Search Engine Marketing Articles

"Online Marketing – Retention"

By Roelof Vermeulen for Digital-m.co.za
3 July 2006

Introduction

The Internet has brought a brand new era for loyalty and retention programs. I often ask marketers if they have a loyalty program or retention strategy in place for their online business. In general most of them believe they do have a system in place. Before retention can be discussed it is however important to understand the reason why retention deserves to be mentioned.

The importance of retention

The most expensive and difficult objective when it comes to online marketing, is the acquisition of new visitors or customers. The online market is filled with 100’s of millions of potential visitors but your site are competing with thousands of other websites offering the same services as yourself.

One thing that these thousands of sites do not all have is a proper retention program and that gives you the opportunity to build up a client base that trusts you and will much easier deal with you than a new customer would.

What a loyalty or retention program is not

online marketers make offers where they offer money back for purchases made to a certain value or above. The online poker industry went through a period where certain poker rooms offered players a percentage of their rake back. In other words they offered players money back from the royalties they paid to the poker rooms. Is this an effective loyalty program? The answer is no… a loud no! This is effectively a business suicide mission that is thoroughly planned.

What about excellent customer service? Can that be regarded as a proper loyalty program? Once again this not it! High quality customer service is a minimum requirement for any business but it is not the loyalty program of the business.

Retention programs are profitable

This is the main intention of a properly designed retention program. Retention programs in essence deals with customers that has already purchased from you. These are people that you have the opportunity to communicate with and built relationships with. The online industry to certain extend has a great benefit in that data collection is much easier and changes to systems can often be made fairly quickly.

what is the crux of a proper data collection strategy? You need to plan ahead and decide what information you need to obtain. The next step is to figure out how the information must be interpreted in order to be meaningful to your retention strategy in a profitable manner.

At this point I believe an example will make it easier to understand. Companies often mention that they have this promotion and that promotion. I will compare 2 promotion strategies to explain my point.

Company A
This company has decided to go through their existing database that they have been building for the past 2 years and approach the existing customers with a Holiday promotion. All these customers have to do is purchase a product for a certain amount to get a free ticked for the draw that will take place on a specific date. They design a winning email accompanied with colourful landing page, which are stacked with tracking software to measure results of the campaign.

Company B
This company has a complete different system that is automated and using specific measurables to send specific customers appropriate offers. Their system is very simple for the purpose of this example. Their system makes use of the frequency of the last visit of a specific customer (“recency”), product interests and their average spent with your business for the past 6 months. This company then targets individuals with appropriate products that they would be interested in. They also ensure that the recency of the customer’s visits coincides with the value of the special offer. The argument is that it is easier to sell a product or service to a customer with the most recent visit to their website.

One of the most important retention principles is the “buckshot principle”. The principle is based on the use of a shotgun with buckshot compared to a carefully aimed arrow from a crossbow. Distance is the main factor in deciding which one to use. The further the distance you need to shoot, the less appropriate the use of buckshot becomes. Buckshot spread further apart as the distance increases and therefore often misses its target at a distance. From a marketing perspective it is much more difficult to retain a customer if the recency factor is too large.

Loyalty can not be paid for

With the previous examples it was clear that Company A was attempting to make use of a promotion to retain their customers. There are many problems with this type of retention. Many customers will not be willing to purchase a product just for a ticket to a draw. Even if the customer were not required to purchase a ticket the response would have been staggering low in terms of retention of customers and still no sales have been initiated.

do you offer a free pen with the next purchase? Or maybe a gift voucher? What about a dinner for 2 at the Spur in your area? None of these are considered profitable retention methods.

So what if the company has given a 10% discount to all customers that purchased again? This in itself is literally trashing your profits. The main objective with this article is to make the point that not all customers or visitors are equal in value to your business. You also need to investigate the effect of a higher “closing ratio” on your profit margin. Customer loyalty cannot be bought it must be earned!

The benefit of a proper data collection strategy on retention

Fortunately in the online industry we are able to learn allot about individuals that visit our sites. We can learn their age, gender, their interests, income group, are they married or single, the work they do and many more interesting things. But is this information or data just interesting or can you actually apply it to your retention strategy?
This is the crux of this entire article! Data collection can increase your closing ratio and earn you more money whilst at the same time cause customer loyalty to increase. The benefits of collecting data from your customers and then applying it to initiate sales are phenomenal!

Example
You have a website with a login function that requires your customer to login or register to login every time they wish to view your product range. During registration you request certain information. Like age, gender, hobbies and an email address. During the visit your data collection system keeps track of searches this individual make and profile him accordingly. Jim is a 46-year-old male from Cape Town, South Africa who is interested in golf. The first visit he made he purchased a set of golf balls. His average time spent on the site was 14 minutes during which time he has spent the majority of time in the music section. He made a couple of searches for country music but never purchased anything. One of his searches included an album of Kenny Rogers. After this visit Jim has made 3 more visits that were more or less 3 days apart once again spending a lot of time searching country music. However your recency alarm has identified that Jim has not returned to your shop for 10 days. This means that you are busy loosing Jim as a potential customer! What should you do now?

It is clear that you have learned allot about Jim during his visits to your website. Are you now able to identify with which offer you will be able to retain him? Can you perhaps more accurately ensure that Jim stays loyal to your business?

fact is that if you approached Jim with a special offer for ladies underwear you wouldn’t have retained him. Data collection ensures that you are able to identify possible defecting customers and enable you to do personalized, individual marketing to ensure higher closing ratios.

Conclusion

This article has one main objective. It should assist you to see the potential of retaining visitors when using online technology. Customer retention has never been easier than in the online environment. The main issue though is to be able to successfully capture information whilst considering the effect that your strategies will have on the usability of your site, SEO and information supplied to obtain registration of visitors. Data mining should be planned properly and with insight from both a technical and marketing level.

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