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.

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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.

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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.

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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!

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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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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.

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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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It’s been a busy few weeks of continued testing and experimenting to discover some of the most reliable methods ecommerce store owners can use to increase sales. I’m back and ready to show more of what I’ve uncovered.

Retaining Current Customers

Building an online business involves many elements, one of which is a solid customer retention strategy. Keeping your current customers coming back for more while adding new customers is one key element that will help build a healthy and sustainable shop.

It order to retain current customers, you need to stay in contact with them. But when is the best time to contact them in order to gain maximum response?

Much of this is determined by the market you are targeting. For example, if you are selling a product that is targeted more toward stay at home mothers, you may find that your emails are more effective when sent during the evening hours (after the kids are in bed and they have time to themselves.) As another example, if you are offering a product that is targeted toward business owners, it may be best to send these follow-ups during normal business hours (knowing this is when they are more likely to be in front of their computers.)

The two examples above are for illustration only and are not intended to be taken as “tested fact”. They are to get you thinking about your target audience and how understanding their lifestyle can determine when they are likely to be listening.

Finding the exact time period, as in the day of the week and hour(s) that are most effective, can involve some clever thinking but fortunately there are some objective reporting methods you can use to get you real close on your very first attempt.

Google Analytics to the Rescue

One way to zero in on the day(s) and times you should be testing is to turn to Google Analytics reporting.

You will be able to get an good estimate of the number of unique visitors that are coming to your site on any given day by going to the Absolute Unique Visitors report. The image to the left shows where in your navigation that report is found.

Once there, make sure you select a nice sample size (say the last 6 months) as a range for analysis. This will provide you with a decent trend report. Once you have that in place, select to “Graph by Day” found in the upper right hand corner of the screen. Selecting that link will report the figures on a daily basis over the past 6 months.

Now all you have to do is scroll down and make note of those days of the week (as in Sunday thru Monday) in which you receive most of your traffic. Keep these figures aside for reference. The report below shows a sample section for one site. Although you are only seeing a few lines, you’ll want to scroll through your entire report to find the ideal days. This section happens to show a pattern that is consistent throughout the entire 6 month period I analyzed.

Partial report showing visits broken down by day.

Ecommerce Revenue by Day, Hour etc…
Now that you have a general idea on the number of visitors you get on a daily basis during any given week, it’s time to figure out what days and more specifically hours actually generate revenue for you.

To do this you’ll be using another report. The “Total Revenue” report found under the ecommerce section (you must have ecommerce tracking turned on and the tracking code in place on your site for this to provide any data.)

You’ve already selected the time frame for analysis when you generated the first Unique Visitors report in the above step. Now you should have on the screen a report that looks much like Figure 1 below. Once you have that on the screen you will be able to scroll down and take note of the most productive days / hours of the week where your site generates the most revenue. You’ll want to take note of the hour, then switch it to “day” view using the selections in the upper right hand corner of the screen that look like this:

Once you have switched between both views (day vs. hour) and have scrolled through the reports making notes of the most effective days and hours during the week in which you generate revenue, you’ve got everything you need to determine when is in all likely hood the best time to send newsletter or promotional emails to your current customer base.

Figure 1

In the real world example I show here, the ideal time to send out a promotional email for this market would fall on either a Weds. or Thursday of the week with the email arriving in customers in boxes between the hours of 9:00AM and 2:00PM with the preference being around 11:00AM (when most sales are generated.) Anything before or after that time will not yield the maximum results.

Why? Because all the reports confirm and show that the majority of our visitors are most active between these periods. Therefore, we can make an educated guess that we have our audience’s attention most often during those times, and that means they are online … where they need to be to receive your email.

Does it work? You bet it does.

In my testing, I used these reports to test whether sending a promotional email on the days that were most active, during the hours that were most productive would yield the desired results. Indeed it was accurate. In fact, on those days and times I sent an email which fell outside the “target period range”, the effects were far less than desirable. Open rates were lower, click through rates were lower, and sales were off.

