Catherine Langman:
Well, hello there, it’s Catherine Langman here back with another episode of the Productpreneur Success Podcast. And as I record this, we are in April now so it means that we’re through the first quarter of the year. And I don’t know about you, but it always feels to me like the first quarter of the year flies by quite quickly. I suppose like many of you I’ve got kids and so January’s pretty busy with the kids being home on school holidays and then once the term then starts, end of January onwards, we’re kind of head down bum up and working really hard and yeah time seems to fly by. But realistically the speed of time passing, I think it’s just going to keep up for the rest of the year and certainly in the e-commerce calendar or the e-commerce year, we definitely want to make sure that we put ourselves in the absolute best position possible to make the most of the fourth quarter of the year, which typically is by far and above the most lucrative quarter of the year in e-commerce.
Catherine Langman:
So in a nutshell, that really means that at the start of the year and leading into that fourth quarter, we really need to be putting marketing in place to build our audience and to start converting as many first time customers as we possibly can. But realistically, building that audience, building that brand awareness for our business is super, super important at the start of the year. Which can be hard when, at the start of the year, oftentimes the sales have dropped compared to the fourth quarter the previous year. That is totally normal, and what we really need to be doing is really focusing our marketing efforts on building the audience, building the brand awareness so we have a bigger catchment, a bigger pool of people who know about us and are ready to buy come the later months of the year. Of course, we still want to be converting as many customers and as many orders as we can along the way. And in fact, in this episode, I’m going to point you towards an episode that is really important that I recorded last year and well, this episode flows on really nicely from that episode.
Catherine Langman:
So what we’re going to talk about in this episode is how you can grow your business around your most profitable customers. This one is a really, really important concept to grasp and to understand, and to put into practice if you really want to be building a profitable business. And what I want you to go and listen to, if you haven’t listened to it before is episode 19 from last year, which is called How To Identify Your Most Profitable Customers. I think it goes without saying, if we can do the best job possible of identifying who those people are likely to be and attracting them to our business, we are putting ourselves in a really good position to convert as many new customers as possible. But when it comes to building a profitable business, just converting new customers is not enough. So I think at the end of the day, we all want to grow our sales and to see that our businesses grow.
Catherine Langman:
Growing our sales really isn’t enough though so I’m not going to dive into the whole balance sheet of your accounts in this episode, but hopefully you do know how to read that and you can see at the end of the day or at the end of the year, rather, that you are actually making some profit and growing our sales revenue is not enough we definitely want to be growing our profits as well. And in order to do that, we need to be able to build our business around our most profitable customers and so that’s what this episode is going to be about. And the power of customer loyalty really can’t be understated. I remember back in the early days of e-commerce and I literally do, because my first professional job out of university back in 1999 was in one of Australia’s earliest e-commerce startup businesses at the time it was called Aboriginal Australia and it sold Aboriginal art work, which was a great concept.
Catherine Langman:
Of course, back then, it was in the times where every single letter and image and web page and whatever on your website literally had to be coded in by a developer so there were no Shopify, there was no WordPress, there was no kind of off the shelf website building platform that you could use and so it was an enormously expensive exercise to get an e-commerce business up and running at that point in time. And anyway, so that particular business started in the dot-com boom and ended in the dot-com bustle. It didn’t actually end, it turned into a physical gallery space but that’s by the by. I do remember back in the early days of e-commerce, it really was believed that customers were not loyal to any particular online retailer and this is because the worldwide web seems to make customer loyalty irrelevant because at the click of a mouse shoppers could effortlessly cover the globe in search of the lowest possible price with little to hold them at any one website.
