Determining how to invest an ecommerce marketing budget is never a simple matter. All levers are crucial: on the one hand, it is important to acquire new users, to increase the audience to work on, to extend your market, to differentiate your clientele. On the other hand, for many ecommerce, Pareto’s law still applies: it is only 20 percent of loyal users, who most often generate most of the revenue.After all, as is clear in the chart below published by Econsultancy in the four-yearly Cross-Channel Marketing Report the topic is far from trivial.
Out of 400 online retailers, at least 40 percent say they are more shifted to acquisition while only 15 percent to retention. Interestingly, the share of those who say they are interested in both increased in 2014.The shift in focus between acquisition and retention often depends on the life cycle of the products. It goes without saying that those who sell products with very long life cycles often work more on acquisition at least in the early stages, because retention pays off only in the medium to long term. Sometimes it takes years to measure a customer’s loyalty. Different models are based on frequent reorder. Measuring CLV is one of the first keys to determine which model you want to focus on (if you don’t know how to do that, we discuss it here). The likelihood of reorder, in fact, underlies some definitions between acquisition-unbalanced, hybrid, or retention-oriented ecommerce models.
What kind of ecommerce are you?According to a definition given in the book Lean Analytics by Alistair Croll and Benjamin Yoskovitz in order to drive a marketing strategy, it is essential to determine what kind of relationship you intend to establish with your customers. To do this, the authors suggest calculating an annual repurchase rate, a metric based on the following question, “What percentage of my customers from last year will buy from my site again within 12 months?” Again, this is a calculation “philosophically” not far removed from Customer Lifetime Value (which we discussed in this post). Projecting the probability of repurchase by the same user on your ecommerce site allows you to classify your model according to different types.
All acquisition
If less than 40 percent of users will buy a new product the following year then the business focus is skewed toward acquisition. For example: those who sell very expensive equipment for certain types of sports can imagine that the probability of repurchasing the same products is quite low. This means that in addition to investing more in new visitors, medium- to long-term strategies should be geared toward customer satisfaction, so that they become brand ambassadors to others.
Hybrid model
If 40-60% of users will still buy within the year, then it is necessary to work on a mix of activities geared toward both acquiring new customers and getting existing ones to buy back.
Loyalty model
If 60 percent of users will buy within the year then it is clear that marketing investments must be aimed at driving the already acquired user to a new purchase, especially to maximize the investment made in acquisition. Loyalty programs are critical and must be consistent between online and physical store (when there is one).
Conclusions
Whatever model you recognize yourself in, there are aspects that remain constant when choosing to invest in acquisition or loyalty. The first is the issue of user recognition.Whether the consumer has not yet purchased or is a loyal user, it is crucial to immediately identify which segment they belong to. Distinguishing between user types means targeting your strategies based on the objective.The second aspect is that of experience. You certainly have a lot of information from existing customers that in all cases is useful in defining the best processes for converting new ones. In addition, as far as the new user is concerned, it is crucial to imagine a good level of personalization so that the navigation lasts long and is rewarding: certainly starting with navigation even when anonymous and refining the business proposition as interactions increase.And what kind of ecommerce are you? Let’s talk about it!
