And Build a Business Around Your Best Buyers
Well hey there, Catherine Langman here, and welcome back to the Productpreneur Success Podcast.
This week I’m really excited about the topic we’ll be discussing. Because probably the number one thing that eCommerce brands tell me they struggle with ALL the time, is how to get more traffic and sales through their online store.
And to get really good at that generally means that you know who your ideal customer is and what they want, right?
I don’t want to over-simplify the eCommerce business model, or the way any business works, as there are so many pieces to the puzzle of business.
But, knowing who your customer is and what they want is pretty fundamental. And it trips many people up.
I know when I started my first business, which was a modern cloth nappy brand, I initially went into that business assuming that all parents or parents-to-be of new babies were my ideal customer.
But in the end, that was completely ridiculous, because not all new parents would consider a reusable nappy for their baby. I had to get a LOT more specific about identifying my ideal customer and working out what they really wanted. And once I worked that out, I could design my website to suit them, I could create promotions and product launches they found really attractive, and my sales took off!
Alrighty – let’s dive into the episode and talk about how to identify your most profitable customers so that you can build your business around your best buyers.
So tell me, do you treat all your customers equally?
This is not the time to be like a parent who loves all their children equally…
You SHOULD love some customers more than others.
Let me explain. And in the process, I’ll give you some insight into your customers, and explain how to build your business around your best buyers.
Why you should play favourites with your customers
Those of you who know me know that caffeine practically runs in my veins. I’ve been a coffee lover for as long as I can remember. (Starting out with decaf iced coffees that I made as a little kid!)
13 years ago I bought my beloved Italian-made espresso machine. I called her my 3rd child, until I actually had a 3rd child…
Since then, I’ve bought a lot of coffee products: coffee grinders, brushes, tampers, beautiful coffee cups and jars – the list goes on. I even bought a professional coffee-making course!
But I didn’t buy all this at once. It happened over time.
The place I initially bought all my products from educated me about coffee using engaging content – I would read their emails, watch their videos, sometimes I would visit them in-store, and I would buy. And buy. And buy.
I became what’s called a hyper-consumer. And these are the people who drive your sales forwards. They are the backbone of your business.
Clearly, selling coffee products to me is easy, and I’m a profitable customer
But I don’t see that many eCommerce brands working as hard as they should to identify their own hyper-consumers.
There’s an over-reliance on just driving more traffic and converting more new customers, without being fussy about whether they’re new or repeat customers.
And for sure, if you are brand new to business, you need to focus completely on acquiring new customers.
And even as you keep growing, you absolutely still need to have a focus on acquiring new customers.
But, in an ideal situation, you would focus on acquiring as many new customers who are similar to your existing BEST customers, your hyper-consumers.
Your hyper-consumers are the gift that keeps on giving
If the easy repeat sales from a hyper-consumer, like me with my coffee paraphernalia, are not attractive enough to persuade you of the importance of them to your business, here are some additional facts to wrap your brain around.
1. You won’t break even on one-time shoppers.
Because customer acquisition costs in e-commerce are high (that is the cost of converting a website visitor into a paying customer, such as the cost of advertising), to recoup your investment you need to convince customers to return to your site time and again.
2. It’s much easier to sell to an existing customer than a new one
There are less hurdles to get past: they already know, like and trust you. They’ve already had a good shopping experience and know what to expect. They’re already familiar with your online store as well, and know where to find what they want.
3. Repeat purchasers spend more and generate larger transactions.
The longer their relationship with an online retailer, the more customers spent in a given period of time. So often a customer will spend a small amount on a first order just to test the waters with a new online store, and over time they’ll spend more per transaction.
Which is why it’s so important to have multiple and/or consumable products. So that people who buy from you – and love your products and your brand – can buy again. Because they will!
4. Repeat customers refer more people and bring in more business.
Word of mouth is the single most effective and economical way online retailers grow their business. Word of mouth referrals have the highest trust rating and new customers are likely to place their first order within 2 weeks of receiving that referral!
And loyalty, it turns out, can be a key driver for referrals. On average, a customer will refer three people after their first purchase, and after 10 purchases that same shopper had referred seven people to the site!
So, have I convinced you yet that identifying your most profitable customers will pay huge dividends for your business’ bottom line?
The next question is, then, how do you do it?
The Pareto principle in action
Vilfredo Federico Damaso Pareto was born in Italy in 1848. He would go on to become an important philosopher and economist. Legend has it that one day he noticed that 20% of the pea plants in his garden generated 80% of the healthy pea pods.
This observation caused him to think about uneven distribution. He thought about wealth and discovered that 80% of the land in Italy was owned by just 20% of the population. He investigated different industries and found that 80% of production typically came from just 20% of the companies.
The generalisation became: 80% of results will come from just 20% of the action.
In my own product-based business, we had about 10% of our customers who were responsible for over 50% of our revenue.