Catherine Langman:
And honestly, I would argue that many business owners who sell online today are still working off this premise and the result of that assumption is that they’re really only using discount or low price strategies to convert their sales. And I guess at the end of the day, physically speaking as shoppers we have the ability to skip easily from one website to the next, it’s not that hard, right? But what’s actually happened in terms of our buying behavior is that online shoppers are actually highly loyal to our favorite online stores. And I’m sure that this would be down to things like internet bookmarks and engaging content that’s leading us to become pretty attached to our favorite stores. But I think there’s also a lot to be put in store with, if we shop from somewhere and we have a really, really great customer experience shopping from there, then we have trust with that store and we also, as shoppers, we know where to click to find what we want. So there’s a lot of different reasons why our online shopping patterns have become loyal or almost addictive for some of us.
Catherine Langman:
And what’s actually happened as a result of this is that loyal shoppers actually visit their favorite online stores far more frequently than they do any brick and mortar store. So that’s pretty cool, right? I mean, it’s pretty cool for those of us in e-commerce maybe less cool for those of us in brick and mortar retail. But if you are an e-commerce brand owner, you really want to be that website and you really want to figure out how to create that sort of an experience for your customers and keep them around and keep them coming back and as loyal customers, repeat customers and maybe eventually some raving brand fans. And it really does get even better than that because high levels of customer loyalty, and by customer loyalty I do mean customers that come back and repeat purchase, it can actually have a really enormous impact on the profitability of your business.
Catherine Langman:
So it’s been demonstrated that online customer loyalty is a really crucial factor in the profitability of your business and this is even more so for online businesses compared to offline or brick and mortar companies. And basically what that means is that even small changes in loyalty, especially amongst those lovely most profitable customers really it can account for much higher profits in the longterm. So even like a 5% increase in customer loyalty or repeat purchases can potentially result in up to 95% growth in your profits, which is a massive statement, right? And how can that possibly be, because and we’re going to dive into this in a little bit more detail, but in short you’ve got to remember that you are spending money and time and resources to build up that audience and to attract them to your website and to convert that first sale, whether it’s money that you’re spending creating content or money that you’re spending on advertising, or money that you’re losing by offering a discount, that you are always going to spend more to get a first time purchase compared to a repeat purchase.
Catherine Langman:
And so there’s the cost factor there, but there’s also an ease of convincing someone to make a repeat purchase. Like I just alluded before, if customers have a really great experience shopping from you, they already trust you and they’ve enjoyed shopping with you and they know where to go on your website to find what they want, that all of those factors are going to make it way easier for a customer to come back and buy again. And of course you do put yourself in a much better position of increasing those lovely repeat purchases if you have attracted the right ideal customers in the first place, the ones that are going to be most likely to turn into those longterm profitable customers. So again, if you don’t know how to do that, you can kind of get started with identifying your most profitable customers by listening to episode 19 of this podcast, I’ll link to that in the show notes of this episode as well so that you don’t have to go hunting for it.
Catherine Langman:
So why does customer loyalty have such a large impact on a website or an online store’s profitability? So the first reason is a little bit of a downer, and that is that you often won’t break even on one time shoppers, and that’s not a hard and fast rule for everybody, of course. But, like I was saying before, customer acquisition costs in e-commerce are pretty high. So that is the cost of converting a website visitor into a paying customer, such as the cost of advertising or the cost of creating the content in the first place or the cost of offering an incentive or whatever the case may be, or even the cost of paying staff time to work on bringing those visitors to your website, so that it’s always going to cost more to acquire a first-time customer. And you can even find that a new business, a new e-commerce business, a new online store may not be profitable for a retailer until they’ve had customers shop with them even up to four times.
Catherine Langman:
Now this is not, I don’t say this to scare anyone at all, this really is just, I guess, hopefully I’m going to put the rocket under you a little bit, put the fire in your belly a little bit to really work hard at how you can kind of retain your customers and get them to come back again and again. Again, this is not a hard and fast rule for everyone. If you are a brand owner and you are making your own products and you have higher profit margins on your products, then you’re going to make a profit sooner than somebody who is retailing other people’s brands and maybe their margins are a lot slimmer. So for example, if you’re an online clothing retailer and you are selling other people’s brands and your profit margins are maybe 30, 40%, then you really will need customers to buy probably three to four times before you’re going to start making some profits, right? And so that’s being a new business you can’t expect that your new business is going to be making a profit in the first 12 months.
