As a previous owner of three online businesses, I’ve learned what does and doesn’t work when it comes to using promotions and offers. Offers are a great tool to increase conversions, foster eCommerce customer loyalty and drive long-term business value. It’s easy to create an offer and drive short-term sales, but it takes a considered approach to drive both short term and long term business value. Today I’ll share some concepts and offers that can be used by online retailers to drive eCommerce customer loyalty.
It’s a startling statistic that it costs a business between five and 25 times more to acquire a new customer compared to hanging on to an existing customer.
As you hold on to that thought, consider this. Existing customers spend 67% more on products and services compared to their new counterparts.
In short, it pays to harvest eCommerce customer loyalty. But what is customer loyalty?
eCommerce customer loyalty can take many forms. A simple definition for a loyal customer is “a customer who returns and transacts with the same business despite other choices being available.” So what makes a customer loyal?
We know that customers can vary broadly, and eCommerce customer loyalty is driven by different aspects of a business and the products or services offered. If we were to distill it down to a simple summary, we could say that “eCommerce Customer Loyalty manifests itself with the customer returning to the same trusted online retailer because they like the products/services and feel they offer good value”. So the three key ingredients are:
- They trust you
- They like (or need) what you offer
- They feel you offer good value
A large base of loyal customers, reinforcing their purchasing decisions and helping others discover new offerings with social proof such as reviews, will provide your business with a solid foundation of loyal, repeat customers returning to your online store time and again. This is the secret ingredient and backbone of all retail success.
With the fast-paced, constantly evolving world of online retail, where consumer habits and demands seemingly change daily, building and nailing eCommerce customer loyalty doesn’t come easy.
That said, one tried and tested method of encouraging and cultivating valuable eCommerce customer loyalty is with the use of discounts, coupons and rewards (for simplicity we’ll just call them offers).
Creating short term business value using offers is simple. You can easily create an offer today using many of LemonStand’s built-in discount and promotion features and/or integrate with other apps where needed.
Creating long term business value requires a little more effort, because the drivers or enablers are not as clear, but the time spent working out how to leverage offers to drive long term business value will pay dividends if executed correctly. By way of example, creating long-term, reusable social proof content in the form of product reviews, can be used to help convert both first time and returning customers.
In this article we’ll highlight some of the things you should consider when using offers and share some of the most effective strategies to drive both short and long-term customer loyalty and conversions. First off we’ll look at some potential pitfalls.
Things to Consider When Using Offers
One of the biggest challenges for any online business is balancing the value of offers with their frequency. One of the greatest pitfalls of any promotional offer campaign is creating an offer dependency, with the result that customers only purchase when there is a valid promotion campaign running. This may result in:
- Decreased overall profitability and margin erosion
- Reduced organic sales and conversions outside offer campaign periods
- Decreased customer loyalty due to attracting price-driven bargain hunters
- Possible brand dilution, being only associated with offers
A study by Standford University confirms what most of us already thought – it’s the thought that counts, not the value of the offer that’s important. Often a token gesture is enough for most customers to feel appreciated and recognized for their loyalty.
The last item that is often overlooked is whether the discount/coupon entry field is visible on your checkout pages. Simply having it displayed, even when an offer isn’t active, can prompt a full paying customer, to ask for an offer code. This can easily result in at best a delayed sale and worst case, an abandoned sale as a result of the customer dissatisfaction. We would recommend hiding any discount fields if there is are no active offer campaigns running.
Building Short and Long term Business Value Using Offers
Whilst there are a ton of ways to use discounts, coupons, sales and other promotions, here are five ways offers can be used intelligently to drive conversions, eCommerce customer loyalty and build business value in the process.
- Onboarding offer
- Customer loyalty offer
- Review generation
- Abandoned cart recovery
- Increase order value
1. Onboarding offer
The start of the loyal customer journey starts with their first purchase with your business. A first time shopper joining offer could be the nudge they need. It builds immediate loyalty and is targeted, so doesn’t erode your existing customer base profitability, however you will need to ensure that your existing loyal customer base is being provided alternative offers for being long term customers.
Example: LemonStand customer Whiskyloot offers new subscribers to their monthly subscription of curated Whisky taster bottles a free 4th bottle in their first shipment.
