Note: This post is based on a webinar we gave: “Bake Retention into your eCommerce Pie.” The webinar recording and presentation can be accessed at the link.
Wining and Dining the Magic 8
For CustomerGauge eCommerce clients, an average of around 8% of customers account for around 48% of revenue – a figure we have dubbed the “Magic 8.”
Since these customers were spending so much in their online stores, you might assume that they are brand advocates. But after segmenting these customers with Net Promoter, our clients tend to find that they are split into the usual mix of Detractors, Passives and Promoters.
It should be a concern to any eCommerce outfit that some of their high value customers are at risk of leaving. But by identifying and segmenting this group, you have an enormous opportunity to rescue your high value Detractors, nurture loyalty among the Passives, and activate advocacy among Promoters.
Here are three tips on how to do it:
1. Segment as many high value customers as possible
Because it is short, demands little effort from your customers, and generally yields a high response rate, Net Promoter is an excellent metric to use.
Any business can implement a Net Promoter survey, but to maximise your response rate by ensuring that your survey is optimised for as many platforms as possible we highly recommend using a specialised software package (such as CustomerGauge). With this kind of software, expect survey response rates of 30%+.
2. Demonstrate to your customers that they are valued
High value customers appreciate being treated like an insider. Ways that you can demonstrate to them that they are valued include:
- Thank you messages: Personal thank you messages that outline what steps you are taking based on their feedback. (This may sound obvious, but you’d be surprised at how many businesses forget basic manners when asking for feedback from their customers).
- VIP service: This may take the form of Club Cards, differentiated service, or newsletters where fans can receive inside information on product updates, special deals, and events – information that they can share with their friends and families.
- Phone calls: A phone call (especially to a Detractor) where issues can be discussed and action plans decided is often enough to completely turn around a struggling relationship.
3. Empower Promoters to activate new customers
Wining and dining Magic 8 Promoters can help deepen your brand’s relationship with them, but with a little creative thinking and effort can also bring new customers in with a minimum investment.
One CustomerGauge client sent a branded, personalised thank you email to the top segment of its Promoters by value, along with three vouchers – one for the recipient and the others for him or her to give to friends. This simple gesture gave an impressive sales return – with an average of EUR 40 for every email sent.
Want more information?
This is not a comprehensive list, but is a few ideas to help get eCommerce organisations thinking about ways to improve retention among their high value customers. If you’d like some more information, listen to the webinar for more, or don’t hesitate to get in touch with us!
With global eCommerce sales tipped to hit $1 trillion by 2016, competition for a slice of the eCommerce pie has never been fiercer.
So if you are involved in eCommerce for a large business on a customer experience or sales level, our webinar “Bake retention into your eCommerce pie,” is a good chance to gain some insights to set you apart from your competition.
The webinar covers how to make the most from your existing customer base, and utilise your most loyal customer to help acquire new buyers (at low or no-cost). It’s hosted by two eCommerce professionals: John Ireland (Digital River), and Adam Dorrell (CEO CustomerGauge, who previously led eCommerce for Sony’s European operations).
Guest presenter John Ireland Sales Director, EMEA & APAC Physical Commerce Group, Digital River, has 14 years e-commerce experience on both sides of the client divide, in both B2B and B2C. He has a wealth of experience in driving ecommerce traffic for multiple clients, especially large manufacturers adapting to today’s multi channel challenge. His unique perspective should make it a lively and informative discussion.
We’d like to share a short 6-step plan for customer retention, based on some years working in e-commerce. We’re going to find some key customers that you can rescue, and others that you can reward. Then help you reach them and increase sales.
Step 1. Segment your customer base. Rank your customers by amount of spend, then make the cut at a suitable point – somewhere like 10 – 20% of your total customers. You’ll probably be aware of the 80-20 rule (sometimes named the Pareto rule) which helps explain how a small number of customers are responsible for much of the sales (20% customers drive 80% sales). In the case of e-commerce, it’s often more extreme. We found on some sites that around 10% of the customer base brought in 50% of the revenue (and even more profit if you take into account acquisition costs). When you do the analysis, you may find it’s just a few hundred customers who make a sizable contribution.
Step 2. Identify your loyal customers. Survey your customers using the Net Promoter® Score question. You can find out how to do it in our 2-minute guide to the Net Promoter Score. Ask “Would you recommend us to a friend of colleague?”, with a 0 – 10 scale. Use the results to understand who in your customer base are “promoters” or “detractors”. You may get up to 30% of your customers responding, so this is a very good way of dividing up the base. Don’t forget to ask for customer comments.
