For e-Commerce Brands, Acquisition Isn't Enough

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New shoppers typically make their second purchase within 90 days of their first. Brands that can determine the next-best steps for connecting with them will demonstrate the greatest long-term value.
Customer Experience

Retailers continue to struggle with customer acquisition efforts, as today's robust market makes it difficult for e-commerce brands to convert prospects from the start. Instead, retailers recognize that, to generate greater profits, they must delve into retention strategies that maximize customer lifetime value and foster long-term customer loyalty.

RJMetrics' recent "Ecommerce Buyer Behavior" report explores how initial consumer behaviors ultimately impact customer lifetime value. The study, which examined the behaviors of 176 e-commerce retailers and 18 million customers, indicates that, by observing how consumers respond to certain campaigns and how their habits develop over time, brands will uncover behavioral patterns that can inform future campaign optimization and engagement strategies. Retailers only have brief windows of opportunity to convert new shoppers into loyal customers, as their second purchase normally happens within 90 days of their first, so brands must focus more attention on cultivating loyalty and engagement in the long term.

The following statistics reveal the value of new customers and how retention efforts influence long-term loyalty and engagement:

  • New e-commerce customers are worth an average of $154 within the first year. Nonetheless, the majority of e-commerce customers only have an average order value of less than $50.
  • Sixty-nine percent of shoppers' first-year spend comes from their first 30 days as customers.
  • Only 32 percent of customers will place second orders within the first year, yet those who do are 53 percent more likely to place a third, as repeat purchase probability increases with each order.
  • Overall, the top 10 percent of customers are worth six times more than their industry average.
  • The top 1 percent of customers, however, are worth 18 times more than the average, meaning this top percentile will spend more than the entire lower 50 percent combined.
  • Fast-growing e-commerce brands experience CLVs 79 percent higher than the industry average.
  • Seventy-five percent of senior executives consider customer lifetime value to be an extremely important indicator for success, yet 42 percent admit to not regularly calculating CLV.

Key takeaway: As the days of easy acquisition begin to fade, e-commerce brands can no longer rely upon growth strategies that solely focus on gaining as many customers as possible. Now, retailers must nurture those customers they've already got in order to boost profits and strengthen loyalty. Overall, the fastest growing companies achieve breakout success because they excel at both acquisition and retention efforts. Such companies acquire customers three-and-a-half times faster than the average retailer and, after three years, the majority of their revenue continues to flow from repeat purchases. Laggards, therefore, must measure customer lifetime value to determine how popular behaviors impact loyalty. Brands must then apply this data to uncover the hidden issues that challenge success and identify what makes customers return. By establishing effective methods for encouraging repeat purchases, e-commerce brands can then determine the next best steps toward connecting with the very customers who demonstrate the greatest long-term value to the bottom line.

EXPERT OPINION
EXPERT OPINION