6 Myths on Customer Loyalty in E-Commerce

Now Reading
6 Myths on Customer Loyalty in E-Commerce

Busting Myths – All Who Worship Customer Loyalty are Liars

I’ve seen a legion of businesses and not less than a legion of loyalty programs. Everybody is kicking customer loyalty around, worshiping it and giving out recommendations right and left on how to nurture it and invest in it. Sweet things and lavish praise alone. But every side has its reverse and I crave for disclosing it: all those coupons and discounts are a downright lie and delusion.

Having been in ecommerce for 5 years, I’ve come across a lot of customers running sophisticated programs who were doomed in the long run as money will never substitute emotions – just like a coupon code will hardly ever console a mom who didn’t get a teddy-bear for her son’s Birthday in time.

I thought I’d take a shot at an article busting 6 myths on customer loyalty. It directly relates to my own experience as well that of my digital agency adapt at building, supporting and promoting online stores.

Myth#1. Satisfied clients are your everlasting brand advocates

Present-day services delivered by ecommerce businesses seem to be humdrum. They are quite good, on the  level, but are somehow… unmemorable.

When was the last time you were so deeply moved by a service delivered that you rushed to vent it to your friends?

It’s not a common thing really, unless you are asked to do so. Just the other way round, bad service is on everyone’s lips. A 2011 American Express survey indicates that more than two in five customers will tell people about a good experience, but three in five tell people about a poor one.

Customer complaints
The main reasons why people don’t roam the streets chanting your brand name seem to be:

  • Unwillingness to give credit to any company for fear of losing certain benefits. Imagine someone who has found a super relaxing and cozy café and simply doesn’t want it to get overcrowded. Or an online store asking for product and customer service reviews offering a hefty discount for the best entry. Everybody craves to be on a roll, so they will be mute about the campaign and about your brand name as well.
  • Mere reluctance to be blamed for that afterwards if anything goes wrong. Picture you ordered something online and everything was just hunky-dory. However, another person you recommended the store to received lame service. Next time you’ll think twice.
To increase loyalty, customer incentivization seems to be a good option but it should have little to do with monetary incentives.

It should be all about, say, ‘emotional charge’ that makes customers pass along word-of-mouth messages. A peculiar impression or any vivid experience that brings a smile to their faces every time they flash back to it is exactly what drives customers to spread the word.

Customers are normally keen to share whatever touches them to the core. So, go ahead and make up your own story, make your customer its main character and viral impressions will be just a matter of time.

Focus on their needs and outline the benefits. But at the same time do not overact or push. Customers should feel they need your service because it’s a real asset – not because you foist it on them.

So… Move away from pecuniary incentives in favor of emotional ones. Being emotionally charged, the customer is sure to speak on behalf of you brand. You can take it from us, it will cost you far less. To make your brand’s story go viral, create the viral magic and… enjoy recognition.

 

Myth#2. Retaining a customer is cheaper than capturing a new one

The idea of customer retention usually involves offering discounts and bonuses. However, such rewards programs mostly attract the low-frequency, price-sensitive part of the active base – bargain-hunters.

It’s likely to be the wrong track, since attractive bids entail fall of profitability in the long run. This shortcut is really going to cost you a bomb, once such bargain-seekers spring up in numbers. To top it off, what are you going to do should a competitor come around offering a more attractive bid? Being dragged into a price war, you will eventually operate at a loss – it’s hardly ever possible to continually sell on margin while pushing up operating expenses.

Customer discounts

To detect a bargain-seeker, you’ll need a holistic understanding of customer behavior. Since data-mining costs a pretty penny, RFM analysis seems to come in mighty handy then. Being of little help in anticipating customer behavior, it will certainly assist in segmentation of the existing database in terms of performance characteristics.

RFM analysis implies quantitative determination of your ‘best’ customers by examining how recently a customer has purchased (R – recency), how often they purchase (F – frequency), and how much the customer spends (M – monetary). RFM analysis is based on the marketing axiom that ‘80% of your business comes from 20% of your customers.’

Eventually you will get a matrix of clients’ behavior based on their activity. You could form up to 125 small groups (standard matrix includes 25 groups). They may be restructured into bigger ones and segmented according to different types of consumer behavior. A ranking number for each RFM parameter is assigned to all customers.

Those with low RFM (Recency-Frequency-Monetary) rankings are more likely to squander your company’s resources rather than generate them. So, focus on priority groups and redirect all of your resources into productive channels.

If you want to go beyond the bounds of excel data files, here is an agency that can help you on thorough segmentation.

 

Myth#3. Always surpass customers’ expectations

It’s crystal-clear: the more you give the more customers expect. Lavishing your consumers with creature comforts on a regular basis will do you a bad turn. Good things are easy to get used to. And once you quit, even the most outstanding service appears to be middling.

Customer expectations

You’d better not go down the wrong path of many companies that invent multiple gimmicks and incorporate them into a standard business process. Folks start taking them for granted straightaway.

Good deals and bonuses should come out in exceptional cases and be targeted on the few.

A good example is a sport’s club owner offering an option of having a personal nutritionist to VIP clients provided they buy an annual pass.

Have a closer look at your customer database (sure you have one so far, just revise it once in a while) and milk it for all its worth:

  1. It’s nice to begin with scanning the way your competitors operate. Go to their website, order some trinkets and see how professional the service is.

Do a thorough research. Investigate your customers: their preferences, buying behavior patterns, fears and expectations. Understanding your customers’ needs is the key to giving them good service and increasing your upsells and cross-sells.

