What Ecommerce Store Owners Can Learn From Toyota

Unless you have been hiding under a rock or living in a cave recently you’re well aware of the issues big auto maker Toyota faced with recalling cars due to faulty accelerator pedals.

Watching this unfold I found three important things that ecommerce store owners can learn from it.

Toyota has put in place a method to remedy the accelerator problem and are working to correct it, but they are now also faced with what might be an even bigger challenge—rebuilding customer confidence.

Ecommerce store owners take note, here’s what we can learn:

1. Speed. The speed at which they addressed the issue from the customers perspective was slow. It has been reported that many customers have vented frustrations over the slowness to respond to the issue, and the lack of a “public face” being tied to the issue.

   You see, as we know, customers expect a number of things and one of those is speed. Speed in shipping, speed in customer response times, and speed at correcting any problem if one should arise are just a few.

   When a problem arises customers want someone to stand up, take blame personally, and fix it fast. According to reports and feedback gathered from consumers, Toyota failed (at least in many consumers eyes) to address the issue fast enough. Yes, they are doing it now, and that is a good thing, but many customers confidence has already been shaking by the initial response time.

2. Service. Customer service, quality, and reliability are some of the top ways Toyota has been able to distinguish themselves to this point.

   At least in the customers eyes, Toyota did not provide the level of service they (the customers) are use to when it came to this problem (again, initially). Toyota reports that they are indeed working on, and have remedied the issue, and are in the process of shipping out “the fix”, but as we’ve seen, some damage may have already been done in the eyes of the customers.

   Depending on how they handle this issue from here on out will determine how well then can rebuild customer confidence. Handle it properly and they should be able to correct the initial perception, but it would have been better to have addressed it from the start the way customers expected it to avert this confidence problem entirely.

3. Growth. Growth of all business is welcomed. It’s what we strive for. Growing too fast however can cause problems.

   I heard one reporter say that Toyota set out as one of its objectives to overtake GM as the world’s largest car manufacturer. And they succeeded in doing that. But that success came with a price.

   It’s the old “quality vs. quantity” issue. The fewer of something you make (in general), the more attention you can pay to its quality. The more of something you make, the less time there seems to be to devote to quality (at least this is the way it tends to work out.) This is why sometimes you get better service from a small business (who knows you by name) over larger businesses where you tend to become just a number.

   In this case, Toyota grew, but they may have grown at the expense of quality—at least temporarily. It’s not always good to be the biggest—it quite often is better to be the best at what you do.

   If that means slower growth, then so be it. Your growth will breed quality and for that your customers will remember you.

So what can ecommerce store owners learn from Toyota?

1. When issues arise, be fast and open to inform your customers of them, take blame if required, and correct those issues asap. It’s inevitable that at some point you’ll encounter customer service issues. It’s not a question of if, but rather when (even the best can’t avoid it.) How you deal with these issues when they arrive is what will determine your outcome.
2. Grow your company at a rate that your internal operations allow. If the infrastructure is not there to keep up with growth, your company will have to sacrifice something to keep that growth alive and that sacrifice usually ends up hurting in the end.

Unexpected Customer Appreciation Hits the Spot

Today I went to the post office to check the mailbox and found a nice albeit unexpected surprise waiting for me.

Let me briefly set the stage. I write and contribute a number of monthly articles for both online and offline publishers and have been doing this for sometime now. One of those online publishers EzineArticles.com knows a little something about customer appreciation.

I get to the post office and along with the other mail I find a small square box with the Ezine Articles logo on the outside. My curiosity is piqued by now and I’m wondering what I ordered?

I open the box and to my surprise I see a nice coffee mug, a bag of coffee, and a note thanking me for being a part of the community and contributing to Ezine Articles.

Ecommerce store owners take note—this type of pro-active customer interaction works! I’m not saying you have to send free gifts to all your customers, but I have said in previous posts that a simple and unexpected hand written note or “bonus” here and there won’t hurt. It builds loyal customers not to mention happy customers.

