Customer loyalty will likely fall when you make a few common mistakes with your website.
However, the world is changing, and as a result, so are the ways in which businesses online are selling products and services. Ecommerce is no exception and it has seen more change in the past two years than in the previous two decades.
Changes such as record-high shipping costs and diminishing returns from digital advertising mean that customer loyalty and returning customers are crucial for growing an e-commerce website.
Despite going to extraordinary lengths to make customers happy, brands are finding that the number of customers that return their order is on the rise.
In this article, we will examine the direct cause of customer loyalty, how to limit customer returns and how to retain new customers online.
How to retain customers in e-commerce.
A common misconception in ecommerce is that the majority of profit is made from new customers that place an initial order.
For example cold traffic sent via a social media ad to a product page.
While getting new customers is great for growth, it is easier and cheaper to market your store to people who have already made a purchase.
Knowing how to retain customers online is critical to the success of any e-commerce website.
Customer retention impacts customer lifetime value.
In most cases, acquiring new customers for an ecommerce business is expensive. There is normally an initial loss because the cost of gaining the new customer is more than the profit made from the sale.
However, smart ecommerce business owners know that average customer lifetime value (the revenue that the average customer spends for as long they’re a customer) is key to growing their business. This is because the more customers they retain, the more sales they make over time.
However, the majority of e-commerce website owners don’t know what the average customer spends for as long they’re a customer.
Average customer lifetime value in ecommerce.
The total amount of revenue that a customer spends with an e-commerce store is called Customer Lifetime Value (CLV for short). Average Customer Lifetime Value is the average CLV for all customers or customers in a segment.
Customer Lifetime Value varies depending on a number of things, some of which include:
- Traffic source
- Device(s) used
- Customer loyalty
Pro tip: I strongly advise that you work out your Average Customer Lifetime Value and if possible, split your customers into segments. This is because each customer segment will have different costs, average order values and customer lifetime values.
This will help you to have better targeting for your advertising campaigns, while knowing which marketing channels are making you a profit.
This in itself can be enough for you to successfully grow an online business. You’re boosting your marketing campaigns that make a profit, whilst reducing costs from wasted ad spend.
Pay close attention to e-commerce trends in 2022.
The desire for authenticity and transparency is driving a new generation of customers to buy from brands they believe in.
People around the world have become increasingly isolated from others. They’re being forced to either social distance or work from home. This has resulted in an influx of customers who want sustainable products that come directly from small, personal shops on their doorstep—not just because this helps to support their local economies and communities, but so that they can interact with other people.
- Customers are 4x more likely to buy from a company that has strong brand values
- 77% of consumers care about environmental impact when making purchases
- Customers are willing to spend more money when buying locally
- Customers are more likely to accept slower shipping times for authentic brands the align with their beliefs
- Social commerce sales are estimated to triple between 2022 and 2025
- 71% increase in online searches for sustainable goods
- 66% of customers expect supply chain delays
- 45% of shoppers actively look for anticipated delivery times
- 40% of online customers intend to use cryptocurrency as a preferred method of payment
- 52% of global online consumers are more likely to purchase from a company with shared values
- Online purchases via social media are expected to triple by 2025
- 30% of customers make regular purchases on social media
- 50% of Chinese sales online are through social media platforms
Customer loyalty is likely to fall when they feel that an e-commerce website or brand is not meeting their values and expectations.
Customers in 2022 want to buy from e-commerce websites and brands that stand for values that align with their personal beliefs.
Furthermore, consumers shopping online are more likely to make a purchase when they have an interactive shopping experience from a fully transparent business.
This means that social media is expected to be increasingly important for ecommerce brands in 2022.
Social commerce and livestreaming in 2022.
This ecommerce trend is called social commerce and it’s expected that the majority of social commerce content will be live streaming.
Live streaming increased by 61% during the first 9-months of 2021. In 2022, large retail brands such as BestBuy, Walmart and Nordstrom all intend to sell products via live streams to local customers.
(At GoGoChimp, we’ve seen a substantial number of clients requesting live streaming and webinar sales funnels. Psst… Keep an eye out for some exciting products that we’re working on…)
- 46% of customers want to watch video content about a product before they buy
- 38% of global consumers make at least one online purchase through marketplaces such as Amazon and eBay
Therefore, customer loyalty is likely to drop when brand doesn’t diversify it’s sales channels and doesn’t provide video content that demonstrates products.
Customer loyalty will likely fall when they feel buyer remorse.
We all buy things. We all regret things. We all buy things we regret.
