral benefit of super happy customers.
Playing off my past, we set a target on digital marketing spend at 10% or less of our revenue and aggressive sales growth targets. We had two options, keep CAC under 10% or drive non-marketing driven revenue while holding gross margin steady. We chose to drive non-marketing through focusing on repeat customers that wouldn’t impact our margins as you cannot be blind to a margin hit higher than your CAC and think you are successful. The way we ensured this was tracking variable contribution margin, which we allocated marketing spend into our gross margin for operational purposes, therefore spend-on-acquire or spend-on-discount would impact the same number.
There are many ways to drive repeat purchases but I thought I would share some of my favorite ways:
- Stuffed the first order with a 20% discount on the second order and then every subsequent order would be a 15% coupon in the box.
- Send a physical postcard after a big order. We would send a postcard to anyone that purchased a kayak with a picture of their kayak and a “congratulations”. Check out lob.com for this service. Each card was personalized and had an offer as someone that buys a kayak needs accessories, we want them to come back to us.
- Discount on free-loading products. This is only achievable if you have a keystone item that you can stuff accessories with it. For us it was a kayak, we could ship other items with it for virtually free so we would offer a discount for these “free-loading” products.
- Happy birthday coupon, this is executed by a lot and I will tell you that this was our single largest used coupon. Hint, send it on their actual birthday.
- Segmented, personalized, and highly targeted emails. Our list was fairly large and we would run our promotional emails segmented, it was a lot of work to create 12 emails for each send but the return was worth it. They were so much more powerful than the daily emails I get from most retailers today.
- Retargeting display ads that were highly targeted to different audiences and times. One such audience was the kayak purchaser in the winter, we wouldn’t retarget in the winter. Instead, we would shift it to the spring/summer. Same with holidays, if they only bought around the holiday time, retarget the next holiday time.
- The most overlooked and non-promotional. Provide amazing customer service and follow-through. Make your customers raving fans, they will not only buy again but they will become part of your marketing team for you.
There are countless other ways to drive repeat customers and while some of these have obstacles for selling through marketplaces, there are other ways around spending adding spend that is not at the same return as the prior dollar.