During June I attended the Direct Commerce Associations Annual Summit in London (UK eCommerce businesses – you should check out the DCA, there’s knowledge being shared there you just can’t get anywhere else in the world).
During one of the forum sessions Nigel Swabey of Scotts of Stow kicked things off by reading out a list of potential topics and getting the room to vote for what was covered. The standout winner was “How to recruit more new customers and increase traffic” with every hand in the room raised. It won ahead of customer retention, selling overseas (not one hand went up!), the European Union Data Protection Act (a few hands – it’s not exciting, but it is essential), how to sell your business for a good price (which got as much interest as Customer retention!).
Clearly ecommerce businesses remain obsessed with new customer acquisition.
But why are we obsessed with customer acquisition?
Read any marketing text book, or take any marketing qualification and they’ll bang on about how customer retention is key and that it’s much more profitable and low risk than recruitment. Those of us who study business strategy always learn that a recurring revenue model is much more attractive, customers who keep buying!
Given we are surrounded by stats that prove we should be much more interested in retaining our existing customers, and milking them for every penny we can – why was the room (of highly experienced managers of businesses of all sizes) most interested in NEW customers?
This attitude is not unique to the group of businesses at the summit. I don’t think there’s one answer, so here are my thoughts on the possible reasons.
Are we all customer retention gurus?
Do we have customer retention sorted to the point we are getting 2+ orders per year from our customers, with ever increasing customer lifetime values, and an average customer lifespan of 10 years?
No. We’re not.
Another “hands up” poll during the same forum asked “who’s doing remarketing online” less than 10% of the room put their hands up.
Automated email systems (like Infusionsoft with Revenue Conduit or Bronto) are only being invested in by the most savvy ecommerce businesses and many of those start with a welcome sequence and an abandoned basket sequence before getting distracted! So they’re barely scratching the surface.
Many eCommerce businesses with big budgets are failing at it too – on our podcast Sugru’s Linda Muck named H&M as the business she’d most like to work for because their lack of progress in this area frustrates her so much.
Is the new customer focus a hangover from when we started the company?
For the first year(s) it is ALL about new customer acquisition. It has to be or you wouldn’t make it to year 2.
So do we get into the habit of focusing on new customer acquisition metrics, and just never get around to changing our KPIs (Key Performance Indicators) and reporting to look at the retention numbers? And never get around to re-aligning our mindset to focus on retention?
Ask any eCommerce business owner these 2 questions, and I’ll bet you they’ll know the answer to the first and not the last:
- What’s your average cost per new customer?
- What’s your customer retention rate?
Ironically the last one is usually easier to calculate!
Are we also just much more familiar and comfortable with our customer recruitment marketing methods than with the retention methods? We spend the first year learning how to recruit, testing everything, finding what works. After all that is it that we just can’t bear to start the learning curve all over again to find out how to keep them?
Are we assuming that our monthly email newsletter and reasonable customer service will take care of it for us?
The “we’re doing something so I can forget about it” approach!
Where we assume that because we can loosely class some of our business as usual activity as “retention” we don’t actually need to approach it properly.
Is it the BBC-effect?
[for those of you not in the UK…. On our islands it is very hard to avoid the BBC’s point of view on things. 2 of our 5 primary TV channels are run by the BBC, all of our most popular radio stations are run by the BBC and broadcast news bulletins every 30 minutes.]
The “BBC effect” has the ability to change the whole mood of the country. For example:
During the London 2012 Olympics there was a huge buzz of positivity in the country – yes we were winning gold medals – but more importantly for the duration of both the Olympic and Paralympic games EVERY SINGLE BBC news broadcast started with a happy feel good story rather than the usual doom and gloom.
The BBC is also rather good at creating a mountain out of a mole hill. In Spring 2014 we had some pretty mental storms that washed away the train line to Cornwall in the far south west of the country, and flooded vast swathes of the south west. Only 5% of visitors to Cornwall (It’s a tourist destination) arrive by train, and the track was promised to be fixed before the tourist season started. Yet the BBC’s coverage made it appear that Cornwall was entirely cut off (the roads and airport were unaffected!), which caused a noticeable downturn in the tourist industry during 2014.
So why would the BBC Effect influence our obsession with new customer acquisition?
As an industry the noise we create does a similar thing. The ecommerce industry content creators (conferences, bloggers, suppliers, podcasters) are bit obsessed with new customer acquisition. A search on Google for “customer retention” delivers 24,000,000 results, a search for “new customer acquisition” over double that 41,500,000.
And in some ways it has now become a self-fulfilling prophecy and I am as guilty as everyone else. I ask every guest on the eCommerce MasterPlan Podcast for their number one traffic tip – because so many eCommerce business people I meet ask me just that question. So I know it’s a subject they want to hear about.
Given so much of the noise is about new customer acquisition – is it surprising that we’re all obsessed with it?
The Human obsession with the “new”?
We all know that if we flag a product online with the all enticing word “new” we’ll shift more of it.
Maybe we’re just as susceptible to “new” as our customers are?
New is just so much more exciting than the same old same old.
And new customer acquisition feels so much more sexy than customer retention.
Customer retention methods just sound so complicated
Start to research customer retention and everything you find will appear complicated:
- To set up this customer retention method you need to install 20 pieces of code on the website, turn around 2 times and should “yahoo” (or should that be “why google why!”?)
- To get this customer retention method to work you need to create this sequence of emails, timers, and segmentations that is such a complex diagram you need an A1 printer to print it and still be able to read the tiny writing
- Well, there’s no point in writing a customer retention strategy unless you have the customers shoe size, inside leg, IQ, birthdate of their 3rd son (or favourite uncle if they don’t have a 3rd son), and that’s just to sell them DVDs
- The only way to measure your success at retention is to fully understand your repeat purchase rate. And to do that you MUST have it accurately – so you’ll need to be able to take account of peoples multiple addresses, track them when they move, work out if they were buying for them self or on behalf of their wife. To do this we have built an outbound call centre that calls each of our 10,000 customers every 5 days just to check. If you can’t track it like that then there’s just no point.
It’s not surprising we’d rather be playing with the easier(?) world of new when repeat just looks like such a mountain.
New Customer Acquisition provides instant gratification
The majority of new customer acquisition campaigns show sizable results within days or weeks. We pick a big fat list, mail it and boom there are our orders.
Or we launch a PPC campaign – and within seconds we can see something happen.
The nature of driving repeat purchases however, is that it’s based on triggering activity when an action is performed, or a timespan has passed. So that our existing customers will slowly start to see it and respond to it as they become eligible for each new campaign. Thus results trickle in slowly.
There’s no big launch of 1000s of records of data, so although we put in a lot of effort, it will take a few months to see the results.
Or, just maybe we are right to be obsessed?
We want to grow our businesses, we’re never going to have 100% retention, so finding new customers is important.
What do you think? Do you suffer from new customer obsession?