5 ways to build customer loyalty in e-commerce

Author:
Anna Meller
Published:
28.9.2022
L

ooking at the not-so-optimistic market forecasts, customer loyalty will be especially valued in the coming year. Why? Because research and market analyses confirm that customer retention is much more profitable from an economic point of view than acquiring a new one. 

Loyalty that pays off

Investing in customer loyalty brings long-term profits to the company - every penny spent on a current customer, has a higher return on investment than if spent on a future customer. It is loyalty that is the factor behind repeat purchases even when the competitive environment offers similar or even more attractive offers and promotions. The facts are that a loyal customer buys more willingly, more often and more frequently.

It is therefore worth understanding what makes loyal customers choose specific stores and products, valuing them more than the range of competitors, and consequently how companies can optimally nurture existing customer relationships. 

A loyal customer is a valuable partner in a crisis

The International Monetary Fund is predicting a slowdown in the global economy for the third time this year. If the forecasts are confirmed, 2023 could be the weakest year in the last 50 years. In times of crisis, companies face the challenge of optimizing expenses even more. Important in this regard is the allocation of costs between activities aimed at acquiring new customers and retaining a company's current customers.

For an e-commerce business, establishing a relationship with a new customer typically comes at a higher cost than acquiring a customer through traditional shopping channels. In the clothing market, for example, the cost of a new customer acquired solely on the basis of an implemented e-commerce solution is 20-40% higher than for retailers offering a mix of shopping channels in the form of a stationary store and online.

Since the online store has already invested so many resources in acquiring a new customer, it makes sense to maintain that relationship for as long as possible, so that the cost of the investment is recouped in the form of more finalized purchases. According to HBR, a 5% increase in customer retention rate, i.e. keeping customers with a brand, increases profits by 25% to 95%. What's more, consumers who are loyal to a brand over a 24-30 month period spend at least twice as much with that company as they spent within 6 months of their first transaction.

Loyalty is more than retention

Customer loyalty, however, is much more than customer retention. To build it, you need to know the customer enough to understand how they want to be treated, what they need and what interests them. This is because loyalty is not only about the consumption need itself, but also about the beliefs and values that trigger the motivation to buy. A brand that understands the consumer becomes more valuable to him, because it builds a sense of affinity and makes the customer want to identify with it. This is why people who care about sustainability buy their clothes from eco-friendly stores (such as Patagonia), and those who want to emphasize their status will spend a few thousand on a new iPhone. The quality of a product makes a customer buy from a store once. Loyalty keeps them coming back. 

Loyalty is also an effective indicator for segmenting the market and profiling communications to specific target groups. 

5 ways to build customer loyalty

A positive shopping experience is the key

A customer's shopping experience is the first step and also a necessary condition in building customer loyalty. It is up to store owners and developers to ensure that the experience in the e-commerce space to which they invite the customer meets their needs and provides such a level of satisfaction that the customer wants to visit them more often and buy more. Just as in the case of brand value, which is enhanced by effective marketing efforts, in the case of a store its position is built by an optimally implemented e-commerce solution. Here, both the first impression left by the site and each subsequent impression provided by a well-designed shopping path are important. The key to success in this case is a comfortable and intuitive store, where the customer will quickly find the product he is looking for and easily finalize the purchase.

Accenture data shows that about 50% of consumers leave online stores because of illegible site navigation. At the initial stage of contact with a store, an important aspect of the purchase path is the proper categorization of the assortment, which makes it easier to find the product one is looking for. It is this that creates the main path along which the customer navigates. When it is clearly labeled, it will navigate the user directly to the product they are looking for.

The signs on the path are determined by categories, subcategories and filters, i.e. everything that makes the customer narrow down his choices to finally choose what he needs. In order for him to do this, when designing the shopping path, it is necessary to create an optimal structure that responds to real needs, the way customers think and leads them step by step to what they are looking for. When a store's statistics show an alarming number of store site abandonments shortly after entering the site, it is worth the temptation, among other things, to have a category audit as one of the elements of a UX audit, which will help optimize the store's performance.

Lowering the price is not a long-term solution

Even a loyal customer who is attached to a brand is often guided by price when choosing a store to make a purchase. 45% of online shoppers cited attractive price as the most important element when choosing a product. Therefore, this issue cannot be overlooked, especially in the age of search engines and price comparison sites. An attractive price will always be one of the key factors, but lowering it drastically, just to win the race against the competition - is a strategy that will not work in the long run. Customers who "catch on" to a lower price often make one-time purchases, and move away to the competition in search of even better bargains. 

Therefore, it is important to think about what pricing policy will be most effective for returning customers. Of course, ideally, consumers who are interested in the goods should buy them at full price. However, the reality is usually not so colorful, and even a regular customer often needs additional sales incentives. It is worth rewarding him with occasional discounts ( e.g. on the occasion of his birthday), or loyalty points earned. 

The more loyal the customer, the greater the room for maneuver in setting the optimal price threshold. The factor that increases competitiveness is not only the price of the product itself, it can also be a low delivery amount or the addition of a free product, or even the introduction of gamification elements. 

Product content influences the shopping experience

The best-optimized store won't do its job if the customer finds it inadequately presented. The experience on a particular product subpage is like meeting a salesperson in a traditional store. And just like in traditional stores, in e-commerce too the quality of providing this information has an impact on shaping customer loyalty. Only, in an online store, the customer won't tell us about their needs - it's our job to guess them and give them the information they need. And not just any way. A refined visual layer, colors, fonts and photos are the language of the digital world, which goes straight to the imagination.  