The latter is commonly known as Buyer’s Remorse.
In fact, 82% of us feel regret or guilt about a purchase. This results in 30% of all online sales being returned.
Most customers will offer a valid reason for returning products.
However, ecommerce brands are noticing a growing trend in customers abusing their returns policy.
Known as serial returners, this customer segment not only has the potential to damage your profit margin but also interferes with the authenticity of your customer loyalty data.
The Most Crucial E-Commerce Trend Brands Need to Know in 2022:
Watch this video on YouTube: The Most Crucial E-Commerce Trend Brands Need to Know in 2022
- 0:00 Intro
- 0:16 30% of online purchases are returned
- 0:23 Ecommerce trend of serial returners
- 01:01 ASOS search social media for abuse of returns policy
- 02:00 Consumer psychology after a purchase
- 02:09 Approach avoidance conflict definition psychology
- 02:18 Avoidance of short-term pain
- 02:32 Buyer’s Remorse is cognitive dissonance
- 02:53 Most common reasons for customer returns 03:09 Buyer’s Remorse house buying
- 03:23 UK most returned purchases
- 03:45 Experiential purchase and material purchase definition
- 03:58 Material purchases lead to Buyer’s Remorse
- 04:29 Experiential purchase is less likely to lead to Buyer’s Remorse
- 05:17 Brands use marketing to associate material products as an experience
- 05:49 Customer returns policy abuse linked to how often a product is used
- 05:57 Impulse purchases are an emotional purchase
- 06:14 How to overcome the e-commerce trend of Buyer’s Remorse in 2022
- 07:30 Conclusion
Buyer’s Remorse Definition
So, what is Buyer’s Remorse?
noun: buyers remorse
a feeling of regret and guilt after making a purchase. Buyer's Remorse is felt if the purchase is regarded by the customer as not important or expensive.
Why customer loyalty will likely fall when someone abuses your returns policy.
The repercussions of Buyer’s Remorse are devastating to e-commerce websites and this trend has given birth to the serial returner — a select group of consumers who purchase a high quantity of items that they have no intention of keeping.
Therefore, customer loyalty will likely fall when a small number of your customers be abusing your return policy.
This has a direct impact on customer loyalty data as the feedback given by serial customers will most likely be negative.
Why do people abuse returns policies?
One explanation offered by retailers and economists for serial returners, and their abuse of returns policies, is social pressure.
Research into serial returners and buyer’s remorse discovered:
- Most Millennials feel that they need a new look in every social media image that they publish
- Serial returners return the items after they feature them in social media content
- Social media influencer is the most desired career path by Millennials
- Younger customers struggle to afford many of the products that they purchase
Therefore, it is not surprising that serial returners are becoming more common.
How to stop customers abusing your returns policy.
So how do you stop customers from feeling buyer’s remorse or abusing your store’s returns policy?
Search customer social media feeds.
It’s common for e-commerce stores to discover that a small number of their customers are buying in bulk and then subsequently return the majority of their purchases.
It’s become such a threat to e-commerce that brands such as ASOS are actively investigating their customers’ social media feeds for evidence of abuse of their return policy.
Suspects are then blacklisted from making future purchases.
While this may sound extreme, the costs attributed to serial returners cannot be understated.
Therefore, don’t be put off by the idea of investigating customers who you suspect are abusing your return policy.
AI is coming, but it’s not quite there yet.
Major retailers and fashion brands are at present investing in AI and image recognition software to automate the process of investigating customers.
Unfortunately, there isn’t an app or plugin that has not been developed for small to medium-sized businesses.
Customer loyalty will likely fall when consumer psychology gets in the way.
While technology and blacklisting customers are one way for e-commerce stores to prevent serial returns, customer loyalty will likely fall when consumer psychology gets in the way.
The cognitive battle of consumption
When a customer considers a purchase, there are two opposing forces that are waging a neural war.
Consumer psychology: avoidance and approach system.
- The avoidance system is aptly named and helps us to avoid risks and negative consequences
- The approach system influences us to do whatever makes us happy
It’s important to remember that most of the choices that we make are to avoid short-term pain.
Even when we know that something is harmful to our body in the long term, we continue to do it in order to avoid short term distress.
Classic examples are smoking, alcohol abuse and eating fatty foods.
Cognitive dissonance is painful for consumers.
Buyer’s Remorse is a form of cognitive dissonance — a period of mental discomfort caused by conflicting beliefs and attitudes.
This means that customer loyalty is likely to fall when a consumer is experiencing this internal conflict.
