E-commerce is flawed.
You see, e-commerce is a great business model. You get people to your store, you make them buy as much as they can, and you make sure they have a good purchase experience.
But here’s the problem: they may never return to buy again.
That’s why SaaS is such a rage: at the end of the month you can know how much money you will have in your bank account, even if you don’t grow at all (assuming a low churn rate). E-commerce isn’t as nice.
You can reduce this problem by increasing your traffic volume or your AOV, as I explained.
But this is nothing but a patch of a bigger problem.
There’s only one way to solve this flaw: increasing your order frequency.
In this article, I will show you what order frequency is, why it matters so much, and X tactics that will show you how you can start increasing your store’s frequency today.
Order Frequency: A Definition
Order frequency is a metric that helps to define how often customers purchase from a store in a given period of time.
The formula for order frequency (sometimes called “purchase frequency”) is:
Total number of orders (365 days) / total number of unique customers (365 days)
For example, if you had 45,700 orders and 35,520 unique customers in the past year, your order frequency would be 1.27. This means each customer bought on average a bit more than 1 time in the past year. This number isn’t necessarily good or bad, as it depends on your industry and on your AOV.
(You can obviously change the period of time as you please, but it’s recommended to leave a longer period of time for a more exact analysis.)
There are other two related formulas that you should take into consideration: the time between purchases, and the repeat customer rate.
The time between purchases metric helps you see how much time an average customer takes to make a repeat order. On the other hand, the repeat customer rate tells you how many of your current customers come back to make a repeat purchase.
When analyzing your store’s order frequency, you should consider these two metrics as well, because they can give you some more context about your customer’s purchasing habits.
Why Order Frequency Matters
The order frequency, along with the other two metrics, can help you see how often your customers come back to buy from you, how effective your retention marketing campaigns are, and how often you should contact them with offers and promotions.
What makes order frequency so unique is that the higher it is, the more revenue and lower acquisition costs your store will have. According to a study by Adobe, repeat customers generate between 3x to 7x higher revenue per visit than first-time visitors.
Also, according to the book Marketing Metrics, it’s 50% easier to sell to an existing customer than to brand new prospects. And on top of that, a study made by Bain and Co. says that a 5% increase in customer retention can increase a company’s profitability by 75%.
[easy-tweet tweet=”A 5% increase in customer retention can increase a company’s profitability by 75%” user=”IvanKreimer” usehashtags=”no” template=”light”]
How to Know When to Contact Your Customers
In order to improve your order frequency, you need to know when to contact your customers. Just spamming them with promotions and offers will do nothing but annoy them (just like any other brand does).
The best way to do so is by using the RFM model.
RFM is an acronym that stands for recency (i.e. how recently a customer has ordered from you), frequency (i.e. how many times that customer has ordered from you), and monetary value (i.e. the total number of dollars the customer has spent on your products).
The RFM model is an old technique that has been used for over 30 years, created by catalog advertisers who wanted to deliver their mailings to the customers that were most likely to buy. By segmenting their customers by those who bought the most recently and the most often, they discovered their catalogs were more effective and profitable.
In order to implement the RFM model, you need to take all your customers and segment them into groups of the 20%. So one group would be the most 20% most recent, the next one would be the 20% that follows it, and so on. Rank them from highest to the lowest level of recency.
Then, you would need to do the same with frequency: one group would have all the customers that purchased only once, then those that bought two times, and so on. Once again, rank them from highest to lowest.
Finally, you would do the same with the monetary value, from the most amount spent to the lowest.
With all this data, you need to draw a line in the sand and segment these groups in four quartiles, 1 being the lowest quartile and 4 the highest. Smart Insights offer a good template that will help you to do this.
With all this data, you need to sum the RFM columns and the customers with the highest RFM value are the ones that you should contact first.
3 Ways to Increase Your Order Frequency
Send Winback Emails
One of the best ways to use the RFM model to bring back profitable customers is by sending them emails. Winback emails (also called “re-engagement emails”) are sent with that one goal in mind. Since you know who you should be sending the emails to, you only need to create a good set of emails that will help you re-engage with these customers.
Winback emails can be sent either to try to re-engage a subscriber or sell them a product. This depends a lot on your goals and your list. If a subscriber hasn’t opened an email in a long time, it’s recommended to first focus on re-engaging him first. On the other hand, if someone usually opens your emails but hasn’t purchased in a long time, you can send a more sale-focused email.
Most winback email campaigns feature a series of emails that span out for a period of time, from a few days to a few weeks. I like sending 4 emails, the first two being less “salesy” and more light in nature, and the two last being more sales focused by using aggressive discounts and incentives.
There are three attributes your winback email campaign needs to have for it to be successful:
- The right message;
- The right incentive;
- The right people.
To target the right people you only need to follow the RFM model, which we already covered before. That’s why we need to focus on the first two attributes.
In order to create a successful email marketing message, you need to do one thing right: call their attention. If you can achieve that, you can make them read the email, which will take them to click on the email, and finally, to see your promotion.
There are many ways to call someone’s attention, but my favorites are to use a funny subject line or a reminder. As always, you need to test that if you can. But if you don’t, I’d start by using the former, since it’s the least expected (as long as it’s coherent with the customer’s profile and your industry).
