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Are You Paying Attention to your Most Profitable Customers?

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Most of the small and home-based entrepreneurs we’ve interviewed attributed their online success to one thing: the quality of their customer service. They do not have deep pockets to advertise in national TV, or the resources to create a massive publicity campaign. Some don’t even advertise at all. Yet their online businesses have been successful, and it is due to one major factor: satisfied repeat customers.

Whatever you are selling, the qualities that bring people back to your site are the same – great dependable service that values customers’ business. If your customers come back, it means that they are impressed by your entire package – from the banner ad that got them there the first time to the shipping system that delivered their products intact and on time.

What is so special with repeat customers?

Customers who stay around tend to buy more, are cheaper to serve, create more word-of-mouth advertising, and are more accepting of premium prices. According to Bain and Company/Mainspring Communications Inc., the longer the relationship between the customer and online retailer, the more money the customer will spend in a given period. This is due in part to frequent visits and to higher-value transactions.

Retention is about getting the whole experience right. According to Ron Zemke and Tom Connellan in their book e-Service: 24 Ways to Keep Your Customers – When the Competition is Just a Click Away, retention comes “when the site is fast and easy, there are no surprises or hidden information, your service people are smart and friendly, and you deliver on all of your promises.”

A research made by The Boston Consulting Group found that it takes “approximately three visits for retail e-customers to imprint on a site.” The first visit is usually a “trial purchase,” where customers cautiously check you out and your service. The second visit is a “confirmatory purchase” to see if the good service that they experienced on their first purchase was simply an aberration or whether the site really gives out a wonderful service. The third purchase “cements” the relationship that could last for years, having been consistently satisfied with what you offer and how you handle their business.

Bain’s Frederick Reichheld and W. Earl Sasser of Harvard University estimated that a customer a company has kept for five years (depending on the industry) can be up to 377 percent more profitable than one who’s using your product or service for the first time. By focusing on customer retention tactics that reduce annual customer defections by a mere 5 percent, they calculated that an organization can boost its pretax profits 25 to 125 percent.

If your budget is limited, taking really good care of your existing customers is the best strategy to reach your profitability goals. Although all customers deserve a certain level of service and be treated with respect and dignity, it is also true that not all customers have the same long-term value to your business. Invest more time and energy in making sure those first-time buyers come back. You need to demonstrate to your customers how much you appreciate their business, so you could win them over as loyal – profitable – repeat shoppers.

Here are some strategies to turn your first-timers into repeat visitors:

1. Master the service basics. While price is often a consideration for a customer’s loyalty, the biggest reason why a customer will stick with you is what experts call “transactional experience.” They must be satisfied with you every step of the way — from the first glimpse of your site design to product delivery to post-sales support. Your customers must leave your site with a feeling that they are respected, special and valued. To achieve this, you must make your site easy to use and navigate. Don’t hinder their experience with “pop-ups” popping up every time they open a new page, or confusing site layout. You must create a compelling array of inventory and make them confident that their information is secure and safe. Don’t make promises you can’t keep, part of which involves clearly indicating whether an item is out of stock or not. Make it easy for your customers to reach you if they need help or have a problem in using your site. If you screw up for whatever reason, b!
e quick to offer an apology and a solution to remedy the situation.

2. Ask your repeat customers. Find out who have bought from you more than once or twice in the last year. To find out what brings them back to you, send out a quick survey to determine the service dimensions that keep them coming back, whether it is your prompt fulfillment, your site’s navigational structure, or your little personal touches like hand-written cards. Ask them whether their repurchase intentions will decrease if you remove those specific elements that in their eyes made your customer service exceptional.

3. Use loyalty marketing programs. Tamara Carlisle of BigKidsVideo.com offers a 10% discount “from now till eternity” for customers who have bought from her online store four times. The concept of “frequent buyer programs” could be an effective way to convince customers to use your products or service, as well as to increase frequency of purchase. Like Tamara, you can offer point systems, loyalty cards or discount coupons to your repeat customers. Some even rewards customers who will refer the site to at least five of their friends, thus encouraging faster word-of-mouth. Others give membership privileges to customers willing to pay a one-time membership fee, in exchange for deeper discounts, special members-only merchandises and other perks.

4. The power of extras. Extras, freebies, or whatever you call it has always attracted customers. Whether it is a free product added in the package, free shipping or an extra service totally unexpected by the customer, “going the extra mile” for the customer never fails to improve the overall customer experience with a site. Michelle Arpas of GeniusBabies.com always include a special handwritten note in the products that she ships out to her customers, and this small gesture has always impressed her customers. The founders of Sneetch.com would even direct and give their customers their competitor’s URL for products that the customer wants but they currently don’t offer. And of course, the free shipping. While some major dot-coms have ceased offering free shipping, many others find it to be a very effective way of luring customers back into their sites for additional purchase. Tamara’s strategy for BigKidsVideo.com, where she offers free shipping for 3 or more orders, have wo!
rked greatly in “scooping the customers.”

5. Don’t forget the after-the sale follow-ups. One strategy for keeping the customers coming back to your site is to let them know that the relationship hasn’t ended with the sale. First off, send a thank you note to let them know how much you appreciate the business. Some entrepreneurs even call up the customer just to check if they are satisfied with the product. These actions will let the customer know that they are not dealing with a “cold, faceless” business and will increase your points in the customer’s overall satisfaction rating.

6. Lure the lost sheep back into the fold. All may not be lost for your one-time purchaser. Scour your records for names and contact information of all those who purchased from you only once in the last six months or last year (depending on your product). Send a quick note to them asking them for reasons why they stopped buying from your site. Some stopped buying from you simply because they don’t need your product (their baby is now a toddler and doesn’t need to buy your infant products); it may be due to a weak element in your customer service; or your competitor offered them a better deal. You will learn a lot from their reasons: your site design may be confusing, the product’s packaging was lousy, your return policy was confusing at best, or they couldn’t get in touch with a person to talk about their complaints in your company. Ask them to rate the quality of your service. More importantly, lure them back by offering incentives such as coupons and discounts when they re! turn to your site.

Nach Maravilla is the President/CEO of PowerHomeBiz.com. For information on starting a small or home-based business, visit PowerHomeBiz.com at http://www.powerhomebiz.com

Are You Paying Attention to your Most Profitable Customers?
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