The main reasons why customers return an online purchase are:
- 58% didn’t meet expectations
- 30% didn’t end up using
- 20% Cost
- 15% found a better deal
- 15% Didn’t need it
Some surveys have shown that as many as 7 out of 10 people who buy a new car, and 60% of all new homeowners, experience some form of buyer’s remorse. But small items — clothing, electronics, and kitchenware — just as easily haunt us.
The most common items for customers to return in the UK are:
- Clothing 60%
- House 44%
- Exercise equipment 42%
- Kitchen gadgets: 41%
- Cosmetics 40%
- Electronics 36%
- Vehicles 32%
- Grocery foods 30%
While customers may have a valid reason for returning a purchase, consumer psychology may be the actual reason.
This will have a direct effect on customer loyalty feedback and this means that your qualitative data (for example a survey of why customers returned products) is corrupt.
Therefore, consumer psychology should be taken into consideration when analysing your customer feedback for returns. However, this is extremely difficult for retail brands to make allowances for.
Emotional purchases vs practical purchases.
- Material purchases: Physical objects like computers, cars, and TVs
- Experiential purchases: Experiences like concerts, vacations, and playing sports
Material purchases cause customer loyalty to fall.
In today’s marketplace, almost any product that a customer buys has dozens (if not hundreds) of similar alternatives.
As the number of choices increases, the psychology of the consumer is affected by the dreaded paradox of choice which causes psychological stress.
The consumer’s subconscious believes that alternative products and/or alternative stores selling the same product are missed opportunities.
This causes buyer’s remorse — even when the item fulfils the customer’s needs.
Engagement causes customer loyalty to drop.
Customer loyalty is likely to fall when customers do not engage with the products that they purchase.
Research has found that the rate of buyer remorse is strongly linked to how often a customer uses a product.
For example, a customer who purchases a new Apple laptop will not be happy with their purchase or be loyal to the Apple brand until they engage with their purchased product on a consistent basis.
Internally, the customer justifies the financial resources they used to purchase it based on how often they use it.
This means that customer loyalty will likely fall when consumers do not engage with the products that an e-commerce store or brand sell.
Customer loyalty will rise if you sell an experience.
Customer loyalty is less likely to fall when they purchase an experiential product.
In fact, it is far more common for consumers to regret missing out on an experience. (FOMO, or “fear of missing out”)
This is partly because consumers interpret experiences as unique and not something that is interchangeable.
You don’t think about how long-lasting the effect of that concert was. You remember the high when you left.Art Markman, UT Austin psychologist
Experiences create sustaining memories that outlive the event.
Even a bad experience can in time evolve into a positive memory.
Many household brands tap into this consumer psychology by developing marketing campaigns to position their products as an experience.
- A Ford Mustang isn’t just a car: it’s the ultimate driving experience and expression of freedom
- The Apple iPhone isn’t just a cellphone: it’s how you connect with friends and capture unique and special events
- Coca-Cola isn’t just a drink: it’s a nostalgic memory of Christmas
This kind of positioning is designed to mitigate buyer’s remorse. This means that these brands use experiences as a way to boost customer loyalty.
Impulse buying is bad for customer loyalty.
80% of sales classed as ‘impulse buying’ are emotional purchases.
This means that products purchased due to impulse buying cannot be justified by consumers. This is because they no longer feel the same emotions that they had when they purchased their goods.
For an e-commerce website or brand, customer loyalty is likely to fall because of impulse buying and emotional purchases as a whole.
What you can do to tackle buyer remorse and raise customer loyalty.
- Check social media for serial returners, but this is time-consuming – hire remote PAs or develop AI image recognition using existing frameworks such as Tensor Flow (GoGoChimp may be able to help you with this)
- Allow customers to earn money back or loyalty points for purchases and not returning goods
- Offer discounts, give-aways and money back for referral purchases
- Provide multiple payment methods including subscriptions, loans, direct debit and more
- Clearly display discounts and the amount saved on your web pages and landing pages
- Annually, customers spend an average of $1,600 on subscriptions. Adapt your business model to incorporate subscriptions
- Market your brand or product as an experience
- Make your products a habit – create a trigger, action, invesment and reward system
- When customers talk, listen (most business owners never listen to their customers)
- Do not offer free postage for returned packages
- Ensure that return labels must be printed off by the consumer
- Use collection points for return packages
Thanks for reading Customer Loyalty Will Likely Fall When Your Website Has This…
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I would also love it if you left a comment with the number one thing that you feel causes customer loyalty to fall.