How to retain customers gained during the pandemic

Big life events like marriage, divorce, becoming parents, and the current once in a century pandemic, all have a huge impact on our shopping behaviour. This, in turn, creates an opportunity for retailers to establish new, profitable customer relationships.

It’s no surprise that those with a strong ecommerce offering have benefitted the most during the coronavirus pandemic, with net sales at Amazon increasing 26% to $75.5 billion in the first quarter of 2020, compared to $59.7 billion in the first quarter of 2019. Also, ecommerce sales at Walmart jumped 74% as millions of customers switched to ordering online. But moving forward, how can those in ecommerce maintain and drive additional revenue from these new customers?

Identify your most profitable customers

While it’s important to retain every customer, the focus must be on those that bring in the most money. There are three ways to determine who these customers are:

1. Start with the 80/20 Pareto principle which recognises that there’s no equality or balance in the marketplace or life. This tenet highlights that only a small percentage, usually around 20% of customers, generate the vast majority of revenue. Therefore, retailers should identify these valuable customers and focus their retention efforts on them.

2. Assign an RFM (Recency, Frequency and Monetary) value to every customer using a five-point scale (one to five) related to recency, frequency of purchase, and money spent. The perfect customer would receive a top score of five across these three areas. This insight can play a vital role in terms of where to focus precious marketing spend to help drive retention.

3. Look at engagement behaviour which might make a customer particularly valuable. For example, it could be a customer that happens to be a social media influencer in your sector who, based on their activity, only has an RFM score of three, three, and two. But the fact they are an important potential advocate for your brand means they should be treated as though they were in the top 20%, and assigned appropriate marketing resources as such. 

Key retention actions

Once you have identified your most profitable customer, there are six retention actions you should deploy:

1. The first is organisational. Build customer retention into your business rules and behaviours. For example, there may be a company-wide directive allowing customer service to spend up to £100 to solve any shopper problem. Or it may be that the money allocated to solve such issues is graded at a level related to the customer’s value to your business.

2. Secondly, useful content – such as informative and entertaining articles and videos – can attract new customers and keep existing customers engaged. This approach encourages customers to become emotionally attached to your business and develop a sense of reciprocity.

3.Automated customer communications can also help drive engagement and retention. Therefore, once a new customer is obtained, you should initiate a series of welcome emails. If done well, these should deliver more revenue than the cost of a single message.

4. Automated and manual actions based on RFM scores are vital so identify, test, and evaluate automated notifications based on customer RFM scores. If, for example, the RFM score highlights that a customer has not purchased from you recently, but they have bought several low value items in quick succession, it’s probably not worth spending a lot of money on retention. Instead, an automated series of ‘win back’ emails might be the better approach. Also, it’s useful to set up automatic RFM score based triggers that require a manual action. For instance, someone who has low RFM scores for recency and frequency of purchase, but a maximum five for the amount they spend, probably deserve special retention focus.

5. Unique circumstances can require manual actions. This usually means being able to react quickly based on new information. It might mean that you rapidly respond to a negative review of your business on Google by contacting the customer directly to resolve the issue.

6. Finally, ensure you have clean and accurate customer data to instil trust and loyalty amongst those who shop with you. Misspelled names and incorrect shipping and email addresses will lead to mis-deliveries of products and delayed customer communications. This will result in a poor customer experience and can seriously damage retention efforts. Data that’s simply incorrect, such as a customer name, address, email or telephone number, can be easily fixed. Retailers need to put procedures in place to ensure customer data is clean, which often requires only straightforward and cost-effective changes as part of their data quality regimen. This should include cleansing and standardising held customer data to deliver data quality in batch, and extend to new data, in real time as it is collected, for a standout customer experience at the point of sale.

For any ambitious ecommerce business, generating a few one-off sales from customers due to the pandemic should not be enough. Investing time and money is necessary to retain these new customers. A commitment to accurate purchaser insight will help retailers identify the value of their customers and take the required action to keep the more lucrative coming back in a post-pandemic world.

By Barley Laing, UK managing director at Melissa

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