Entrepreneur Corner

Odds are a large percentage of your company’s attention and budget goes toward customer acquisition.  That makes sense if your customer lifetime value is high – but if you aren’t driving repeat business, it’s ultimately a waste of resources. Securing the second transaction is a key step to generating a good return on your investment.

A 10 percent increase in the number of new customers who buy a second time results in a 15-25 percent revenue improvement (depending on your level of repeat business today).  That directly impacts your break-even cost for customer acquisition and makes more acquisition options feasible.

The trick is figuring out how to do this.  The easiest way is with an opt-in program or program registration during the first purchase. Customers are most engaged at the time of purchase.  Your ability to opt them into anything is vastly lower once they leave, so the time to engage is while they are on the site or at your location for the first time.

I cannot stress this enough.  Any time a customer walks or clicks out without opting into something is a sales and marketing failure.  (In this example, ‘something’ is anything that promises structured benefits in exchange for customer data or loyalty, such as a loyalty program, a free content subscription, access to white papers, etc.)

If you’re able to secure some sort of structured program opt-in during the first transaction, there are three tactics you can follow to lock in the second sale.

Expiring accrued value - Something expiring is a very powerful motivator.  When the customer first bought and opted-in to a program, they accrued some value.  A message sequence starting a month before expiration is often very successful.

Distance to threshold or tier - If your program is designed well, a first purchase will put customers within striking distance of their first benefit.  Messaging around the small commitment needed to reach that first benefit will be effective.

Bonuses to reach threshold or tier - One smart approach is to structure bonuses for the second purchase that push customers over the first benefit threshold.  That way, they hit the benefit on their second purchase and get something to drive them towards purchase number three.

If you managed to secure email opt-in during the first transaction, there are four additional tactics at your disposal.

Increased communication cadence in first 15 or 30 days - There is a direct relationship between recency and activity.  If you look at the recency of your repeat purchasers, it follows a power law (starts high, decays quickly, then evens out).  So while you risk unsubscribes, your frequency of mailings should be higher in the first 2-4 weeks after a first purchase.

What you’re doing with this is searching for the right message – and unless you have collected good profile data, you’re guessing at what will motivate a second purchase.  It’s best to get your most effective offers in front of your new customer within these first four weeks. Otherwise, you risk losing them.

If you are going to do one thing on this list, this is the one.  Script and (hopefully) automate your remarketing cadence for the first 4 weeks after a first purchase, then let customers migrate into your standard communication cadence. And remember, email subject lines are like tweets now, so tell your story there.

Discounted complementary product - Your marketing cost on the second product or service is virtually zero, so pass that savings on.  Find an appropriate product or service that complements the purchase and price it so low that your new customer would be (ahem) unintelligent not to buy it.

Branding communications in first 15 days - New customers are unlikely to be familiar with your brand and everything it stands for.  One way to increase frequency during the crucial first few days after a purchase is to include brand-centric communications, such as a personal thank you, a guide to services, any social or community options available or reiteration of your brand promise.  By complementing your hard sell emails with softer, brand-oriented email, you stand a higher chance of finding the right message to appeal to any given customer.

Invitations to connect/review – This can be via Facebook, Twitter, MySpace or any other forum.  If you didn’t connect during the first transaction, use some of your initial communications to connect your new customer to one of your community or social network options.  Product or service reviews are particularly effective here, so consider partnering with BazaarVoice or Yelp.

Of course, you’re not going to be able to secure an opt-in with every customers during the first transaction.  Since commercial email risks violating CAN-SPAM, your communication methods are limited, but you do have option:

Order confirmation/Ship notification/Thank you offer - This is the no-brainer.  These messages are exempted from CAN-SPAM as long as they are clearly transactional in nature, but adding relevant offers to the bottom or sidebar will be the best performing tactic you have.  Ideally these are related to the product or service purchases (such as “next best item”) or profile data you collected during the first purchase.

Enhanced or bonus service or support in first 30-90 days - New customers need to be treated very differently than existing customers.

They may not be as familiar with your extended assortment or services.  They may be less capable of installing, assembling or navigating your product or service.  Enhancing your typical support for the first 30 days will increase satisfaction, advocacy and referrals and demand for accessories or ancillary services.

You could also have a new user service that is undocumented – or you could extend the new user service by 30 extra days when it is about to expire.  Chances are this is very inexpensive and generates a high return.  And since the message relates to support of the first purchase, it conforms to CAN-SPAM.

Outbound phone campaign - These can be expensive, so they should be part of the mix only if it makes economic sense.  Since robocalls are now essentially illegal, you will need to have your staff or call center make the call.  If your average transaction is high enough, this is likely to be a very productive activity.  For B2B companies, this is a no-brainer, since you almost certainly have additional products or services to sell to a business customer.

Chances are you can afford to add most, if not all, of the tactics listed here to your marketing mix.  Few are expensive, and most just take discipline and execution.  With the right person or team in place executing these ideas, your repurchase rate will increase, your revenue will grow and your stakeholders will be happy.

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Tags: customer loyalty, email marketing; loyalty programs, sales