Catherine Langman:
So you really need to be playing this as a long game and putting a lot of effort into not just acquiring those new customers, but to actually bring as many of them back as you possibly can. Don’t worry, I’m going to give you some tips and ideas about how you can do that so that you can get there as fast as possible. So the second reason that customer loyalty has such a big impact on your profitability is that repeat purchases tend to spend more and generate larger transactions. So that’s pretty cool, right? Basically the longer a customer is in a relationship with an online retailer, the more customers tend to spend in a given time period. So I think this also, if you think about your own shopping passions, this makes sense. Oftentimes the first purchase that you place with a new store, you kind of testing them out, right? You want to make sure that they’re legit and that the products are really good and they’re what you expect, and that they arrive in a timely fashion.
Catherine Langman:
I actually, I placed an order, I don’t do this very often, but I placed an order for this funny new kind of widget that was something to help a sore neck. I saw an ad on Facebook and it was at a time where I’ve been working really hard and getting lots of headaches because my neck had been really tight. So I bought this thing and honestly it did not turn up for two months and so that is not going to make me want to go back and buy from that business again, is it? But if you can give them that really good first time experience, even if the average order value is low, then what you can see with the right marketing in place is that those customers, once they’ve sort of tested you out and they’ve had that great experience, it’s not just a great experience with shopping with you on your website and receiving the orders, it’s obviously also using the products too, right?
Catherine Langman:
But all of that being in the positive, then over time, every time they come back you can generally expect that the orders will be bigger, which is a pretty nice situation to be in. And just a quick note there, I just want to acknowledge that some of you are probably sitting there going, yeah but Catherine, I sell something that people only need to buy once. And so I want to acknowledge that because I have heard it from clients many times and by and large there are ways to get around this, right? And to encourage a repeat purchase. So I want to give a couple of examples. Number one, I want to point towards babiators.net.au. So you guys have heard me interview Kristy a couple of times on the show and she’s built an amazing business. I’m pretty sure she said that to me back in the early days of working together. And because I guess realistically your kids should only need one pair of sunglasses, right? But what’s actually happened is that customers do come back and buy again.
Catherine Langman:
They’re either buying because there’s a different design or a style or their child has grown up and they’ve grown out of that pair or they’re buying them for their other kids or they’re buying them for gifts. And so there has been a really good opportunity there to generate those repeat purchases. Another example would be from a past client who sold a baby carrier. And in that particular example, yeah look, most parents are probably only going to buy one baby carrier, at least the kind that she sold, which was something you could wear in the water and not something that you’d necessarily wear all the time every day. And so that is probably something that you would buy once, right? And so in that scenario the ways around this number one, looking to sell wholesale, and that was certainly something that she was working to grow.
Catherine Langman:
Obviously, if you have wholesale customers, then they are going to sell out of their products and buy more from you. So that’s one way that you can get repeat customers or repeat purchases. But additionally, the other thing that you want to be looking to do is to add to your product range over time. That’s certainly not something that’s a immediate solution for many people, especially if you are designing and manufacturing something that’s going to take awhile to test and to pass safety regulations, et cetera. However, it is a really smart way you should grow because if you think about it, what does that ideal customer who maybe is buying the baby carrier, what else would they need either at the same time or maybe before they need the baby carrier or maybe after they need the baby carrier so that you can… And that obviously makes sense with what you make and sell and your brand, et cetera.
Catherine Langman:
But what you can think about is the opportunity to extend the lifetime of a customer. So that can be a really useful to sort of approach thinking about how to generate those repeat purchases. All right, onwards. The third reason that customer loyalty can have a positive impact on your profitability is that repeat customers refer more people and bring in more business to your online store and this is huge guys. So word of mouth, I think you all know this, right? Word of mouth is the single most effective and economical way online retailers can grow their business because word of mouth referrals have the highest trust rating and new customers are likely to place their first order with you within two weeks of receiving that referral. That’s amazing, right? You can’t pay for that with advertising, I guess that’s the whole point. This is why it’s trusted more highly than any other sort of way of being introduced to a business.
