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30/09/2020
 

Customer Loyalty in E-Commerce

30/09/2020

The importance of Customer Loyalty in E-Commerce

If you break it down, it sounds straightforward: you sell products or services online and you have customers to purchase your products. Selling online comes with challenges of its own and in order to compete with the numerous other businesses your customers can access you need a compelling enough offering.
New customers acquisition is both time consuming and expensive. Many businesses overlook their existing customer base, they know the value they bring today but fail to see the value they could bring tomorrow. So how do you attract and retain your customer base? Let us guide you through customer loyalty for e-commerce.

Expensive New Customers
The costs of attracting new customers is one of the main reasons behind why companies invest in customer loyalty. The key indicator used for this is the Customer Acquisition Cost (CAC), which is often over 50 EURO and sometimes even exceeds 100 EURO. This is due to the fact that the conversion rate for digital advertising is usually less than 1% for first-time buyers. However, it is not the only reason why existing customers are so valuable.

Profitable Regular Customers
An example of this is Adobe's Digital Index which shows that you need five to seven first-time buyers in the U.S. and Europe to achieve the same sales volume of one repeat customer. This can also be seen in the relationship between the number of sales and visitors: In the U.S., 40% of online sales come from repeat customers, although they only represent 8% of the visitors. In Europe, this ratio is 38% sales come from 10% of the visitors. The sales revenue from repeat customers increases especially during the Christmas season and during financially difficult times.

Valuable Customer Loyalty
Taking this into consideration, a focus on customer loyalty in e-commerce is not only necessary but extremely valuable. Certain factors, such as ever-growing competition and the accessibility of offers that can be found through comparison sites and search engines, make it all the more important to have loyal customers. The path to achieving this begins with new customers becoming repeat customers and continues with taking the appropriate measures to retain these regular customers. But how can this be accomplished?

Voluntary and Involuntary
In general, customer loyalty results either from involuntary or voluntary factors, known as factual or emotional loyalty. Involuntary loyalty results primarily from existing barriers that make it more difficult to switch from. These include, for example, contracts with a commitment, certain cost structures, commitment to an operating system, non-transferable profile data or even a highly personalised offer that the customer does not want to part with.

Satisfaction and Trust as Conditions for Commitment
Voluntary or emotional loyalty is based on satisfaction with a service, which may result from the choices available, the prices offered or good service. Trust in a shop is also an important aspect for the long-term loyalty of a customer. This trust is created above all by an error-free ordering process, secure payment processing, reliable delivery and uncomplicated and solution-oriented handling of any problems that may arise. It is important to note, however, that satisfaction and trust do not immediately lead to customer loyalty but are necessary conditions for it. If the customer believes that they will experience the same level of quality in the future as they have in the past, they will come back and their loyalty will grow.

Measures for Customer Loyalty
This leads us to the measures to create and maintain the bond. These can be divided into four main areas, each of which should be addressed in a particular way:

  • Comfort/Usability
  • Individualisation/Personalisation
  • Interaction/Communication
  • Information/Service

Comfort/Usability
When setting up an online shop, numerous aspects can be considered that can have positive effects on customer loyalty. This begins with a simple and self-explanatory menu guide that the customer can use to find desired products more easily. In addition to this are navigation levels and a targeted search feature with good filter options. The registration process should have as little data requirements as possible and logging in later should be easy. The same goes for the order process. The fewer clicks necessary, the better - mistakes should not be made and everything must go smoothly.
Even things that are sometimes considered as trivial, such as font size and colour contrast, should not be neglected. Technical aspects, such as the site speed, a good mobile layout and the security of electronic payments with different payment providers, are also important factors. Of course, it is essential that the shop ensures good product selection and availability. And those who would like to sell in other countries must make their shop in all respective languages available. All in all, the purchase process should be as easy, error-free and as clear as possible for the customer - only then will they happily return.

Individualisation/Personalisation
When it comes to personalisation, many things can be implemented correctly during the planning of the online shop or its relaunch. If the customer can configure the home page to their needs or it is adjusted to their previous preferences, they are more likely to return. The profile should also offer the customer the possibility of customisation, with examples such as wishlists, a search and purchase history and they should, of course, be addressed personally. Customers can also be reeled in very quickly if they receive personal offers or product suggestions based on their previous purchase or search behaviour, or if they are suggested relatable, additional offers for a purchase. They will feel even better if they can customise the product to suit their needs, but of course that is dependent on the products offered.

