In today’s ultra-competitive e-commerce market, it’s harder than ever to earn and maintain customer loyalty.
Yet e-commerce leaders like NastyGal, Sole Society, and thredUP are leading the way with innovative tactics to boost customer retention. NastyGal recently reported it had achieved a 17% lift in reactivation of lapsed customers — and an 11% boost in revenue/user — using predictive lifecycle marketing email strategy. (Disclosure: Companies mentioned are all customers of Custora, my employer.)
How are these companies achieving breakthrough results, and what can e-commerce marketers learn from them?
1. Timing Is Everything
Many retailers live in the world of averages: the average time-to-repeat, for example, or the industry-standard definition of a “lapsed” or “active” customer.
But leading customer-centric marketing teams recognize that there is no “average” customer. Each retailer’s customer base includes a diversity of shoppers with different cadences and preferences. And best-in-class retailers are matching the message with the right point in the customer’s lifecycle.
Consider a “we miss you” discount email designed to go out to lapsed customers. A standard approach would be to send that out to customers that hadn’t purchased for six months.
But for a monthly shopper, six months might be waiting too long — you might have missed your opportunity to re-activate them. Conversely, for a customer that typically buys only once a year around holiday time, you might be throwing away discount margin unnecessarily.
Reaching the right customer at the right time can lead to breakthrough gains: Sole Society has driven a greater than 2% lift in overall revenue by personalizing the timing of activation messages to members and winback messages to lapsing customers.
2. Differentiate
According to The Custora E-Commerce Pulse, a free dashboard for e-commerce stats from over 100 retailers, email marketing is driving a fifth of all e-commerce purchases. It’s hard to deny the proliferation of marketing emails over the past few years.
Yet, leading retailers recognize that the secret to email success is not just more, but more targeted. They differentiate the emails they’re sending based on factors as diverse as category and brand affinity, predicted order size, and email or on-site engagement behavior.
The results have been astounding. By using predicted customer lifetime value (CLV) to segment customers, and creating different versions of their daily sales email, One Kings Lane reported a 4% lift in annual revenue.
Across the board, the retention stars of the e-commerce world have discovered that communication strategies based on segmentation insights consistently outperform a one-size-fits-all approach.
3. Experiment & Iterate
Discovering the most efficient way to segment your customer base is an iterative process. It starts with data-driven insights about what makes one pocket of customers different from each other. But then it requires controlled experiments to help guide long-term marketing strategy.
Do customers with an affinity for shoes actually respond better to emails featuring shoe messaging and creative? Or is the most effective tactic to try to cross-sell them into new categories on the site?
Best-in-class marketing teams are constantly running tests to identify the most effective way to communicate with different segments of customers.
4. Optimize For The Right Metrics
Opens, clicks, and other measures of email engagement are vital as a proxy for understanding how effectively you’re communicating with different customer groups. But ultimately, driving meaningful increases in purchase behavior — specifically customer lifetime value and customer equity — should be the goal of any retention marketing program.
This means evaluating the impact of any marketing tactic on core customer purchase behaviors: conversions, revenue and profit/user, and customer longevity. And for a discount strategy, it means evaluating the incremental impact of the promotion relative to a lookalike group that didn’t receive the incentive.
5. Automate
Even the best ideas are unlikely to produce sustainable long-term gains unless they are scalable. This means that any wins — a segment-based email approach — need to be automated.
An email marketing platform that allows for customer segmentation based on variables like predicted customer lifetime value, and lifecycle stage, is indispensable.
Short of that, application programming interfaces (APIs) that automatically pump segmentation variables into the email service provider environment or trigger lifecycle marketing emails based on key behavioral milestones can help reduce the friction involved in executing an email marketing strategy.
The Bottom Line
Leading e-commerce retailers are demonstrating that even in today’s crowded digital marketplace, winning customer loyalty is possible. Ultimately, retention success is based on deep customer insights, agility to test and iterate, and the ability to automate wins when they emerge.
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