When you’re thinking about your customer acquisition costs, it’s important to factor in not just the cost of acquiring a new customer – but the opportunity cost of losing an existing customer. Acquisition typically costs five times as much as retention, and a 5% increase in customer retention can increase your profits by anywhere from 25% to 95%.
By using the right technologies to optimize both customer acquisition and customer retention, you’ll be able to drive new customer loyalty across the entire sales cycle, lowering acquisition costs and increasing customer lifetime revenue.
Here’s how to do it.
Getting Customers in the Door Affordably
First, let’s look at optimizing the customer acquisition cycle.
Brands have access to a variety of channels that they can use to introduce customers to their product, and may rely on a combination of affiliate marketing, paid social ads, display ads, paid and organic search, PR/influencer marketing, retail advertising, and word of mouth – but which channels give you the best bang for your buck?
More than 81% of brands run affiliate marketing programs, and the evidence is in: It works. Forty percent of brands rank affiliate marketing as their most successful customer acquisition channel, and 54% of brands say it’s one of their top three channels.
Affiliate marketing enables brands to acquire new customers in a frictionless environment, because they’re relying on businesses and influencers that they trust to recommend new brands to them. Rather than spend on digital ad campaigns that target the same customers again and again in hopes of familiarizing them with your brand and gaining their trust, with affiliate marketing you can build on the trust that customers already have with your affiliates. With affiliate marketing, you’re able to use social currency to win over new fans, and pay only for the customers that actually convert, rather than spending just to raise visibility without knowing whether a prospect will decide to buy from your brand.
Using a best-in-class referral marketing platform like Refersion, you can easily track all of your affiliate, brand ambassador, and influencer marketing program in one centralized location. That helps you understand which marketing campaigns and programs are most successful and manage your spend in one location, giving you the insights to easily optimize your strategy to draw in even more new customers across all of your channels.
Optimizing Customer Retention
Using affiliate marketing to build a reliable and affordable customer acquisition journey is a key part of a strong marketing strategy – but just because a customer has bought from you once, doesn’t mean that they will again without a good customer retention plan in place.
To keep customers coming back, use a best-in-class CRM that helps you understand each customer’s behavior and spending patterns, and can break down customers into different segments so that you can develop custom marketing automation campaigns that meet their needs, with personalized offers based on their browsing and purchase history.
For example, if one customer purchased a pair of sandals from your ecommerce shoe store last month, you might send them a promotion that spotlights fall boots on special from the same brand. By demonstrating that you know what your customers like, you can continually engage them across whichever channels they prefer – whether that’s email, SMS marketing, in-app messaging, or even direct mail.
It’s also important to identify the signs of customer churn, so that you can re-engage customers and encourage them to remain loyal to your brand. By tracking metrics such as website visits, email open rates, and purchase history, you can identify which customers are in danger of churning – and send them a limited time, exclusive promotion that will encourage them to come back to your brand and give you another try.
Increasing Profits in the Post-Purchase Phase
Finally, don’t forget about another crucial part of the customer journey: the post-purchase phase.
After a customer has made a purchase, it’s important to ensure that they have a great customer experience with your brand’s communication (including up-to-date shipping notifications), and a delivery timeline that meets their expectations.
The post-purchase phase also extends to the returns process. When it comes to ecommerce, up to 40% of product purchases may ultimately end in a return – so it’s essential that customers have a streamlined and positive experience with returns, which will encourage them to come back again. In fact, 84% of ecommerce shoppers said that a positive returns experience would encourage them to buy from that retailer again.
Using a returns automation platform like Loop, you’ll be able to set up a self-service dashboard where customers can initiate their own returns, with no need to wait for customer support to guide them through the process. Your brand will be able to collect insights on why the customer wants to return a certain item, and offer personalized recommendations for product exchanges that they can make based on their needs. The platform offers a seamless exchange experience, with no need for the customer to return to their shopping cart. Your brand can even incentivize exchanges by offering customers bonus credit that they can use towards any product in your store.
Delivering a personalized and delightful experience throughout the post-purchase cycle results in more retained revenue: Loop merchants retain an average of 40% of revenue on exchanges. And that means rather than churning, these customers are likely to remain loyal and continue to generate value for your brand over the years to come.
The Right Formula for Greater Customer Lifetime Value
Using an affiliate marketing platform can help your brand get new customers in the door at a low cost, enabling you to quickly build trust and increase your revenue. During the course of the customer lifecycle, marketing automation and a good CRM can help you engage with your customers based on their needs at any specific time, helping you to re-engage with them and encourage more sales. And during the post-purchase cycle, using a returns and exchanges management platform like Loop can help you to deliver a great post-purchase experience that encourages more exchanges and a higher lifetime customer value.
With the right technology and processes in place, you can drive more revenue at a lower cost through every phase of the customer journey.