Catherine Langman:
The difficulty of course is that it’s really hard to put any sort of a marketing system to drive word of mouth referrals. We can of course, try and collect testimonials and put them on our website, but that’s not the same as a word of mouth referral. A word of mouth referral is literally, you’re saying to your friends, hey, I’m really keen to find a pair of jeans that is going to fit me absolutely perfectly. I’m not loving these other pair because they’re uncomfortable or they’ve shrunk in the wash or whatever the case may be. Right? And your friend will turn around and say, well, I’ve just bought this pair from blah, blah, blah brand and it’s amazing and I think you should try it.
Catherine Langman:
So that’s what I mean by word of mouth referral, is literally between people in real life, it’s not online. But the cool thing is that customer loyalty it turns out can actually be a key driver for those referrals. Because on average, a customer will refer three people after their first purchase and after 10 purchases at your business, that same shopper has referred seven people to your business. So that’s a really, probably underutilized reason for focusing on building the customer loyalty and returning purchaser right in your business. The fourth reason loyalty can impact your profitability that I want to mention here is that those referrals really are powerful selling tools. And I think it’s no surprise that over 70% of online shoppers read reviews before they buy it so referrals here, I am referring online testimonials that you might collect.
Catherine Langman:
So a couple more impressive stats to wrap your brain around here. According to Nielsen, market research business, 92% of people trust referrals from people they know and people are four times more likely to buy when referred by a friend. So if there is any reason to make sure your customers are happy, this is going to be it, right? So we really need to try and do our best to encourage this growth in customer loyalty and growth in your returning customer rate. And definitely the first thing you need to be doing is to make sure that you have an amazing, enjoyable experience shopping on your website. So do not make your website hard to navigate, don’t force your customers to have to go hunting to find what they want, you really want to try and give them a great experience shopping with you online.
Catherine Langman:
I’ve got plenty of other episodes on the podcast and blogs as well on my website that you can read if you’re looking for help on how to make your website a little bit more… Improve the customer experience in there. But then definitely think about things like the unboxing experience or the delivery experience, how can you make that really good. And I got a delivery the other day, I bought some skincare products and I was kind of testing out this new serum that I wanted to try, again, referred by somebody else, my sister. And so I bought this online and it turned up in a box with some chocolates. I’m like, that’s pretty cool, of course, I didn’t get to eat them, the kids nabbed them. But anyway, so that unboxing experience was quite fun.
Catherine Langman:
But then beyond that, other than making sure that your product and the service and that online customer experience is absolutely sensational, what else can you do? And so there is a really important thing that we do and that we advocate that all of you do in e-commerce after somebody has bought from you for the first time. In digital marketing speak is called onboarding. But basically what it means is to welcome your new customers to your business and to your brand and to do your best to communicate with them with information that is going to help them have a great experience using or consuming your products and just try and roll out that red carpet a bit and make sure their experience really is enjoyable and successful as possible.
Catherine Langman:
And so what you can actually do is to put some automation around this process. You guys probably know I’m a massive fan of email automation. So you can definitely use this in this post-purchase process as a way of trying to ensure that the customer is really happy and having a great experience and then also to drum up a repeat order from them. And like we’ve been talking about, really ensuring that people become not just a one-time buyer, but a repeat buyer is so crucial and then beyond that they’re going to be far more likely to buy again and again. So what we want to be doing is when a customer purchases on your website, that action on your website triggers an automated email campaign or an email flow if you use Klaviyo like we do, and what you want to do is really think through.
