New customers are the lifeblood of successful businesses. At least, that is a belief that many business owners have internalized. You can see it in their actions. For example, SocialMediaToday reports that 7 million advertisers spent $10.1 billion on pay-per-click online ads in the year 2017 alone.
For more experienced business owners, though, a different goal reigns supreme: turning one-time shoppers into lifetime buyers. Early on, businesses focus on generating leads. Established businesses, on the other hand, often focus on making more money with each customer.
Repeat customers are much better for running a profitable business. First and foremost, they often spend more money. On top of that, you don't have to spend money getting them to buy for the first time. Lastly, the happiest customers often turn into evangelists for your brand - bringing new customers with them.
Acquiring New Customers Can Be Expensive
It's easy to intuitively understand why repeat customers spend more money. Similarly, we all can think of brands that we enjoy so much that we've recommended them to others. But the statement we made earlier that "you don't have to spend money getting them to buy for the first time" warrants further explanation.
In marketing, there is an important term called customer acquisition cost. You often see it abbreviated as CAC. You calculate CAC by dividing all costs spent on acquiring new customers by the number of new customers acquired.
If your customer acquisition rate is too high, your business can end up folding. In fact, this is a large part of why Blue Apron's stock price fell by about 70% in a year.
What is a New Customer Really Worth?
Of course, taken alone, CAC is not a meaningful metric. If you spend $100 to acquire a new customer, but you make $10,000 in revenue for each one, then you've practically created a money factory. Similarly, if you spend $100 to acquire a new customer, but you make a paltry $50 in revenue for each one, then you probably should rethink your strategy.
Enter life-time value. Also known as LTV, the simplest way to calculate this is to take the cost of customer revenue minus the expenses incurred by acquiring new customers. Then, divide that by the number of customers you have.
According to Klipfolio, the ideal LTV:CAC ratio is 3:1. For every dollar you spent acquiring customers, you need to be making $3 back in revenue.
Repeat Customers Are the Best Customers - Here's Why
The concepts of CAC and LTV are pretty straightforward. Their implications, however, are profound.
Consider for a moment this simple fact: the cost of acquiring a customer is the same regardless of whether they place 1 order or 10. You essentially have no cost of acquisition for repeat customers. Thus, repeat orders increase the LTV of the customer without increasing CAC.
This is talking purely in terms of revenue and expenses that can be tracked directly to the repeat customer themselves. Bear in mind that repeat customers also tend to be satisfied ones. Satisfied customers tend to talk, bringing fresh leads your way without you having to spend a dime. In short, you benefit from word-of-mouth!
12 Ways to Turn One-Time Shoppers into Lifetime Buyers
With all of this in mind, let's talk about how you can convert one-time shoppers into lifetime buyers. We're going to start with broad principles and work our way down to more specific tips as we go.
1. Focus on building meaningful relationships with your customers.
In order to turn one-time shoppers into lifetime buyers, your business needs to be adept at building meaningful relationships. The internet makes it incredibly easy for people to purchase an item one time, leave the website, and never come back. You need either a way to contact your customers after their purchase or a way to personalize the experience to where it feels so well-suited for your new customer that they remember your name.
Train your employees. Focus on delivering great customer service. Remember your customers' names. These details go a long way.
2. Perfect the customer experience.
There is a burgeoning field of study known as customer experience (CX). It's a complex field of study, but the basic principles are easy to grasp. Make sure your website is easy-to-use and not buggy. Make sure customers are able to easily get a hold of your staff if they have a problem. Don't be stingy with returns or ship orders late.
3. Tell a cohesive brand story.
If customers don't remember who you are, they will not return to buy more. That's where branding becomes incredibly important. In the words of RetailNext, "all buyers want to purchase from brands that share their core values and world views." Work hard on content that tells the story of your brand in a memorable way to help create a lasting impression in your customer’s heads.
4. Follow up with new customers so they remember you.
No matter how flashy your branding is or how smooth the customer experience is, people are bound to forget that they purchased from you. However, if you make a conscious effort to collect their information, such as an email address, you can follow up with them. While many of your follow-ups will go unread or unacknowledged, a sizable percentage of them will lead to further sales.
5. Deliver your product quickly and in good condition.
In 2017, 63% of online shoppers revealed that they expect three-day delivery as standard. That means shipping your products quickly and in good condition is critical to keep customers happy. If you ship slowly, you are likely to lose business you would have otherwise had. Luckily, there are companies whose entire purpose is dedicated to helping businesses ship orders quickly.
6. Perfect the post-purchase customer experience.
This is an extension of the follow up principle above. The post-purchase experience is often not given the consideration it deserves when crafting a good customer experience. After all, the sale has already been made!
However, your customer may be excited that they're purchasing something new. They may hope they've made the right choice or even feel concern that they've made the wrong one.
When you consider the journey that the customer is undergoing at this point, you have a chance to capitalize on their excitement and soothe their concerns. There are a lot of ways you can do this, such as providing product care tips or rewarding brand loyalty.
7. Roll out a loyalty program.
If you've ever enrolled in a Frequent Flyer program, you understand the basic principle of a loyalty program. Reward customers with discounts and perks in exchange for their continued business. This is not just something that Delta and American Airlines do with vast reserves of cash, though. Even your local ice cream shop might give you a card that they punch, and when your card has been punched 10 times, you get a free ice cream cone.
Building a customer loyalty program can be simple or complex, depending on what you hope to do through it. This great article from HubSpot provides more tips on how you can roll out your own loyalty program.
8. Implement a flexible returns policy.
Think for a moment about how you feel when you order something online and it arrives broken. Naturally, you would want your money back. Your customers are no different. Many stores, however, will choose to return items only within a short period of time. Others still will only refund items in store credit, as opposed to money.
Over 81% of customers say they are more loyal to retailers that have a generous returns policy. To some extent, customers are scared away from making their first purchase by restrictive return policies. But, you can still safely assume that return policies affect customer retention.
9. Start a referral program.
Referral marketing is a well-established way to acquire new customers. But did you know they can also improve customer retention? In fact, 84% of customers trust recommendations from their friends. That means first-time customers acquired through a referral program are more likely to become loyal customers in the long run.
10. Engage in content marketing to keep customers coming back.
Content marketing is a well-known way to acquire first-time customers. You can create content in the form of blog posts, videos, podcasts, or social media posts. This is because content marketing provides an effective way to brand your business, which itself is beneficial to customer retention. It also provides value to your existing customers, particularly the ones who already know about your brand.
BlueSteele has a good guide on how to use content marketing to retain customers. You can read it here.
11. Request product reviews.
Asking for customer reviews can help with customer retention in two ways. First, it allows you to see what they are not enjoying so you can correct it. Second, if they have positive things to say about your company, being asked to write a review will remind them of everything that you've done right!
12. Invite your customers to answer questions about the product.
Conducting surveys and asking questions are great ways to learn about what your customers like and dislike about your products. Product reviews give similar insight into what you can improve on, but it doesn't stop there. The mere act of asking customers to answer your questions reminds them you exist and shows them that you care about improving your products. Both can positively impact customer retention.
There are countless ways that you can turn one-time shoppers into lifetime buyers. The value in doing so is clear – increased sales revenue without increased customer acquisition costs. All these tips ultimately come down to creating great customer experiences and giving them a reason to remember you.