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eCommerce Marketing Blog

The silver bullet to compensate the rising costs of customer acquisition

Posted by Marcel Schut on May 3, 2016 4:38:52 PM
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As a retailer you will probably recognize this problem. Shoppers come to your store, look at a specific product, ask your sales staff all kinds of questions and then they leave without buying.

This happens everyday and many retailers have accepted this phenomenon. In fact, some forward thinking retailers have turned this ´problem´ into an opportunity and are considering their physical store as a ´supporting act ´ to their website where friendly and knowledgeable customer service employees strengthen the brand experience and generate credibility that will support the online store.

Fact remains that 81% of todays shoppers have done their research before they enter your store. Their research consists mainly of product & price comparison and product reviews. While they are conducting their research they click on paid search ads and links from price comparison sites. Good news for search engines and price comparison websites, but for you as a retailer this has a negative impact on both your eCPA and the conversion rates of your website.

The rise of the eCPA and the factors involved

First and foremost, you will have to accept that it is basically inevitable that consumers will click on your paid search ads. You probably have anticipated these costs as there is not much you can do about it, apart from making sure your SEO is effective and cross fingers that they will click on your organic search listings instead of your paid ads.

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Another factor are the price comparison sites. Because of their popularity, huge numbers of traffic and the fact that their visitors are potential customers ready to buy,
retailers have their products listed on those sites. 

However, by focussing purely on price they stimulate a price war among retailers which
will affect the margins of all retailers involved. This is a race to the bottom which is no good to anyone except the consumer and the one retailer that offers the lowest price and can ship directly from stock.

 

 

3 things that will generate more money per customer

With an increasing eCPA, conversions rates that are declining and with margins that are under pressure you want to make sure that when a customer does end up on your site they will spend more then they initially intended to do. So how do you do that?

1. Increase the average basket value

Two of the most effective ways to have people spend more on your website are product bundling and product recommendations. Like with so many things, there is a right way
and a wrong way of doing this. If you do it the wrong way, it can seriously backfire and have clients leave your website without making a purchase or worse. 

If you are a retailer with a sizable product catalogue you want to avoid manual product bundling and recommendations since it´s not only very labour intensive and error sensitive, but it is also static and doesn’t adapt to your customers needs.

Recommendations and product bundling should be done by automated data driven solutions which look at each single product from your catalogue and combine it with complementary products based on each unique users’ profile and variables like e.g. profit margin, compatibility or availability. All in real-time.

If you would do this manually you won’t be the the first one who bundles the main product with complementary products that are out of stock or simply not compatible. This won´t increase your basket value. On the contrary. You will give the user a reason to abandon their shopping cart. Or even worse, when they do make the purchase they will have to return the incompatible products. It goes without saying that this has a negative effect on the customer experience and the likelihood of them coming back for any future purchases is nil.

2. Increase customer lifetime value (CLV)

It is estimated that on average it costs 6 times as much to gain a new client compared to taking care of an existing one. Still a lot of retailers are solely focussing on driving new clients to their website and leave their existing clients wandering off with the risk of them making their next purchase with one of your competitors. You need to keep your existing clients for as long as you possibly can.

One retailer who understands this like no other is Amazon.

Their biggest strength is not their next day delivery, nor is it their huge product catalogue. Yes, both are convenient and important, but the one thing that Amazon does so well is personalization. They really know know their customers inside out and they use data to tailor the shopping experience for each unique individual. By applying personalization, they have managed to built a personal relationship with their customers which result in repeated business over and over again. This is how Amazon increases their CLV and so should you.

Personalization and recommendation systems can help you to understand your
customers better and built a 1:1 relationship with them. There are many recommendation and personalization systems on the market today which won’t necessarily have to cost you a small fortune. Just make sure that they work on a fixed monthly fee to avoid financial surprises at the end of the month and if possible, choose a vendor with a pro-active customer support team. They will think along with you and acts as an external marketing consultant which will result in better recommendations, more revenue and increased customer loyalty.

3. Increasing the conversion rate

There are many factors, good and bad, that can influence the conversion rates. One of the more powerful ones, but funny enough still underutilized, is segmentation. No customer is the same and therefore shouldn’t be treated as such.

Retailers hold a wealth of data on their existing customers which could be put to good
use for both yourself as for your customer. Non identifiable information can be connected with your personalization and recommendation system in order to ´teach and feed´ the systems with knowledge.

Unique characteristics like clothing size, favourite colours, preferred brands, etc. can all
be used in order to help you create that unique tailored shopping experience. This method will result in repeat business, higher conversion rates and it will strengthen the customer relationship. Everybody wins.

Conclusion

Now that the retail industry is facing tough times where sales of high street stores are soaring and some are going out of business you will need to get creative. Traditional retailers who had a passive attitude are now panicking and hoping to change things around by focussing purely on ecommerce. However, a serious e-commerce business is not something you do on the side. For many it is already the main revenue stream or it will soon match or surpass that of their physical stores.

With more and more retailers focussing on e-commerce it is only logical that the online marketplace is becoming increasingly crowded. You will not only have to deal with online price fighters that work with minimal margins and rely on volume, but also have to realize that consumers have access to price information at all times by the means of their mobile phone.

Therefore, you are forced to think about how smart technology can be used to increase the average order value and compensate for the higher eCPA´s and lower margins and at the same time provide your customers with a reason to come back to your store for their next purchase.

 

10 things every retailer must do to maximize product recommendations

 

Topics: Ecommerce Marketing, ecommerce trends, customer retention

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