Then, your email needs to be short and to-the-point. If they are not reading your emails nor buying from you, it may be for a series of reasons, one of them being you are annoying them. So start by reminding them of you, telling them you miss them and appreciate them, and suggest them relevant products based on their previous purchases. You can also send them a piece of content to “warm” them up (along with a promotion).
However, many people need more than a reminder: they need the right incentive. Providing a discount is a good incentive that lapsed customers will most likely appreciate. You can start small, and increase that a few days later. You can offer them bundles, percentage discounts, free shipping coupons, etc. Whatever you give them, make sure to let them know this offer is unique to them and time-sensitive.
Pinkberry, a franchise of frozen dessert restaurants, uses their winback emails pretty well by making them short, visual, and to the point. They also incentivize their subscribers by giving them a free yogurt, which any of their customers would love to get.
Crocs, the famous sandals company, also make a good use of their winback emails by sending a reminder email that stands out, are friendly, and have a discount for a next purchase.
Retargeting is the marketing tactic of serving ads based on prior engagement. There are many types of retargeting, including site-based, search, display, social, and email retargeting.
The most common type of retargeting is site-based, in which you serve ads to people who visit your website after they leave. These ads show up on different sites around the web, keeping your brand in front of your bounced site visitors to try to bring them back.
The most important aspect of a successful site-based retargeting campaign is segmenting your visitors. Showing the same ad to all your visitors is as ineffective as sending the same email to all your customers.
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There are three key segments you should use in your retargeting campaign:
- Visitors who visited a product page.
- Visitors who added a product to the cart.
- Visitors who converted.
These three segments all have one thing in common: they are high in purchase intent. That means they are interested in your products, which can make your retargeting campaign much more effective than if they were visitors who were just browsing.
For each of these segments, you can create more than one campaign.
- For the visitors who visited a product page, you can create a branding campaign, so your company stays at the top of their heads; a product campaign, which shows them the product they saw; a related products campaign, which shows other products they should see; a category campaign, which shows other products in the category of the products they saw; or an incentive campaign, which gives them any kind of discount to make them want to purchase.
- For the visitors who added a product to the cart, you should create an abandoned cart campaign, which shows the products they left behind; and an incentive campaign, which I previously explained.
- For those visitors that converted, it’s best not to retarget them at first since they already did what you wanted them to do. However, you can create a winback campaign that targets them after a few weeks or months after they made their purchase.
Always make sure to add a strong call to action into your creatives. Make it clear and concise, so they know they should click through your ad. Also, try to make your ads dynamic, so you can add into the ad the product or products they saw. Finally, you can add a promotional offer, so they have yet another reason to purchase.
Watchfinder, the UK’s largest online watch dealer, achieved an ROI of 1,300% while increasing their average order value by 13% thanks to their retargeting campaigns.
Some tools I like to use for e-commerce retargeting are:
Create a Loyalty Program
A loyalty program is a rewards program offered by a company to customers who frequently make purchases. This loyalty program usually gives their customers free stuff, like products, financial rewards, or discounts.
If you have ever had a credit card or shopped often at a supermarket, you must have probably been in a loyalty program. As a customer, they are great because you are being rewarded for spending money on something you would have done anyways. It’s a win-win for everybody, and that’s why they work so great.
To create a successful loyalty program, you need to consider what makes one stand out from the rest.
According to a survey made in 2015 by Colloquy, the most important aspects customers value in a loyalty program is the ability to earn points on purchases, and getting discounts on products and services. On the other hand, they found customers stop participating in a loyalty program when they couldn’t get good rewards, and when they found it too hard to earn points.
Also, the number 1 cause that makes people want to continue to participate in a loyalty program is the ease of understanding and the relevancy of the rewards.
To start out, I’d highly recommend you start small and simple. Create a points system to reward your customers (or visitors) based on the activities they take on your store. Some of the best ones are:
- Visiting the website.
- Sharing a product or article.
- Signing up to your newsletter.
- Making a purchase.
- Writing a product review.
- Referring a friend.
Be clear on the rewards they get based on their actions, and make sure to give them what they want. To know this, you can survey them, so they literally tell you what they want.
Finally, there are other ideas you can consider when creating a loyalty program:
- Create a paid VIP program (e.g. Amazon Prime).
- Add gamification elements to your program.
- Partner with another company to provide all-inclusive offers.
- Use a tier system to reward initial loyalty and encourage more purchases.
Shop4Vitamins, a supplement store, saw a 265% increase in repeat business, from $21,5K/year to almost $57K/year, after they implemented a loyalty program in their store.
The best Shopify apps to create loyalty programs for your e-commerce store are:
Order frequency is one of the three key metrics any e-commerce store needs to optimize, along with the number of customers and average order value. It can help you make more money from your current customers without having to spend money on acquiring or nurturing them.
Choose one of the three tactics mentioned in this article, and start bringing back old customers to your store.
With this article, we finished a 3-part series on growth hacking for e-commerce.
You have learned how to acquire more customers, how to get them to spend more with you, and how to make them come back often.
Now it’s time for you to start growing your store.
Have you ever implemented any of the tactics mentioned before? If so, what was your experience?
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