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The Kings of Repeat E-Business

By Mark W. Vigoroso
Feb 21, 2002 6:29 PM PT

Acquiring customers may be Job One for many e-tail marketers. But only those e-tailers that convert new customers into loyal ones will thrive over the long term.

The Kings of Repeat E-Business

"Customer acquisition only really happens with a repeat purchase, not a first-time, heavily discounted purchase," Forrester Research analyst James Crawford told the E-Commerce Times.

Bellwether companies like Amazon.com (Nasdaq: AMZN), EBay (Nasdaq: EBAY), Best Buy (NYSE: BBY) and Expedia (Nasdaq: EXPE) use targeted remarketing campaigns and site personalization to drive repeat purchases, according to analysts.

That said, e-tailers must deliver consistent and reliable service over time to lock in a devoted customer base.

"It is critical to get order fulfillment and a usable site design in place first," Giga Information Group analyst Andrew Bartels told the E-Commerce Times. "Then personalization and outbound e-marketing can [retain customers]."

Have Fares, Will Travel

Online retailers that do not provide a satisfactory shopping experience will fail to convert site visitors into buyers and buyers into loyal customers, according to Yankee Group analyst Paul Ritter.

For its part, online travel heavyweight Expedia cultivates relationships with frequent travelers through personalized e-mail.

"We have a number of ways we reach out to existing customers," Expedia marketing manager Christina Kozloff told the E-Commerce Times. "Fare Tracker e-mails include the lowest published rates for customers' preferred flight routes, as well as our latest travel deals."

By increasingly tapping into its repeat customer base, Expedia achieved fourth-quarter gross profits of US$56 million, up 102 percent year-over-year.

Repeat Performance

As evidenced by Expedia's latest financial reports, e-tailers that build faithful customer bases may enjoy lower sales costs and shorter paths to profitability.

Existing online customers respond to e-mail campaigns and product promotions about four or five times more readily than do new customers, according to Giga's Bartels. Not surprisingly, the cost of selling to a repeat customer is typically just one-quarter of the cost of selling to a new customer.

Therefore, to maximize returns on marketing investments, e-tailers must earn shoppers' trust and allegiance.

"Merchants that have average revenue per customer that is less than or equal to their average customer acquisition cost must increase the amount customers spend [online] and reduce the churn rate of existing customers," said Ritter.

For instance, defunct e-tailers EToys.com, Pets.com and PlanetRx.com all incurred excessive customer acquisition costs and met their demise partly because of their failure to profit from repeat customers, according to Ritter.

Start with Service

On the other end of the spectrum, thriving e-tail giant Amazon.com relies on personalized product recommendations and improved shopping tools to lure customers back to its site.

"The '1-Click Ordering' feature provides customers with a compelling reason to return to Amazon for future purchases," Ritter wrote in a recent report. "It minimizes the hassle of reentering personal and credit card information."

But, as Amazon illustrates, basic deliverables like order fulfillment, customer service and usable site design must buttress e-mail marketing and site personalization efforts in order to meet customer retention goals, argued Bartels.

Indeed, superior customer service may be the most cost-effective -- yet underutilized -- way for e-tailers to attract repeat business and trigger word-of-mouth marketing, Forrester's Crawford added.

Come Back Soon

E-tailers that are struggling to retain customers should make sure they offer a tangible and sustainable value proposition before launching promotions, Crawford said. And to deliver value, companies must cater to consumers' evolving shopping patterns.

"The best thing a retailer can do to ensure repeat business is to make its site capable of sustaining a multi-visit purchase," Crawford noted. "Customers buying high-ticket items will not only shop around, they will also come back to the same site repeatedly to research the purchase."

Retailers like Best Buy -- which allows customers to store pending purchases instead of emptying their shopping carts when they leave the site -- will pocket these multi-visit customers, according to Crawford.

"Store any repeat-customer profile information you can, and offer to keep payment information," Gartner research director Geri Spieler advised e-tailers in a recent report. "Allow the customer to keep purchasing lists and reminder data, and offer benefits for repeat shoppers to keep them coming back."


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