Not that I needed it to keep writing for them, but it certainly cemented my relationship with Ezine Articles.

Do you reward or surprise your customers? If so how? If not, why? Part of customer retention is keeping your current customers happy. What would happen if you sent an unexpected gift to your current top customers? I’m sure the impact of that small gesture would reach far beyond what you think.

Just look at this case, EzineArticles.com probably had no intention of getting mentioned for their efforts. But their simple gesture of appreciation did just that.

Thanks guys!

Your Current Customers Hold the Key to Bigger Profits

If you want a sure way of increasing profits you should start looking inside your business. Shifting your sales focus from attracting new customers to enticing your proven customers to buy again is one way to increase your sales dramatically.

I’m not saying you should stop looking for new customers—not at all. However, it makes sense that your ideal prospect is one that has already converted – in other words, one of your current customers. We can also say with good certainty that the cost to generate a sale from acquiring new customers is higher than the cost of generating a sale from current customers.

Why? Because you have already spent the initial investment to gain your current customer and if retained properly, your investment to sell to them again should be far less. In other words, you put more revenue in your pocket from the sale to a current customer because the expense to persuade them to buy is less than the investment needed to win a new customer. This is how you build profit in a company.

The 80/20 Rule

The 80/20 Rule has foundations in economics and states that roughly 80 percent of your outcomes come from 20 percent of your inputs. Or in other words, 20 percent of your current customers account for 80 percent of your revenues.

Although the rule was proven using statistical analysis by a man named Pareto, they are not hard rules set in concrete and not every company will be like this. The ratio won’t be exactly 80/20, but chances are if you look at it closely, you’ll find striking similarities in your findings.

Wikipedia says this about the 80/20 rule:

The principle was suggested by management thinker Joseph M. Juran. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of income in Italy was received by 20% of the Italian population. The assumption is that most of the results in any situation are determined by a small number of causes.

What does this mean for your business?

Well if it is true that 80 percent of your revenues come from 20 percent of your customers then it would be wise to invest in finding out whom that 20 percent is and make it a point to get them to buy again from you. Your bottom line should see a nice bump each time these current customers repeat purchase and the cost to get them to do so will be next to nothing.

This brings me to my final point. Each customer holds a value to your company beyond the initial sale.
Jim Rohn once said “One good customer well taken care of could be more valuable than $10,000 worth of advertising.” What you do when you keep customers happy is build what is called Lifetime Value, and knowing what it means to your business is critical to building profits.

Customer Lifetime Value

The lifetime value (LTV) of a customer can be defined as the total amount an average customer will spend with your store over the period of time that they are your customer.

It is important to know your customers’ lifetime value so that you can make informed decisions about your marketing costs, budget, and customer acquisition strategies.

Wikipedia defines customer lifetime value as:

In marketing, customer lifetime value (CLV), lifetime customer value (LCV), or lifetime value (LTV) and a new concept of “customer life cycle management” is the present value of the future cash flows attributed to the customer relationship. Use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.

For example, if your customers’ lifetime value is $400 and it cost you $50 to acquire that customer then that customer is considered to be profitable ($400 LTV – $50 CPA = $350 Profit) and obtaining similar customers would be wise.

Taking that example one step further, if your average customer purchased a product worth $40 ten times from you then their lifetime value would be $400. If it cost you $50 to acquire this customer then the customer is still considered to be profitable even though you spent more to acquire them than the average revenue generated from one sale ($400 LTV – $50 CPA = $350 Profit.)

You build lifetime value by nurturing your current customer base, listening to their needs, and delivering high quality customer service among other things.

Here are 3 ways you can increase your customer lifetime value.

1. Personalize the customer relationship & build rapport.
2. Make yourself available and answer their questions.
3. Deliver a monthly email follow up to improve communication and retention.

In Summary

Building a successful ecommerce business—or any business for that matter, requires the ability to retain customers and foster loyalty. Profitability in ecommerce is found through customer loyalty. The 80/20 rule holds that 20 percent of your current customers provide 80 percent of your business—you need to find out who those 20 percent are and cater to their every need. Lifetime value increases by developing a retention program that nurtures the relationship between you and your customer.

