Marketing is the key driver for recruitment and retention

2nd April 2009

‘Build it and they will come’ still appears to be the belief of a number of businesses. But while a website can extend the reach of a brand and help to create a window to the world, you still need to tell consumers that your website is there in the first place.

Therefore you need to ensure that you determine an appropriate level of marketing expenditure in order to achieve the financial objectives for the e-commerce channel.

You also need to make sure that your marketing communications activity includes a healthy balance of both offline above and below the line activity, as well as digital marketing campaigns.

In addition, too few businesses have well-defined customer retention strategies and the focus often falls more on customer recruitment. Yet it will always be more expensive to recruit a new customer than it will be to retain an existing one. Not only does the existing customer have a potential lifetime value (LTV) greater than one purchase, but they can also become even more valuable if they can be persuaded to purchase through more than one channel (becoming multichannel customers). There’s also the potential for the customer to be an brand advocate, referring their friends and family to drive additional sales.

Think about the ‘Pareto’ effect. For many businesses, 80% of the sales come from the top 20% of customers, and therefore customer retention should also be segmented by the most profitable customer groups. Ignore customer churn at your peril.

Internet retailer Zappos.com refers to itself as: “A customer service business that happens to sell shoes”. There’s a lot to take from that. Customer satisfaction is massively important, and your website should play a huge part in keeping your customers happy.

Best practice recommendations 

1. Remember that e-commerce and your web channel will have an impact on *all* of your business and therefore when determining the size of budget, think about the impact it will have on your stores, direct mail, contact centre and any other channels you distribute your products through.

2. Use agencies. Don’t try to do everything in-house yourself. The specific digital marketing activity that lends itself best to specialist agencies includes; search engine optimisation (SEO), pay per click (PPC), email marketing and affiliates.

3. Develop a single customer view. This is when you pool all of the customer data (irrespective of the channel they purchased through) into one database where you then have a view of the behaviour of your customers and their preferences, and can influence their behaviour by offering more targeted and relevant promotions.

4. Develop strategies to recruit new customers, to retain existing customers and to reactivate lapsed customers.

A retention strategy might include the following: 

- Segment your customer base by ‘RFV’. Recency (when they last purchased), frequency (how often they purchase) and value (how much they spend). This will enable you to focus on the most profitable customers when it comes to your retention strategy.

- Reward customer loyalty. This could take the form of discounts or incentives to purchase through another channel; loyalty programmes; early access to products on sale; access to exclusive products and new collections, etc.

- Drive consumer behaviour. This is achieved by developing a single customer view. Integrate information gathered from every stage of the customer lifecycle (from enquiry or requests for further information, through to initial and subsequent purchases and responses to campaigns, and even financial and billing information). This can be used to carry out loyalty building programmes.

- Develop trigger and event based marketing communications. Determine key criteria for triggering of a personalised offer to be communicated to customers based on when they last bought, what they purchased, how much they spent, etc. The offer will have more relevance and therefore there will be a higher conversion rate from this activity, and it will leave the customer feeling more valued.

- Produce integrated marketing communication programmes. This is where the advertising, direct communications, customer service, database marketing and sales programmes are all orchestrated together and designed to build loyalty. The more consistently you communicate with your customers, the more resonance your brand and specific messaging will have.

- Ensure the customer service team is empowered to solve problems. There should be online customer service solutions in place for customers who need a bit more help making product choices (such as live chat) and for self-service customers who prefer to find the answer themselves (online knowledge base and dynamic / intelligent FAQs).

- Segment the customer base by lifetime value groups. Create different marketing programmes designed for each segment.

- Reward existing customers by incentivising them to introduce their friends and family as customers.

- Email marketing. Communicate with your existing customer base to drive future sales, and loyalty.

The important thing to consider is that most users are now consuming at least 30% of their media online. As such, the web is a key channel to reach and recruit customers. But the more traditional offline channels still have their part to play. For example, TV ads can drive search activity and direct visits, so why not join this up (use dedicated / unique URLs on TV ads, focus creative on established keywords / buy campaign-specific keywords via Google).

If you’re looking to drive a direct sales response to your advertising for your website, then the following activities will help you to maximise the value and volume of customers you recruit while continually driving down the cost of recruiting them:

A recruitment strategy should include the following activity: 

i. Measure the performance of all marketing activity. Constantly review customer acquisition costs and the lifetime value (LTV) of customers and also measure this by different customer segments.

ii. And then feed this analysis into your marketing campaign and revise your activity accordingly. Digital marketing is a science, but you’ll only find out what works by constantly testing, tweaking and revising your activity

iii. In terms of media and the specific activity for the web, I recommend you focus on the following:

· Search engine marketing. Both natural search (SEO) and paid placement (pay per click). This is one of the best vehicles for the recruitment of new customers. But the latter has become extremely competitive and therefore ‘keyword inflation’ has really kicked in.

· It’s a good idea to run a test for a few months as it takes time to build up your campaign. That way you can build a picture of the likely ongoing investment required to generate ROI, as well as getting a better understanding of whether or not category-related search terms or brand-specific terms work best for you. Often it is a combination of both.

· Affiliate marketing programmes. You only pay commission when a sale is generated, and this is an excellent driver for the recruitment of new customers.

· Behavioural targeting. This enables you to push your message to consumers who have shown in an interest in brands or categories with a proximity to yours and is therefore a good recruitment tool.

A reactivation strategy might have the following approach: 

- Offer lapsed customers a reasonable discount or offer (such as free delivery or a discount) to make a purchase from you. But set a time limit for redemption.

- As is the case with customer retention, you can try rewarding lapsed customers for introducing their friends and family to your brand.

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