Store Owners Beware

I wanted to post a quick thought here that all store owners should consider.

Change can be good — sometimes — especially if it is meant to decreased expenses (thus directly affecting the bottom line.) However, change that has not been planned out properly or change that does not take into consideration customer needs and wants can cause trouble.

I recently worked with a store owner who thought that switching shipping companies would save them some expense over the previous shipping company (which did a great job … but had slightly higher prices.) In theory, and on paper this might have been true. However, without proper planning and without taking their current and potential customers interest into consideration, the event turned out to be a disaster … causing long time customers to leave, new customers to never return (even canceling orders), and a customer service nightmare for those working the phones.

You see, the store may have thought that looking at the sheer numbers (from a shipping rate standpoint only) that the one carrier with lower rates would have saved them money. It makes sense … if you only look at that.

But running an ecommerce business — or any business for that matter — means you must take into consideration much more than just “perceived cost”.

The customers feedback all basically said the same thing … “I’d rather pay a few dollars more to get my package on time and fast then to not get it at all or get it much later than expected.”

Considering the lifetime value of customers that will not be realized due to leaving, the new customers never returning, and the bad word that is surely to spread across the internet about them, the company has dug themselves a hole that is going to take a lot of energy to correct. Rather than saving money on shipping they ended up losing a ton of money both now and also potential future realized revenue.

So the next time you consider making changes to your shipping (or anything else to save a few bucks) operations, make sure you do your homework first, plan next, and when all the information is presented, be sure to choose the option that benefits your customers most.

Earning Customer Loyalty

It is said in business that customer acquisition is an investment but profitability is built on customer retention. In other words, it typically costs you more to sell to a new customer than it does to a current one. As a result, your profits are higher when you sell to those who have already purchased from you.

Customer retention is essential to business growth.

So how do you earn customer loyalty and retain their business? Like any successful relationship, If you want customers to be loyal to you, you must be loyal to them. Your product must deliver on its promise as advertised—but that is just the beginning.

Here are some tips to help you keep your current customers coming back for more:

Provide Exceptional Customer Service

Often times, customer service can be a key differentiator for companies that sell similar products. In today’s digital age it is all too common for companies to hide behind “digital walls”. Often times this elusive nature can lead to lost sales not to mention decreasing customer confidence. When customers have questions or problems they want them addressed—by a real human with real answers, not just a scripted list of FAQs or automated phone system. Two ways to accomplish this are through posting customer service phone numbers on your site and considering Live Chat type systems.

Stay in Front of Your Customers

You can’t foster customer loyalty if your customers forget you exist. You must stay in contact with them on a regular basis preferably with information that ultimately benefits them in the end (remember it about the customer not you.) Two ways of staying in front of them are through email and RSS feeds. The key here is to feed them information that helps them. Promotions on products, sales etc… all work and should be a part of your communication but don’t neglect the need to provide them with valuable content that helps better their position.

This could be showing them new ways to use your product, complimentary products that may work well with the one they already have etc…

Develop Customer Friendly Policies

If you want to keep customers happy you must offer flexible policies. Don’t make it hard for them to return an item, get support for current, broken, or discountinued products, etc… Be flexible and understanding of their needs and above all else, make it right for them. Put these policies in place and honor them. If you don’t, your customers will run to the competitors that do never to return again.

Consider Implementing a Rewards Program

Loyalty or rewards programs are a great way to foster long term relationships and repeat sales. Rewards can be managed in just about anyway you can dream up from earning discounts on future purchases to earning products at various levels. Just make sure your internal systems can handle the route you adopt.

Just about anybody can sell on the internet. Selling profitably and doing it for sustained durations is what separates real businesses from short run fly-by-night operations. If given the chance, I’d rather build a sustained business that lasts many years than build a business that is here today gone the next. Profitability is a key element in this equation.

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.

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