Paying careful attention to these elements will help you build a more profitable and sustainable ecommerce business.

20 Words That Create Urgency and Drive Sales

Many successful companies use urgency as a known factor to help them win sales. Urgency is a form of persuasion that works very well when combined with promotional offers. It creates an anxiety within the buyer which makes them feel that they might lose a benefit if they don’t act immediately.

For this reason, offers with words like “Limited Time” attached to them tend to do better than offers with no time frame or urgency factor attached to them. Urgency offers are generally concerned with or focused on time but are often combined with scarcity (only a few left) and availability (chance, opportunity.) Home shopping network sites like QVC use this to their advantage all the time and it’s one of the primary reasons they move product as fast as they do (not to mention the large audience they reach.)

QVC has the “today’s special value”, they have the countdown clock, they have the number sold and constantly push the number remaining in their broadcasts. They do it well and they are a good example of how to do it right.

So how do you add urgency to your sales promotions? Here are a few common words and methods used to express urgency.

Common words used to express urgency

LIMITED TIME
ONLY
TODAY
HURRY
ACT NOW
RUSH
LAST CHANCE
DEADLINE
FINAL CLOSE-OUT
GOING OUT-OF-BUSINESS
ONE DAY ONLY
NEVER AGAIN
CLEARANCE
DON’T DELAY
NOW OR NEVER
DON’T MISS OUT
OFFER EXPIRES
ONCE IN A LIFETIME
PROMPTNESS BONUS
PRICES GOING UP

Nonverbal ways to express urgency

Ticking clocks
Countdowns (7,6,5,4,3 …)

So here I’ve listed a few methods of creating urgency. Don’t overuse it, but do consider using it during one of your next promotions. Compare the difference between your standard promotion and one that utilizes urgency. I think you’ll be pleased with the results.

Appeal to Your Recession Shoppers Through Social Networking Venues

Welcome to the age of the Recession Shopper. According to research conducted by Penn, Schoen & Berland Associates and commissioned by LinkShare Recession Shoppers are the new breed of consumers.

Careful and conscious of what they’re purchasing, Recession Shoppers scour the Internet for good deals as meticulously as Martha Stewart folds hospital corners.

According to LinkShare, “Retailers that offer discounts, special promotions and product comparisons to engage – and keep – these consumers will have more success than those that continue to try striking emotional chords through traditional channels.”

The study also revealed that in order to engage with these consumers e-commerce retailers must change how they think and connect with current and potential customers.

Your e-commerce consumer is going to be an information-based shopper. They are going to click through a lot of websites before making a final decision. They’re going to ask their friends on Facebook, send out a Twitter post and post a question to their online web group.

To separate yourself from your competition, you’re going to need to get into those online channels with them. You’re going to appeal to those Recession Shoppers through social networking.

Facebook. If you’ve done your homework, you’ll know that there are more decision-making purchasers using Facebook than nearly any other tool out there. These purchasers are asking their Facebook friends for opinions on products as well as referrals. If you want to get in — or stay in — the conversation, you want to be on Facebook, too. You’ll want a fan page that your loyal or prospective customers can click to in order to learn more about your site and your products or services. Use your Fan Page to post pictures and announcements about discounts or sales. Consider it a customer service portal.

Twitter. Twitter is closing in on The New York Times as one of the most often clicked-on sites in the United States. Like Facebook, this is another place where your decision-making purchasers are talking. Like Facebook, they’re posing questions and doing research. Creating a Twitter account and using it to connect with your brand loyalists will show you’ve already gone above and beyond your competitors.

YouTube. Given our visual nature, it’s no wonder YouTube has taken off the way it has. Why not serve up a series of how-to videos for current or potential customers. Create a channel dedicated to your site and post tutorials, consumer testimonials or alternative uses to your products. Host a contest that asks people to post a 60-second video on why they love your product. Create buzz and the customers will follow.

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