Read: www.strix.net/blog/influence-product-content-customer-shopping-experience

Depending on the assortment being sold - a key role may be played by technical specifications (e.g., in the case of specialized equipment), or a visual layer - large, clear photos, a video showing how the product works, or - in the case of a fashion assortment, how the garment looks in motion. 

Different markets, depending on their target audience and product features, structure their information differently. When developing a communication strategy, it is important to know the customer's needs and typical consumer behavior for a particular market or segment. 

In an era of increasing skepticism and less trust in brands, the trick is to invite the customer to meet the product in such a way that he himself recognizes that the item is valuable, meets his real needs and will positively affect his life.

Finalize the purchase efficiently

The icing on the cake is the stage of finalizing the purchase. When it is poorly designed, it can undo all previous efforts to build a good customer experience as the foundation of a lasting relationship. The standard in this regard has been dented by changing shopping habits. The most popular device used in the online shopping process is now a laptop (78% of indications), but its lead over the second-ranked smartphone has clearly diminished (76% of respondents). We are buying more and more often on phones, and in this environment we get tired of typing in data much more than on a computer. On phones we particularly dislike wasting time on unnecessary activities.

Up to 70% of customers who have taken the time to select products and put them in their shopping cart leave their shopping carts unpaid. This loses the customer, because they have wasted their time, and the company, which will not be reimbursed for its investment in getting the customer to this stage of the purchase path. It turns out that the main reason for abandonment is additional costs, such as shipping or customs, which are only revealed at the ordering stage and surprise customers (58%) - so it's a good idea to inform the customer about additional fees earlier in the purchase path. Carts are also abandoned because of the need to create an account when the option of shopping without registration is not available (24%) and the overly complicated ordering method with the need to fill in a large amount of data (17%).

At the order finalization stage, less is more! Leaving only the fields to fill in the necessary data reduces the risk of leaving the site before finalizing the purchase. In addition to keeping registration forms as short as possible, the risk of leaving the store before finalizing the order is also reduced by enabling auto-complete forms, which not only prompts for data (e.g. suggesting a city based on the postal code), but also frees you from the need to re-enter the same information.

Tip: A great convenience for the customer is the ability to create an account at the end of the entire ordering process. This way he or she is not distracted during the shopping process. Such a solution has been implemented on Lancerto.com.

Smart delivery and returns policy

Customers often leave stores because of long delivery times. It has to be fast, and preferably the same day. That's why the supply chain is speeding up every year. Something that was unattainable just a few years ago is slowly becoming the new standard, and customers are increasingly getting orders even hours after purchase.

Express delivery has been operating successfully for a second decade. Amazon introduced Same Day Delivery service as early as 2009, although it applied to few stores. Nowadays, such services are being introduced by more and more courier companies and carriers such as Uber, although it is still not a common and widely used solution. 

In addition to speed of delivery, flexibility is also important. Research conducted by KPMG showed that 43% of consumers in Europe consider additional delivery options to be the most important factor in choosing where to buy. In our market, 71% value the option to deliver to work or to another designated address, and 59% to a parcel machine. Customers appreciate being able to choose the time, date and place of delivery. They want to be able to decide whether the package will be delivered to the customer's home, to a neighbor or to a local store or other pick-up point.

In addition to speed and flexibility in choosing the form of shipping, the price of delivery also plays a key role. A few years ago, one of the leaders in e-commerce - Amazon launched a "buy two books, get free delivery" promotion. Sales skyrocketed except in one country. It turned out that in France, which did not see an increased pool of purchases, a small amount was charged for shipping. Thus, the magic of free delivery took flight, and when Amazon removed the fee and started communicating the action with free delivery, the number of orders in the French market increased analogously to other countries! This trend is confirmed by domestic research. According to the report E-commerce in Poland, as many as 59% of people are encouraged to buy thanks to free delivery with a free return option.

Customer loyalty requires a solid foundation

Customer loyalty management is the conscious work of building positive customer beliefs about a brand and creating the kind of value associated with an e-commerce implementation that the customer values highly. This is an area of freedom and our powerful sphere of influence in building an effective e-business.

This is not possible without a good shopping experience, quick access to the product on the website, attractively provided product information, as well as efficient completion of the transaction and fast delivery, which becomes an important element of competitive advantage. Let the hard data be a warning. 47% of respondents participating in a research project covering 19 countries and tens of thousands of respondents, say that after a frustrating shopping experience, they will not return to a particular online store again. For that, a reward awaits the company for a good experience! For 47% of all consumers in the same survey say they are willing to pay more if the shopping experience meets their needs every time!

Without e-commerce optimization, any efforts to foster loyalty will be like building castles on sand. And this is because they will not be rooted in a satisfying customer experience. Therefore, the first and indispensable prerequisite for building customer loyalty in this case is to optimize the store at every stage of the shopping process. 

Sources:

1. E-Loyalty: Your Secret Weapon on the Web, Harvard Business Review, lipiec-sierpień 2000;

2. Forbes, Don't Spend 5 Times More Attracting New Customers, Nurture The Existing Ones, Jia Wertz, 12.09.2018;

3. Making it personal, Why brands must move from communication to conversation

for greater personalization, Pulse Check 2018, Accenture, 2018;

4. Raport E-commerce w Polsce 2020. Gemius dla e-Commerce Polska, 2020;

5. Raport E-commerce w Polsce 2019. Gemius dla e-Commerce Polska, 2019;

6. 48 Cart Abandonment Rate Statistics 2022 - Baymard Institute, 2022;

7. The truth about online consumers: Globalny raport na temat konsumentów online za rok 2017 – KPMG, 2017;

8. Cross-Channel Marketing Study, Coleman Parkes Research Ltd na zlecenie Accenture, styczeń-luty 2019.

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