If you’re in the ecommerce business, Quarter 4 (Q4) is the best and most stressful time of year. You see the hard work you’ve put in throughout the year pay off as a flood of new orders and customers come rushing in. It can be tempting to see these new customers and orders as a representation of the growth you can expect over the next 12 months. But for many eCommerce owners, that growth is a mirage that disappears in Q1 and Q2.
When growth doesn’t carry over from your busiest shopping season, it can be tempting to look at seasonality, promotion calendars, and plan new product releases to “solve” your growth problem. But ultimately, you end up back on the hamster wheel to prepare for Q4 without an answer as to why your numbers aren’t generating growth throughout the rest of the year.
The peak of Q4 and subsequent valleys throughout the rest of the year can be frustrating, create cash flow problems, and even kill your business. But there is a way to actualize growth throughout the rest of the year. And it has everything to do with understanding what types of customers are buying your products and when.
What kind of first-purchase customer do you have?
Growth boils down to the number of net-new customers that you add to your business. But, not all new customers are created equal. If you sell winter apparel, a new customer who buys your product during the summer holds a different value than someone who purchases it during the winter. If you’re a fitness brand, a new customer who buys your product in early January is not the same as someone who purchases it in the middle of July.
The key to driving growth outside of naturally occurring peak seasons is understanding the types of customers you are acquiring and how they relate to your product. What’s nice is that customers automatically sort themselves into like-minded cohorts based on when they buy. Let’s take a look at a few common types of customers and how you can turn them into repeat customers.
Moment-Driven New Customers
Fitness brands have peaks in January.
Swimsuit brands have peaks in May.
Outerwear brands have peaks in October.
Everyone has a peak in November and December.
Why? Because there are built-in moments that drive these peaks. There’s a reason why hardware stores are stocked with grills ahead of Father’s Day. And grocery stores make beer and tortilla chip displays for the Big Game. For many brands, peaks are natural. The reason? People are already buying more of those items. During these moments, you aren’t creating demand. You’re capturing it. Take a look at your sales data. Do you have peaks outside of Q4? If so, do you know what moment is creating those peaks?
Whether the moment is a day on the calendar, a promotion from your brand, or an event like a warehouse sale or loyalty day, it is critical to understand what drives each customer so you can plan customer retention efforts. When you understand the moments that drive purchases, you can look at historical and similar cohorts to understand when a specific customer is most likely to purchase again and plan segmented and targeted retention efforts.
What does this look like in practice? If a customer bought something during Valentine’s Day, they may have a greater likelihood of purchasing an item during Mother’s Day. So you look at your cohort data for Valentine’s Day last year and see that a majority of customers also bought in April/May. With this information, you know you have a chance to increase customer retention and plan a campaign targeting husbands and dads. You tailor your email strategy for the campaign, launch new ads to target this group, and activate a focused social strategy to increase the LTV from this cohort of customers.
Knowing how your cohorts perform also empowers you to proactively adjust your acquisition strategy. When you understand what cohorts of customers have the highest LTV and shortest reorder periods, you can confidently spend more to acquire customers in these moments.
Discount-Driven New Customers
Discount-driven customers are people who tried your product because of an offer. Maybe they had been considering a purchase, and the discount pushed them over the edge. Or maybe they know nothing about you, but now you’re the lowest-price option for their needs.
Discount-driven customers often have the lowest retention rates. If you’re seeing a large increase in sales during Q4, but aren’t seeing those customers return, you’ve acquired discount-driven customers. You offered 30% off orders during Black Friday/Cyber Monday. Want to retain this group of customers? You’ll likely need to offer another promotion.
But you don’t have to discount forever. Test other offers to this specific cohort of customers to see what works. To convert these types of customers to return to your store, consider these offers:
- Buy More, Save More
- Gift with Purchase
- Free Shipping
- Loyalty Program Invite
These types of offers appeal to a discount-driven customer without cutting the value of your product and helps bridge the expectation from discount to full-price.
How do I retain customers from each audience?
Now that you understand your types of customers, I’m sure you’re wondering, “How can I retain customers from each audience?”
Email is the ultimate retention tool
Email is not dead, especially for ecommerce. Email should make up around 20-30% of your monthly revenue (if it isn’t, let us help you). And email is the ultimate tool for retention efforts. Beyond your core email marketing flows like browse abandonment, cart abandonment, welcome, win-back, and post-purchase, there are other email tactics to consider implementing for your retention marketing.
Ongoing Campaign Emails
You should send more emails. You might be worried about flooding someone’s inbox or adding noise. Your customer is on dozens of other email lists and is consistently getting emails. But unless your customer is brand-loyal and you aren’t sending regular emails, you’re losing customers to brands that are sending regular emails. People sign up for email lists because they think they will receive something from you that’s valuable to them. So, deliver value to them and do it consistently.
Some brands have naturally complimentary products. If you are a brand with complimentary products (shirts + pants, face wash + moisturizer, coffee bean + mug), be sure to segment your post-purchase flow to include a cross-sell offer for purchasers of one item.
If you are a CPG brand, you should have a replenishment flow added to your email strategy. A replenishment flow sends reorder reminders on a specified cadence and can be tailored to specific items. Toothpaste, water filters, and laundry detergent are examples of products that could benefit from a replenishment flow. These products will be used/need replacing, and adding a reminder to your customer to re-order is a service to your customers and also boosts customer retention.
Social Ads as Retention
When you understand your customers deeply, you can create specific experiences for each cohort. If you know that your customers that buy for Valentine’s Day also buy for Mother’s Day, you can target this cohort with timely and relevant paid advertising by producing creatives that talk specifically to this audience.
Email is great. But when you pair your email strategy with a social ads strategy for retention, you get higher returns.
How can I acquire the customers that are best for my business?
The best way to retain customers is to acquire the right customers. When you understand the types of customers you are acquiring, you have the confidence to sacrifice acquisition costs or ROAS. You may be willing to pay a little more on the front end to acquire a customer, knowing they will repurchase soon. And the opposite may also be true. In moments where you know that new customers hold less value, you can adjust your acquisition strategy to pay less.
Though ecommerce revenue growth is a function of net new customers, not all new customers contribute to sustained growth over a long period. Understanding what opportunities exist is the key to sustainable growth for your business.
- Know your customers
- Segment and plan retention efforts around customer types
- Adjust your acquisition efforts to acquire the customers that are best for your business