One of the trends I hear discussed all the time is that of chasing the next shiny object. As it turns out, that’s not something that occurs solely in the tech space. A recent study from Adobe – The Adobe Digital Index – shows that online retailers are ignoring the 80/20 rule by ignoring current customers in favor of attracting new ones. Maybe today’s screed should have been titled “You Always Hurt The One You Love.” Their summary:
Online retailers spend nearly 80% of their digital marketing budgets acquiring shoppers (new visitors), but does this focus make sense? To find out, Adobe Digital Index analyzed 33 billion visits to 180 online retail website in Europe and the United States from April 2011 to June 2012. Our data indicates retailers should shift spend to returning and repeat purchasers, two existing customer segments that drive a disproportionately high share of revenue, exhibit higher conversion rates, and really step up in the Christmas holiday season and tough economic times. Migrating just 1% of shoppers to returning purchasers could generate as much as $39 million in additional revenue per retailer.
In other words, we’re spending way too much time and money chasing new customers while we ignore a lucrative user base that’s just waiting to be asked to the dance. 40% of revenue for online retailers comes from returning or repeat purchasers, who represent only 8% of all visitors, according to the study. In other words, you have to attract five to seven shoppers to equal the revenue of one repeat purchaser.
Having run an online retail business I can tell you that the vast majority of our thinking was about attracting and converting new customers. It wasn’t as if customer service was an afterthought and we did allocate a good deal of our marketing to up-selling our existing customer base. However, this study opened my eyes to the fact that we probably could have done more with those who’ve already demonstrated a desire for our products and I’ll keep that in mind as I work with clients going forward. How about you?