4 Tips to Better Understand and Retain New Buyers
You’ve sliced and diced lists, compiled search terms and analyzed affiliates. After all that time, effort and cost, you’ve finally converted that prospect to a new customer. Now what?
Customer strategies tend to focus on acquiring new customers and retaining active ones. Single-purchase buyers fall right between these two customer segments. They’re no longer prospects, but they’re not active customers yet. They’ve dipped their toes in the water and tested your product and your company. New buyer response may be double that of prospects, but it's also often half of multibuyers. It’s also not uncommon for companies to retain less than 30 percent of their new customers.
So, what can you do to improve the performance of these customers? First, look at the performance over time of your sources of new customers — initial results can be deceptive. Many marketers acquire new customers at low acquisition costs and assume they're as valuable as customers with higher acquisition costs. That may not be the case.
By looking at the balance of revenue and marketing spend by source over 12 months, you may find that some sources provide greater overall profitability than you initially thought. This gives you a better understanding of how to allocate your acquisition budgets and lets you make more informed decisions about the short- and long-term health of your customer file.
Now that you’ve determined the value of your new customers, what do you do? Here are some tactics for retaining them:
- Say thank you. Every customer who decides to buy in your category makes a decision to buy from you or your competition. Let customers know you understand they can shop anywhere, and you appreciate their business. Include a thank-you note with their packages. Not a note on the shipping invoice, but an actual card from an executive at the company. From past experience, a simple thank-you can increase conversion rates by 6 percent to 10 percent.
- Give them gifts. Do you have a product that's not moving off the shelves? Toss one in the box with the thank-you note. I know of one company that had 13,000 totes costing $3 each that were about to be written off by merchandising. It tossed them in the packages with thank-you notes. Eighteen months later, while giving an industry speech, I mentioned that program and an audience member talked about how surprised (and pleased) she'd been when she received a free tote bag with her first purchase. How many times do you think she told that story before I heard it? (A word of caution: Stay away from trinkets like key chains, magnets, pens, etc. Stick to your own products, especially products with high perceived value.)
- Figure out time to next purchase. Do you know how long it takes for a new buyer to repurchase? Is it three weeks or three months? With that knowledge, you can build a strategic campaign to reactivate buyers who haven’t repurchased by that time. On the other hand, if you know new buyers won't purchase in a given window, scale marketing efforts back to avoid overinvesting.
- Determine next-best product. Do you know what your customers typically buy on their second purchases? Is the second product purchased driven by the first? If you can narrow that second likely product to just a few items, it becomes easier to build a cost-efficient campaign focused on converting single buyers to multibuyers. Conversely, if you know which products these customers aren't going to buy, you can lower costs by excluding them from the campaign.
You have a limited time to convert new buyers into multibuyers. If you don’t do it in the first 12 months, their responses may drop to a level similar to prospects, forcing you to start all over again. But follow the steps outlined above, and you could find yourself with a larger housefile and, even better, a more profitable business.
Tim Hoerrner is the chief customer economist at Carmot Marketing, which advises clients on profit-driving customer communication strategies. He can be reached at firstname.lastname@example.org or (858) 774-2083.