2. Customer loyalty offer
A general customer loyalty offer is a core pillar to reinforcing and building a stronger brand bond with your loyal customer base.
The customer loyalty offer should ideally promote ‘exclusivity’ for the customers who have already spent money with you, thus reinforcing they are special and unique.
Offers can be tailored and segmented based on customer spend or purchase frequency. Offer urgency can also be generated with something like a special ‘1-day only’ deep discount exclusively for them. These offers should be used sparingly, so not to erode organic sales and profitability, but be frequent enough to remain in the customers awareness. Use them as unexpected surprises or run these promotions during the common season offer periods, achieving several objectives in a single campaign.
Example: LemonStand customer Cirkul has created a points program called the Inner Cirkul – where their customers can earn loyalty points that can be redeemed for free branded products and where their most loyal customers also get exclusive access to other special offers and freebies.
3. Review generation
With 90% of consumers reading online reviews before visiting a brand’s website, and 88% of consumers trusting online reviews as much as personal recommendations, customer reviews are tantamount to retail success in the digital era.
Generating social proof content, such as product reviews, provides your business with tangible long term value. It creates reusable content that you own the rights to and helps create credibility and trust with both new and existing customers.
HelpfulCrowd, one of the newest apps on LemonStand, enables you to automatically collect product reviews delivering industry leading review collection rates, boosted even higher when coupled with an offer, such as LemonStands discount features.
What if you could collect a review, say thank you and provide an offer to build customer loyalty and repeat business?
Now you can, with HelpfulCrowd’s thank you email templates – one for positive reviews and one for critical reviews.
This is how it works:
- HelpfulCrowd automatically sends an email review request to your customer after purchase
- Customer completes a review, that can be displayed anywhere on your site
- HelpfulCrowd automatically sends out a positive or critical ‘thank you email’ on your behalf
Different offers can be included in the thank you email templates and the review request and the thank you templates can scripted in your brand’s unique personality and tone, showing your appreciation on a more personal level, something that contemporary consumers appreciate.
4. Abandoned Cart Recovery
The Baymard Institute reports that the average online shopping cart abandonment rate is a whopping 69.89%.
This is where well-targeted offers combined with the MailChimp for LemonStand integration and MailChimp’s abandoned cart automation can really help retailers recover lost and incomplete sales. Your abandoned cart recovery success factors are increased significantly with:
- Timing – not too soon or late with sequence follow-up
- Copy – sincere, information collecting, compelling
- Offer – relevant
To be fair, an offer does not need to be extended immediately. You can wait to get feedback on why the customer left the items in the cart. This is also useful to gather more customer feedback on purchase barriers, so that you can finetune and adjust. Once you understand the customers reasons, you can then tailor a relevant offer that helps convert them from a shopper to a customer.
Example: Topo Designs used MailChimp’s abandoned cart automation to re-engage over 20% of lost customers.
5. Increase Order Value
Nudging your customer to increase their total basket value is an effective upsell technique to encourage customers to spend more, boosting average order value.
As with any offer, it will be sector or segment specific, but a great way to increase basket value as well as increase brand and loyalty value is to offer free shipping if the total value of the shopping cart is over a certain amount. Ironically, one of the biggest reasons for cart abandonment in checkout is due to extra costs, like shipping, being too high, another great reason to offer free shipping.
What should that value be?
An easy way to work out what the shopping cart value should be is to simply look at what the current average order value is, say over the last three months. If you’ve already been running offers in this period, be sure to ‘gross up’ the average value by the average value per order you’ve given away over the same period. Be sure to also exclude any taxes in this calculation. You can then set the free shipping offer to be available at 10 to 20% of the average order value.
Example: LemonStand powered fashion retailer Gentle Fawn offers free shipping on all orders over $150.
Every business is different and there’s no ‘one size fits all’ approach. Not all offers may be right for your business.
One of the best ways to find out what works and doesn’t is to experiment, or even undertake some A/B testing.
And remember, whenever using offers try to deliver on both short and long term business value, whether it be by generating content, acquiring new customers or retaining those that have already paid you money.
Now it’s over to you. Share what secret offer strategies you’ve had success with and recommend for your business.