eHarbor eCommerce Marketing Blog

By Robert Lockard

Customer retention has always been an important part of business, but it is even more essential for survival in the world of ecommerce. I read an eye-opening E-Commerce Times article, entitled, “Mapping Out an Effective Online Customer Retention Strategy,” that really laid out the situation.

I’ve talked a lot about using social-media websites, such as Twitter and Facebook, to spread the word about your online business. These, combined with search engine optimization, are powerful Internet marketing tools. However, they can also be used against you by disappointed customers with an ax to grind.

Word of mouth used to be the most-effective and least-expensive way to market a company’s products or services. But today, anyone with online access can easily send a message about a company, whether good or bad, and have it seen by hundreds or thousands of people.

This is an important topic, and this isn’t the first time I’ve talked about customer service on the eHarbor Blog. I mentioned some customers’ efforts to get even with companies they thought were unfair to them in the blog entry, “Do you hate customer service?” In that post, I talked in general about losing customers and how they often turn to social media to vent their frustrations. But now I can share specific statistics that show why it is so important to keep customers happy.

The E-Commerce Times article mentions some sobering statistics that add a sense of urgency to retaining online customers. I think it’s okay to republish them here because the article’s author was quoting from a book, “Leading on the Edge of Chaos.” Here they are:

- Acquiring new customers can cost five times more than satisfying and retaining current customers.

- The average company loses 10 percent of its customers each year.

- A 5-percent reduction in customer defection rate can increase profits by 25 percent to 85 percent, depending on the industry.

- The customer-profitability rate tends to increase over the life of a retained customer.

- A 2-percent increase in customer retention has the same effect on profits as cutting costs by 10 percent.

Clearly, customer retention should be the focus of every business. Angry customers’ unfavorable words could influence a large number of people who might have otherwise become customers. If you keep your customers happy, they could share good stories about your company with their friends on social networks.

The photo of the dog catching a chicken in midair is from Flickr, and it is the copyright of mylerdude.