Getting Repeat, Regular Conversions
Decision-makers are finally seeing the light. According to a recent survey from Manta and BIA/Kelsey, 62 percent of small business owners (SBOs) are now spending the majority of their annual marketing budgets on retaining existing customers rather than acquiring new ones. This is a huge departure from 2012, when they prioritized customer acquisition over retention at a whopping 7-1 ratio – likely wasting valuable resources (time and money) in doing so.
Similarly, that same year, Adobe reported that online retailers were spending nearly 80 percent of their digital marketing budgets acquiring new visitors. At the time, Adobe suggested that if merchants converted just one percent of shoppers to returning purchasers they could generate as much as $39 million in additional revenue for each of the 180 retailers involved in the study – proving that regular, repeat conversions are the Web’s golden goose.
There are some products and services that naturally lend themselves to regularly timed purchases, but often, brands must be creative with how they can market their products/services in an ongoing manner.
A subscription (when someone makes an agreement with a company to get a product or service that is usually paid for in advance) is the ultimate recurring conversion. In the case of software sales, Gartner has found that revenue streams from a subscription model are more predictable than a perpetual model (which allows customers to use licensed software indefinitely after purchase) and investors tend to look favorably at businesses with them.
Subscriptions aren’t limited to software sales, of course. Shutterfly presents a terrific example of a company who created a subscription-based service despite its products not being typically associated with that payment arrangement.
Loyalty for online-only Brands
Discover which Web-based companies are mimicking real-world loyalty programs on the 'Net (and how you can too) at wsm.co/netloyalty.
For the unfamiliar, Shutterfly is an online image publishing serviced, which markets to a consumer group that routinely uploads, prints and shares photos of their kids. Knowing this, Shutterfly created “savings plans” to not only encourage repeat purchases throughout the year, but also to give their shoppers incentives to buy. For example, if a Shutterfly customer purchases its annual print plan, she will get a free custom photo book as well, as 30 percent off of whatever she buys on Shutterfly.com that year, or she can pre-pay for a certain amount of prints annually. At the end of the cycle, Shutterfly will automatically bill her for another year (unless canceled, of course).
Despite subscriptions being the most obvious way to get repeat, regular conversions because of their ability to increase a customer’s average annual spend, they are not without headaches (think trial periods, credit card issues, refunds, etc.). A number of solutions exist to not only make the billing process simpler, but also to manage upgrades and downgrades, messaging and more. Some of the top players in the space are Chargify, ChargeBee, Digital River, OrderGroove and others. For a more in-depth look at subscription platforms, visit wsm.co/5recurringpay.
OrderGroove, specifically, integrates with nearly every e-commerce platform on the market with standard integrations for eBay Enterprise, Demandware and Magento. Its marketing team also works with customers to promote the program on landing pages, product pages, banner ads, email campaigns and more. For example, OrderGroove fuels Lancôme’s auto replenish program, which enables customers to select the auto-replenish option when they add items to their carts, and provides the flexibility of selecting the desired delivery frequency of those items. With every auto-replenish order, shoppers get free shipping and a gift (building brand loyalty). Introduced in late 2013, Lancôme has successfully brought subscription billing to cosmetics – an item often bought in cycles but not typically associated with this model.
When managed and marketed correctly, subscriptions provide unique opportunities to create loyal shoppers, but loyalty programs are equally important to getting repeat, regular conversions. While, as previously stated, business owners are investing heavily in retaining existing customers, they are downright failing in making provisions for these programs.
In fact, 66 percent of SBOs do not currently have a loyalty program. Moreover, of the companies that do have them (34 percent), 54 percent of the loyalty programs are paper-based and therefore do not leverage valuable consumer data that can be discovered through cross-channel programs. Even those that do are digital are usually, in this case, just an email list.
Digital loyalty programs can be expensive but worth the investment. When looking at a loyalty program from a big brand like Starbucks, however, they seem out of reach. Since Starbucks just might present the industry’s loyalty standard though, we’ll start there.
Here’s how it works. When a Starbucks buyer registers a gift card online and makes 30 purchases within a year, that card gets upgraded to a “gold card.” Starbucks sends them a physical card in the mail complete with their name on it (a.k.a. prestige). The member also has the option of accessing the gold card from the Starbucks app on his smartphone. After every 12 purchases (or 12 stars), the person gets a free beverage or food item, and he must earn 30 stars annually to maintain his gold-level status. This author can speak from experience, when she says, she’s witnessed someone buy multiple items at a Starbucks back-to-back (in separate transactions) to keep his gold status for another year.
Starbucks is, of course, backed by vast resources to build a sophisticated, cross-channel loyalty program, but there are providers that bridge the gap between heavyweights like Starbucks and the rest of us. Take loyalty program solution, Belly, for example.
Molly’s Cupcakes in Chicago used Belly to strengthen relationships with existing customers (and its bottom line). When signing up, they got a tablet running the app (for in-store use), loyalty cards for their customers, email and social media integration and more. Their customers earn points every time they visit Molly’s Cupcakes, which can be redeemed for rewards specific to the business like the ability to name a cupcake for the day, smash a cupcake (even in an employee’s face), free upgrades, etc.
Not only are current customers being rewarded in unique ways (building repeat conversions), but they’re also becoming brand advocates. For example, Belly card holders are prompted to leave Yelp reviews after they’ve visited companies a few times. Then, Molly Cupcake’s most loyal customers are the ones leaving reviews. By taking care of existing customers, Belly enables this growing company to leverage them as marketing tools.
Investing in Conversions
The proof for investing more resources in customer retention than customer acquisition is not tough to find. Retention clearly costs less and provides a higher return on investment. Regardless, only time will only tell whether brands continue to put more eggs in their customer retention baskets or go back to their old, ineffective ways. It is clear, however, that the more companies invest in current customers, the more those customers will invest in them.