Not quite the 80/20 pareto principle, but a significant disparity and it was obviously worth putting more focus on those brand fanatics among my customer base.
In my business, I did this by creating a Consultant model, where my biggest brand advocates received a commission for referral sales. We put a lot of time and effort and marketing resources into cultivating these customer relationships and it was hugely effective at growing our brand bigger and faster than our competition.
So it is your responsibility to build your business around your hyper-consumers. Figure out what they would love to see and how you can improve their experience.
Here’s how you can learn your hyper-consumer’s buying journey
One of the best ways to learn such insights from your customers is to survey them.
I like to have a mix of open-ended questions and close questions, with the questions designed to understand your customers’ buyer journey from the moment where they realise they need or want something, through their journey of looking at and evaluating alternatives and making their purchase decision.
In an ideal world, you would survey your existing customers to gain these insights. But if you don’t have any, or many or those yet, you can survey people you think fit your profile of an ideal customer as a starting point.
What you’re looking for in that situation are the longest, wordiest answers to your open-ended questions, as these people have a higher chance of going on to become your customers.
By listening to what your customers say, you’ll work out what they love and what helps them to make a purchase decision, so that you can then tailor your business and your marketing and even your fulfilment strategy so that its perfectly suited to what your customers want.
And by doing this, you’ll extend the lifetime value of your best customers and keep them coming back for more, again and again.
Have a think about how your customers experience your business
Would you think they get a 5-star experience when they shop from you? What makes it a 5-star experience? Hopefully, by asking the right questions in your survey you will KNOW what’s important to them and can then create that 5-star experience for them.
But it’s really worthwhile writing this out. What are the things that your customers value in their shopping experience with you? What are the pain points that make that experience less-than? Friction in any form is definitely a conversion-killer and would deter a repeat purchase.
For example, I recently purchased two pairs of winter pyjamas from an ecommerce brand I’d never bought from before. I’d found it hard to find winter pyjamas in stock when the weather turned cold, probably because a lot of brands’ manufacturing was delayed thanks to the COVID-19 pandemic shutting many of China’s textile factories in January and February.
Anyway, I ordered the same size in two different styles and received them fairly promptly. Unfortunately, one style was much smaller than the other, and who wants to wear uncomfortable PJs to bed at night! So I decided to return it and exchange it for a second pair of the other style I’d bought and emailed the brand to let them know.
I posted it back express, because the postal system was quite slow during the pandemic lock-down, but weeks later I hadn’t heard anything. When I tracked the delivery, it had been sitting at the brand’s local post office for 2 weeks, waiting for collection! So not really the best experience all in all and I doubt I’ll shop from their website again.
Once you’ve identified what makes up a 5-star experience for your customers, and you’ve worked out the pain-points that cause friction or a negative experience, then have a think about what specific characteristics would make up a 6 star experience? or a 7, 8, 9 or 10 star experience?
Often you’d be surprised to discover that there are little things that would create an even better than 5 star experience, are actually within your reach right now. And if you can find some opportunities to genuinely surprise and delight your customers, don’t you think you’ll give yourself an even better chance of keeping them hooked for life, leading to ongoing repeat purchases and becoming total brand fanatics?
And then you can take that a step further. Use your knowledge about your best customers to make the right product offers to your best customers at the right time.
You can use your customer insights to automate some of your marketing campaigns, via email and even social media advertising.
For example, in my favourite email marketing platform Klaviyo, we can send automated post-purchase emails that invite customers to buy by offering them the right product at the right time. And you can integrate your database with your Facebook ads manager, so that you can show ads to your customers for things they’re likely to buy next, or so that you can create Facebook Lookalike audiences to find more new customers that are similar to your best existing customers in your database.
Treat your best customers like royalty and you’ll skyrocket your profits!
The benefits to your bottom line of having loyal, repeat customers is irrefutable.
I talk more about this and how to build loyalty and encourage repeat sales in my previous blog, “The Secret Sauce for a Profitable eCommerce Business”, which I’ll link to in the show notes for this episode.
The other thing, if you’re looking for help with how to identify your most profitable customers, keep an eye out for my upcoming Masterclasses.
There’s a process for learning this stuff, but don’t despair, it’s totally figure-out-able! And I’ll be sharing some of this process with you all very soon in a live masterclass.
For now, make sure you join our free community in our Rockstar Productpreneur Facebook group, where you can go through some introductory eCommerce marketing training modules as well as network with other product-based business owners who are all working on the same sort of business as yourself and dealing with the sorts of situations unique to product businesses.
I’ll share the link to join in the shownotes for this episode as well!
Lastly – a heads up for next week’s episode. I’ll be sharing another Mini Training called Your Ultimate Guide to Ecommerce Email Marketing. You all know how much I love, love email – I mean, it IS still capable of generating an almost 40x ROI, and who wouldn’t want that? So you’ll want to tune in to listen to that!