Step 3. Draw up the matrix. See the chart above. On one axis, plot customer spend (or value). On the other, loyalty. In the top boxes you should have a manageable number of customers who represent a sizable portion of business, divided into those who would recommend you (promoters) and those who would not recommend you (detractors).
Step 4. “Customer Rescue”: Find the customers who are most at risk from defecting: High value customers that scored low ratings. If you do nothing, you risk losing repeat sales, or lose them to a competitor. At worst, they may warn their friends from buying from you. By reading their comments you can understand what the issues are. Don’t waste time – divide up the numbers and get your team on the phone to them within 24 hours of harvesting their comments. Failing that, personal emails will do. Acknowledge any problems, apologise if needed, and ask what it will take to put it right. Often, customers will make allowances for errors – and if you can surprise them by over-delivering on a fix, you may even turn them into evangelists.
Step 5. “Customer Reward”: Identify the high spenders who rate you highly. These are customers who are likely to make a repeat purchase, and with luck, bring you new customers. So give them the tools to do so. In the excellent book Creating Customer Evangelists (Huba/McConnell) you can get some good ideas on how to turn customers into referral machines – offer new product information, ask for product feedback, give small gifts. Surprisingly, there are more effective actions than financial incentives.
Step 6. Automate and track the progress. This retention model is not a one-off task – the successful companies bake these process steps into their sales DNA, and monitor which actions are most successful, while reducing the number of detractors. Keeping a customer is far cheaper than finding a new one.
Do the hard work, easily
Yes, you can do all the above steps using manual analysis. You can do it for next to nothing with low cost survey tools, if you have spreadsheet skills and plenty of time.
However, there is an easier way: CustomerGauge automates all the steps for you: segmenting, surveying, reporting, closing the loop. By integrating with e-commerce systems, CustomerGauge can survey every transaction with the Net Promoter Score question, and can often reach 30% response. Thanks to special reporting, the system automatically ranks customers (and repeat orders) by value, showing results in real-time, and providing call- and email-lists for actions. CustomerGauge even tracks open customer issues with internal workflow, and reports on returning customers.
Now all you have to do is come up with some creative ways of keeping your best customers recommending you to others!
Learn for free
Our upcoming webinar “Learn how to increase customer loyalty and grow online sales automatically” on 10 Feb 2010 has additional resources on how to keep customers. Details/sign-up here.
Serge Acker, Senior Director Philips Flagship Store, presented a state-of-the-union address on the Philips webstore at ceBIT last week, to a gathering of hi-tech companies at the DigitalRiver Consumer Electronics Conference.
Following a movie-trailer like taste of the impressive new webstore, Acker highlighted some recent successes (and a few pitfalls) of the recent store migration. Philips were “late to e-commerce” he said, but “determined to do it with excellence“. Success was down to having a clear vision for direct sales, fighting internal battles (especially over channels), a dedicated team, and doggedly measuring the Net Promoter Score (NPS). He gave an example of the importance of customer experience for Philips (“50% of electric shavers are bought as a gift“), and made the point that CE companies today are not just selling televisions any more, they are selling a service.
Answering a question on whether dealers were upset by Philips selling to consumers, Acker said that dealers had lived with direct sales for many years (See also “Retailers Expect Direct Sales“). Customers want choice – some wish to buy direct. He added that selling direct creates “noise” and provides lots of detail in product presentation that ultimately benefits dealers.
The Philips online store Net Promoter Score (as measured by CustomerGauge) had helped them improve customer service, improved products (with voice-of-customer feedback) and grow revenue. Acker had earlier stated that “If we could only do one thing on their Top Ten list, it would be the Net Promoter Score“, and his last piece of advice to the appreciative audience was “Build your NPS, and revenue will follow.”
Contact DigitalRiver for presentation details.
Some other Net Promoter News snippets:
Outsourced invoicer OSG Billing Services announced on its site and by press release that it has achieved a Net Promoter Score (NPS) of 72 percent.
“As a service-based company, OSG Billing Services takes a great amount of pride in receiving such an impressive score,” said Ron Whaley, vice president of sales and marketing. “We are excited to have this metric to measure our customer satisfaction…” Source: Billing and OSS World
There is a new Linked-In group called NPS Ops (Net Promoter Score), set up by Seth Harbaugh of Utah-based service provider DirectPointe. His aim is to openly discuss process improvements, performance documentation and trends in the improvement arena of Net Promoter Score. Joining request should be submitted on the site.