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Why Customer Service is as important as Marketing

Why Customer Service is as important as Marketing

Customer retention is vital for the growth and sustainability of any eCommerce business. The cost of acquiring new customers means building loyalty within your current customer base should take precedence.

The benefits of this will be twofold.

Firstly, the best marketing is word-of-mouth, and by providing exceptional experiences for your existing customers, you are encouraging them to discuss your business with their friends and family.

Secondly, repeat customers spend more than first timers. Their transactions will be larger and will occur more often, which will become the core of your business.

The importance of retaining customers

Loyal customers can spend as much as 10 times their first purchase when they return. The Pareto Principle determines that 80% of your sales will come from just 20% of your customer base. This single statistic underlines the importance of nurturing your customer relationships and taking a long-term approach to service and care. While new customers are important, the aim should always be building and maintaining long term relationships.

Salesperson assisting customer in store.

What products are best-suited for repeat customers?

Some products and services lend themselves to loyalty more than others. People are more likely to buy clothes every week or every month than they are a bed. They will replace their printer cartridges every couple of weeks while a fridge might last ten years. Food and beverage are a totally different ball game—with people eating and drinking every day, it’s likely they’ll return to the same cafes for lunch and coffee time after time.

While some businesses will find it easier to apply the practice of customer service for better retention, businesses selling less frequently purchased products aren’t immune to the need to retain customers and treat them well. Loyalty can take other forms, such as recommending your business based on the quality of your aftersales service. Your business might sell a hundred thousand products a day, but your customers will have only bought one and will want to be treated like their purchase mattered to your company, regardless of when they will need to return and buy another.

How to use email messaging and content marketing to drive retention

The key to effective customer retention lies in your aftersales service. Your customers must have a reason to return. This begins with their initial purchase and providing support for any issues they may have with the product, but then extends to tempting them back.

Often businesses make the mistake of pitching their best offers and discounts to new customers. But why? It has been shown that existing customers will spend more and bringing these people back will be far more lucrative than new business.

By using an effective loyalty scheme, one that matches the way your store works and the products it sells, you can provide the discounts and offers to those who are at the heart of what is keeping your business moving forward. By building a list of loyal and engaged customers, you will be able to offer greater personalisation the more they return as you track their site behaviour and monitor the pattern of their purchases.

Example of customer loyalty program.


The critical metrics to measure and track results

As Peter Drucker once said, “What gets measured gets managed.” Understanding the important numbers is vital to developing a strategy to grow your engaged customer base and rely less and less on one-time sales.

Average Customer Lifetime Value (ACLV) is the amount a person will be expected to spend over the course of their relationship with your business. This is calculated using historical data and multiplied by the average number of years a customer is predicted to stay loyal to a company. For example, a Starbucks customer will usually have a lifespan of 20 years drinking their coffee. If they spend $3.50 a day, four times a week, their $14 x 52 weeks a year x 20 = an ACLV of $14,560. This equation can be applied to any business and will help build a projection of what size revenue can be expected. However, this figure is only applicable to repeat customers and without the data gained from retaining clients, you won’t be able to accurately predict your sales and revenue. As a business, your aim is to increase this figure by providing an exceptional customer experience every time.

Customer retention rate (CRR) is a measure of how many customers leave vs how many remain loyal to your company. Ideally, you want your retention rate to be 100%, but this isn’t realistic. The ideal rate will differ from industry to industry, but as a general guide, 85% is a good number to aim for.

The equation to work out your CRR is ((CE-CN)/CS)) x 100.

Over a defined period, you subtract the number of new customers (CN) from the number of customers at the end of the month (CE), divide this by the number at the start of the period, then multiply by 100. For example, your business starts with 76 customers. During the period of a month, you gain 15 new customers but lose 8. This gives you a total number at the end of the month of 83. The equation looks like this:

((83-15) / 76) x 100 = 89.47% retention rate.

Improving your retention rate is designed to mitigate the costs of attracting new business, as well as understand that continually replacing lost customers is costlier than attempting to hang on to your current ones. By retaining a larger core of loyal and engaged customers, you can reduce your marketing costs and thus reduce the amount every new customer is costing you. Customer retention can be a good indicator of the standard of your customer service and might show that this is an area your business needs to improve in.

Good customer service is no longer optional

Competing on price alone is becoming less viable in virtually every industry. In eCommerce, it is almost impossible. Every time an original business springs up, several imitators appear instantly. This means that your business must establish itself as the long term option. The one that will still be there when the customer needs aftersales support. It is important to nourish these relationships through high-quality customer care and personalised marketing plans. A customer will tend to return to the business they feel best understands and meets their needs and doesn’t treat them as expendable.

Digital Commerce Seriesd

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