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30-09-2020
 

Customer Loyalty in E-Commerce

30-09-2020

Importance of Customer Loyalty in E-Commerce

The concept can be broken down quite simply: whoever has something to sell online needs customers to buy it. How the seller reels in permanent buyers is typically a bit more complicated. Staying on the online market long term requires a loyal customer base that can always be relied on. Of course, new customer acquisition is also a part of the business but the efforts of bringing in new customers is becoming more and more expensive and the number of potential customers does not tend to increase over time. That is why customer loyalty in e-commerce is just as important as it is in-store.

Expensive New Customers
The costs of gathering new customers, as mentioned before, is also the main reason for the need of long-term loyalty. The key indicator used for this is the Cost New Customer (CNC), which is more often now above 50 euros and sometimes even exceeds the 100 euro limit. This is especially due to the fact that the conversion rate for digital advertising is usually less than 1% for first-time buyers. Some costs need to be drawn back in and for that it is best when a customer returns - the more often, the better. However, it is not the only reason why existing customers are so valuable.

Profitable Regular Customers
One example is Adobe's Digital Index showing that five to seven first-time buyers (with no orders) in the U.S. and Europe must be acquired to achieve the sales volume of a regular buyer (with several orders already). 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 buyers (with previously one order) and regular buyers, although these only represent 8% of visitors. In Europe, this ratio is 38% sales with 10% of visitors. The sales revenue from regular buyers increases especially during the Christmas season and even more during economically trying 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 easy accessibility of offers that can be found through comparison sites, make it all the more important to have loyal customers. The path to achieving this begins with new customers becoming regular customers and continues with taking 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 develop.

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
Even when planning 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 means being in contact with the customer and for them to keep you in the back of their minds. Newsletters with new products or special offers shared on social media posts are suitable for this. On social media it is especially important to, not only advertise, but also to interact with customers when they have questions about a particular post or a general question about an offer.

Information/Service
Depending on the type of products offered, the customer needs a different amount of information to imagine the appropriate picture. If it is technical, meaningful technical data is a must so that a purchasing decision can be confidently made. If clothes are offered, the visual appearance plays a large roll with the zoom and all-around visibility features being very helpful. Consider your products and think about what you would need to feel secure about making a purchase. Customer reviews bring additional information to light that can increase the customer's trust in making a purchase.
There is some other information that not only makes the customer comfortable but also gives them a feeling of trust. Clear information on the privacy policy also contributes to the customer's seal of approval along with well-designed FAQs and service information. Even after a purchase, customers want to be well-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 the reminder with every purchase that they are greatly appreciated by the online shop. There are a number of ways these benefits can look. It can be 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 makes an interesting proposal here, offering customer loyalty programmes both purely for e-commerce as well as for stores with online shops. The benefit is that new Partners become connected to a customer pool of 14 million potential shoppers around the world and grant 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. myWorld.com is also a part of the 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 thus 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 exactly 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. That way you can reach your customers better and more efficiently.

It's the mix that yields results
In conclusion, if you want to achieve reliable customer loyalty in e-commerce, you may have to put some work into your online shop, but the reward for this effort will all be worth it. It is important to find the right mix of measures for your own shop that leads to the desired result: Customers who find their way around a shop easily feel at ease and are well looked after. Such 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 the customer is happy, the shop will also be happy for a long time to come.

 

Sources: https://www.omt.de/online-marketing/kundenbindung-im-e-commerce/
http://success.adobe.com/assets/de/downloads/whitepaper/13926.digital_index_loyal_shoppers_report_de.pdf
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