However, when I sent the email ensuring it would land in customers in boxes during the specified target hours and days, the results were spectacular. In fact, sales over tripled for the day when the promotional email was sent within the target time frame. This was a consistent increase that happened every time the email was sent during the target time frame. It was not a one time only occurrence.

Using this method of reporting, you can continue to refine this process to get an even tighter time frame by going back to the same reports mentioned above a few days AFTER sending an email and breaking it down by hour for the day the email was sent. This will tell you to the day, the week, and the hour during any given month that is best for contacting your customers.

So if you are sending newsletters or promotional emails without really knowing whether your customers are listening, and furthermore, without knowing whether you have a shot a increase productivity, then you need to stop now. Take the time to gather the proper data and start sending your emails when your customers are active and ready. You’ll thank yourself for the research and your sales should reflect that added time spent.

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Building a sustainable online business often involves solid customer retention strategies combined with new customer acquisition strategies. You build a sustainable base and add new customers on top of that to grow the bottom line.

Whether your business lends itself toward repeat orders (customers coming back to buy more from you) or seems to be more of a “one time” purchase, keeping yourself in front of past customers is an important step toward growing your business.

Here is one phrase I’ve heard from store owners time and time again. “My customers only buy one time from me so there is no reason I need to follow up with them.”

This couldn’t be further from the truth.

If your business lends itself toward repeat orders from past customers, the answer is pretty easy to see. If you’re not keeping in contact with your past customers, you are missing out on additional sales. It’s that simple.

If your business sells products that tend to be more of a “one time only” purchase the answer is not as clear but it is there. If you are not keeping in contact with your past customers, you are missing out on potential referrals (which can translate into sales) of others they may encounter which have a need for a similar product.

Having said that, there should be no excuse for not staying in contact with your past customer base as part of a strategy for growing your online business.

Choose a Qualified System

There are plenty of email systems out there that help you develop super campaigns. I prefer and recommend Constant Contact myself. Great system, easy to use, nice reporting capabilities, import / export features, and more.

Using its import / export features, I have integrated Constant Contact with a number of shopping cart systems and have used it very effectively to keep in contact with past customers and potential prospects.

Planning the Campaign

When planning your campaign, here are some things to consider:

• Frequency. How often will you contact your list? I’ve seen weekly follow-ups work wonderful in some markets, daily contacts in others, and monthly, bi-monthly etc.. in others. You’ll have to determine what works for your market. Oftentimes this can be determined by the type of follow-up you are planning.
• Which day(s) of the week will you be sending your email out? Some days are better than others, and you’ll have to determine which day or days are best for your market.
• Are you going to do a “blanket” campaign (follow up with all customers at the same time) or send out follow-ups based on customer segmentation factors?

Planning the campaign alone will not ensure its effectiveness. It doesn’t matter who well planned a campaign is if the email layout does not persuade action.

Here is the order of focus you need to think about when developing the email.

1. Gain interest and get them to open the email.
2. Confirm Interest and present offer.
3. Get the action (persuade them to click).

The above elements all must begin with the email subject line of the email.

Crafting an email can be compared to writing an ad for a paid search advertising campaign. You’ve first got to gain interest through an effective headline (the subject line of the email). You must then confirm that interest through a brief description (in the case of an email, this comes with the initial headline of the email that can be found after the email has been opened.) Then, finally, you must get the click.

The key is first to get them to open the email. Then you must quickly convince them that what they thought they would find upon opening (based on the subject line) is exactly what they will get if they “click a link” in the email. Relevancy is key. Very much like one would expect in search engine marketing.

Proper calls to action in the email are of top importance.

Closing Thoughts

If you run a “standard special” then don’t forget to always remind them of that and mention it in each email. It pays to keep that “forever special” in front of your customers.

Don’t forget to ask for the “referral”. You can often time pick up additional customers by simply asking your current customers to forward the email to a friend that may also be interested in your products.

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