Interaction/Communication
Customers feel better when they believe they are well looked after. That does not just apply in-store but also online. An online consultant that helps with purchase decisions or that answers important questions in a live chat can provide the customer with this assurance. A product configurator is also a good tool. It is generally important to be available when the customer needs something. That could be a service hotline, on social media or via email - the more contact options available, the more taken care of the customer feels. This also extends to reaching out to the customer. Newsletters showcasing new products or sharing special offers on social media are ways to seamlessly communicate with you customers. It’s especially important to not only advertise, but to interact with customers on social media platforms.

Information/Service
Depending on the type of products offered, the customer needs a different data or information to purchase. If it is technical purchase, you need to supply enough meaningful technical data for the customer to transact. If you are selling clothe, the visuals play a large roll with the zoom and all-around visibility features being helpful. Consider your products and think about what you would need to feel secure about to make a purchase. Customer reviews bring additional information to light that can increase the customer's trust whilst making a purchase.
There is other information that you can provide in order to make the customer comfortable and instil a sense of trust. Make sure you have clear information on the privacy policy, along with well-designed FAQs and service information. Even after a purchase, customers expect to be informed by means of a purchase or order confirmation as well as a reliable way of tracking the delivery. Here, newsletters play an important role in sharing up-to-date information about offers, new products or seasonal campaigns.

Customer Loyalty Programme as a Multiplier
Customer loyalty programmes with additional and exclusive benefits for members are ideal to strengthen the customer loyalty measures already taken. This is where the reward for loyalty is paramount and the customer receives a reminder with every purchase that they are valued by your online shop. There are a number of ways you can reward and incentives your customers. It can be through special discounts, bonus points or even Cashback.

Cashback World Partner
The establishment of a customer loyalty programme for online shops is often expensive and usually involves some sort of investment. That is why it is recommended to use an existing programme. Cashback World Partner has an interesting proposal, offering customer loyalty programmes for pure e-commerce sites as well as for physical stores with an online presence. The benefit is that new Partners are connected to a customer pool of 14 million potential shoppers around the world and offer Cashback and Shopping Points as benefits to those shoppers with every purchase. As a result, Cashback World Partners are actively sought out by shoppers, all the while being actively promoted through the Cashback World marketing channels. The marketplace myWorld.com is also a part of Cashback World and knows the value of its benefits.

Customer Relationship Management
Customer Relationship Management (CRM) is also a part of the Cashback World Partner Programmes and should generally be included in the implementation of customer loyalty measures. With the help of CRM, customer and sales data can be analysed precisely and the measures can be checked, managed and ultimately improved. Only the exact data analysis allows for relationship-oriented market and customer segmentation in order to reach the relevant target groups with the right offers and messages. As a result, it can be determined if the target group approach was successful or not and readjustments can be made if necessary. Use a CRM tool to successfully and efficiently reach your customers.

It's the mix that yields results
If you want to successfully work with customer loyalty in e-commerce, you may have to put some work into your online shop, but it’s worth it. Customers who can seamlessly navigate around your shop feel at ease and well looked after. These customers will gladly return and will spend more on their follow-up purchases than they did on their first purchase. That is the return of investment that is so important for online shops. Or simply put: If your customer is happy, your business will be happy for a long time to come.

 

Sources: https://www.omt.de/online-marketing/kundenbindung-im-e-commerce/ 
Blömeke, E./Clement, M./Shehu, E./Pagendarm, E.: 2013, S. 85f.
https://www.ifhkoeln.de/blog/details/ecc-erfolgsfaktorenstudie-kundenbindung-ist-der-schluessel-zum-erfolg/https://www.ifhkoeln.de/blog/details/ecc-erfolgsfaktorenstudie-kundenbindung-ist-der-schluessel-zum-erfolg/
https://de.statista.com/statistik/daten/studie/305216/umfrage/einzelkriterien-der-benutzerfreundlichkeit-bei-online-shops-in-oesterreich/https://de.statista.com/statistik/daten/studie/305216/umfrage/einzelkriterien-der-benutzerfreundlichkeit-bei-online-shops-in-oesterreich/
Blömeke, E./Clement, M./Shehu, E./Pagendarm, E.: 2013, S. 83
https://www.gs1-germany.de/fileadmin/gs1/basis_informationen/ECC-Vertrauensbildende_Massnahmen_im_E-Commerce_auf_dem_Pruefstand.pdf

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