  1. As soon as your customer database has got a uniform structure, work out a general set of guidelines – the so-called client playbook – that will affect the whole of your database. It’s crucial that all customers should be treated equally.
  2. Once the client playbook has been introduced, and it operates properly on each level (ensuring equally good service for everybody), apply an individual approach to a separate group of clients or groups of them. ‘Product flower’ concept is just the right thing to work out unique service. LTV analysis and segmentation principle are bound to optimize your customer acquisition strategies either.

 

Myth#4. No beef from clients

If you hunger for evolution, do not disregard customer complaints. View your customer dissatisfaction as an opportunity. It’s all about giving your customers space for feedback. Redress a grievance by responding to it to show that you do care for handling complaints efficiently. This provides a great opportunity to turn dissatisfied clients into proactive advocates for your brand.

Customer experience

Gather customer feedback, process it and turn a negative experience into a chance to change for the better.

Focus on the most lame areas of your performance as revealed in customer feedback results, try to meet customers’ needs and expectations, thus improving your own business – and you are sure to hit a home run.

Make sure you have an easily accessible service of getting back to you. It could be a Online Guided Troubleshooting service, online chat pop-up or a special Q&A section (like Sephora Q&A tab). Allow your customers to ask questions or voice concerns, and make your answers visible to all shoppers. Once the complaint has been submitted, do something to improve the status quo (a guide to help you on the way).

Show how responsive you are and how much you care about customers by sending them a message vowing to resolve the issue. Follow up with making sure they are pleased with the solution. Reach out to your customers on a regular basis to let them know their voice is heard and does matter.

 

Myth# 5. Satisfied clients are loyal clients

What is satisfaction when it comes to loyalty issues? As long as the customer is pleased, they hang in there. However, in terms of seller-customer relations, satisfaction is an ephemeral thing which has little to do with being really loyal. It is by no means a warrant of eternal fairytale relationships.

True customer loyalty means something more indeed. It indicates customer’s reluctance to seek out alternative retailers or better services even when a problem emerges.

True loyalty encompasses emotional engagement with the brand backed up with a customer story. Bear in mind, such clients are not simply satisfied; they feel that their interaction with the company is something bigger than just regular purchasing.

In short, a loyal customer is the one sharing the values of your company and cooperating in your business growth.

 

Myth#6. Customer retention is built solely on bonuses and discounts

One more myth to get busted outright.

Most of present-day loyalty programs are entirely based on discounts (95% of pecuniary incentives to only 5% of emotional ones), which costs them almost nothing in the beginning if compared to the revenue derivable from that option. A good thing on the one hand. But the bad thing is that it will surely kill your business in the long haul, for operating costs will be just skyrocketing.

Do remember, only high margin businesses are able to share their margin with no adverse aftermath. Hence, do focus on personalization and emotional charge in your loyalty programs. After all, the so-called egocentric consumers who are the prevailing majority lack being in the limelight. So, turn it into a pivotal objective to please them.

The discounts you are offering should never serve as the only impetus. They do well in the short run alone. It is simply a need that drives people to pay in emergency cases irrespective of a discount. Nothing more. So, lay stress on emotional engagement – that is what really bears fruit.

Emotional backgrounds give more rope for customer attraction and further retention. At the same time, these backgrounds are hard to build up and sustain. Therefore, many providers don’t bother to contrive sophisticated schemes. Sticking to a bonus system is no sweat. But don’t take the easy way out – engendering emotional background is the right note to strike for long-lasting seller-customer association.

Some tips to leverage emotional engagement with your customers:

  • Thank-you notes or thank-you email messages prove to be nice gimmicks to display customer appreciation. If you want to wow your customer, a handwritten note is the right thing to blow them away. People just love to see the company taking extra pains to win their goodwill, therefore handwritten notes as well as some samples of new products will go a long way.

Customer loyalty

  • Sending birthday or anniversary wishes is another thing not to forget. A special group of clients might be lucky enough to get, say, a T-shirt with your brand name on it and this will speak volumes.
  • Personalization in all of its aspects – like conducting a customer’s satisfaction survey and using the collected data for a more intimate touchpoint next time around – will keep you at the top of this game. Nothing flatters customers more than concern for their opinion. Create small 5-7 point questionnaires revealing the level of your service and send them to your customers only once in a while to avoid irritation. Earning reward points for filling out questionnaires may come out to be a good reason to cooperate.

 

To sum it up

Accentuating monetary rewards and bonus programs on your journey to genuine customer loyalty is trivially the wrong track to follow. Do relate to your customer on a personal level each time you are in contact with them. Give them emotional injections exceeding their expectations and anticipating their needs.

In a nutshell, do whatever floats their boat and stirs up overwhelming emotions. Overall emotional engagement with your customers at every touchpoint is what secures long-term loyalty and keeps your brand top of mind with consumers throughout your business.

 

 

About The Author
Max Krukovsky
Max Krukovsky is an ecommerce evangelist with years of experience in online business transformation, creating compelling ecommerce/digital experiences and leading a whole team of passionate ecommerce professionals. Max is the CEO and Co-Founder of Mavitech, a full-cycle Magento ecommerce digital agency with offices in the US and Europe. The Mavitech team consists of die hard pros of triggered & personalized email marketing, multi-channel marketing and 360-degree technical and promotional support, catering to online retailers' digital marketing needs. Destined to bring you ahead of your competition.

Did you like what you read?

Have the next blog posts delivered to your inbox! Subscribe and never miss an interesting article.

Receive weekly updates on Guided Selling insights, trends and technologies.