Catherine Langman:
So what goes into this automated email flow or email campaign is going to be a little bit different depending on what you sell and how people use it, and how much information they are going to need to have a great experience, right? So you definitely need to think about that in relation to your own product. So I’ll give you a couple of examples. If you are selling fashion, there’s not a whole lot of information that most people need in order to know how to put on a pair of jeans or how to have a good experience using those products, right? There might be a few things that would be useful, like making that returns process super easy so that they feel like your customers know exactly what they need to do if something doesn’t fit right or it doesn’t suit them, right? So there’s definitely some information there.
Catherine Langman:
But in terms of using the products, et cetera, you probably going to be very minimal there. On the flip side, I’ll give the example of cake2therescue.com.au, that’s the digit two in the middle, not the word to, cake 2 The Rescue. And with their cake kits, there is some education process for customers to know how to use them, the cake kits correctly, and get a really great result. And that’s largely down to the fact that their brand positioning is aiming at people who are making birthday cakes or occasion cakes that aren’t really natural bakers. So they’re not people who have a lot of baking experience and the cake kits are designed to try and make them really easy so that anyone can bake this cake and decorate it and it’s going to look amazing.
Catherine Langman:
So there is definitely an education process after someone receives their cake kit so that they know exactly how to use it, they know how to bake the cake, they know how to decorate the cake. There’s the education there to help that customer feel confident and know exactly what they’re going to do and turn out an amazing looking cake. So what you can do is to automate the process of sending any relevant information via email and you want to really think it through in terms of your buyer journey and your customers and what they’re going to need to know in order to have that great experience, either shopping with you or using the products. And you want to put that information, whether it’s in one email or you’re dripping it out so that they are going to have that really great experience.
Catherine Langman:
Another thing that might be the right thing to include is finding a way to entice people to join you on social media. I know that there’s a lot of people come from social media to your store, but sometimes it’s the other way around. And sometimes you can actually really entice your customers to post photos of themselves using or wearing or whatever, your products onto your social channels and that sort of user generated content is so amazing to collect and to show on your social media pages. So if there’s a way, don’t literally say join us on social media that’s super boring, nobody is going to click over from that, right? But if there’s a way that you can speak about the community that you’ve built up and how fun it is and what you guys chat about or whatever the case may be on social media. If there’s ways that you can really excite people about coming over and joining your community on social media and sharing their own images as well then honestly, that will be one of the most positive things that you could do to help build out that sort of loyalty.
Catherine Langman:
One example of that would be Cake 2 The Rescue and she actually invites people to join her Facebook group and that Facebook group has grown really, really amazingly over the last few years and it has turned into a amazing tool for her to build her business and so she really has grown her revenue and her profitability off the back of that sort of move. So anyway, you’ll have a few emails in that sort of first part of your onboarding automated email campaign, email flow but beyond that, there’s a couple of things that you want to do and want to automate. You want to request a review or a testimonial and that needs to be timed at around about when your customers are likely to have had a chance to use the products, right? And have some experience using the products. Again, that’s going to be very dependent on what you sell and how soon somebody might use it.
Catherine Langman:
So you definitely want to do that before you ask for a second order. But once you’ve done that, you definitely want to put some sort of invitation to come back and buy from you into this automated flow. And sometimes that might just be offering the right next product at the right time. So certainly for me in my first business, that was the case. So we sold modern cloth nappies in that particular business and we typically sold them in bundles. So we had a trial pack, a half-time pack and a full-time pack with the main packs that we sold and they were value packs. I used to pack out the value by adding in some free accessories and things like that, but that was a pretty cost-effective way to really build out the value of those bundles. Right?
Catherine Langman:
However, realistically, once somebody had bought a trial pack and they went into this onboarding automation, just literally being able to educate them so that they knew how to use the products and how to have a good experience, then offering them the right next thing to buy whether it was a half-time pack or a full-time pack, I didn’t have to discount it so it was just literally offering the right thing at the right time. But in some instances you might need to offer a small incentive, whether it’s free shipping or something or other else or you might be able to do a volume discount, buy four get one free or whatever the case may be. It’s going to depend a lot again, on what you sell and what sorts of offers or incentives your customers respond well to.
Catherine Langman:
But at the end of the day, the goal here is to elicit that second purchase, right? Beyond this particular campaign, this automated flow rather, then you are likely to continue to get repeat orders from a customer who has converted into a second time customer. And beyond this automated flow, it will come down to things like having really great quality content going out on social media and on emails and running the sorts of marketing that I love to talk about, like your product launches and promotional campaigns and then smaller things as well like good quality content. So an example here would be Up On The Rooftop, which is one of our clients and she publishes fantastic blog content. And there’s oftentimes it’s highly relevant to the time of year and what you might be planting in your garden at that time of year.
Catherine Langman:
And then so she’ll share some of that content and show what products that you would need to be using to be able to do the same thing as what she’s talking about in the blog, so that sort of content can also be really helpful. So really having the regular content beyond this automated flow is also going to be really crucial to being able to continue to build on this loyalty and to get the ongoing repeat purchases. But if you can automate the process of turning a one-time customer into a two time purchaser, you are well on your way to building up this profitable business for yourself. So obviously if you are going to run an automated email flow triggered by a purchase, you definitely need to be using the right email application for this.
Catherine Langman:
It needs to be something that is properly integrated into your shopping cart. So if you are on Shopify, you can’t really successfully use MailChimp for this, MailChimp and Shopify don’t integrate anymore. And sure there might be some apps like Zapier that you can use that might trigger campaigns, but you’re not getting any kind of analytics to judge the success or otherwise of that campaign. So realistically you need to be using the right tools for the job and for e-commerce we just cannot go buy Klaviyo as our tool of choice. It is made for e-commerce the way Shopify is also made for e-commerce as a website platform. So Klaviyo you get all of this sorts of functionality that you need for e-commerce out of the box, it doesn’t matter what plan you are on, it’s not like you have to spend massive amounts of money to get all of the functionality, which is amazing.
Catherine Langman:
And it has such intuitive analytics in there that you really start to learn so much about your ideal customers and what helps them to convert and what makes them tick and all of that kind of stuff, even predictive analytics in there. So once you’ve been using it for a little while, the app will help you to predict when somebody is going to be buying next, which is pretty cool. So Klaviyo is our recommendation, there I’ll include a link to that in the podcast show notes as well, and highly, highly, highly recommend that you start working on this post-purchase automated flow and getting this into your business and remembering that it’s not just about hitting somebody out for a purchase straight away. You need to think about how can you really ensure that your new customers have that fantastic experience with you before you think about asking them to come back and buy again.
Catherine Langman:
And you will need to think about this in relation to your business so that it totally makes sense to your customers. I have one last piece of homework for you and that is that you need to start tracking your returning customer rate. If you’re on Shopify, you can get that metric from your analytics dashboard. But if it is something that you want to focus on, which I think it should be in an e-commerce business, you need to track it. Otherwise you have no idea where you are now and you will have no idea if your efforts are actually having the right impact and taking you in a direction that you want to go in, which would be improvement, right? So make sure that you start by documenting your current returning customer rate and then keep track of it and record your progress over time, especially after you have implemented something like this that I’m talking about in this episode. All right guys, that’s what I’ve got for you for today, hopefully you’ve enjoyed that.
Catherine Langman:
Of course, if you are looking for a community of e-commerce businesses and would like to network with our amazing group, we have our Rockstar Productpreneur group on Facebook. You can get access to that by joining at catherinelangman.com/rockstar. It’s a really active group full of e-commerce business owners looking to grow their business. It’s not a place where you can just go in and post your promotions. It’s literally there for networking and for support and for giving and receiving help from your peers and my team and I are also in that group as well so that you’ll have the opportunity to learn and grow from us as well. So head on over to catherinelangman.com/rockstar, if you are not a member of that group you absolutely should be and I look forward to meeting you in there.