As E-Commercial 2018 comes to a close, the last of our speakers, Andraž Štalec, CEO at digital marketing agency Red Orbit, shares his expertise on customer retention.
With an increasing number of online retailers and a slowing growth of online user population, e-commerce businesses need a shift in focus. The number of returning customers is now in decline, as new competitors enter the market. In addition, the cost of advertising is rising and one-time customers are no longer profitable, to turn this around online retailers need to shift focus to retention.
We’re now seeing a record number of transactions and revenue from online shopping, with a 25% increase in retail e-commerce sales in 2017. So why is Andraž seeing paid search revenues for some clients dropping by 80%?
Generic keywords, which used to perform really well and were responsible for large portion of transactions, are now delivering just a few percent of transactions. On the other hand, branded keywords have been behaving steadily throughout the time.
And the answer?
Brands age. Industries change. Markets get mature. Even on search.
Each market can be segmented based on its maturity into a few segments (picture above). Each segment has a dominant user base, from Innovators at the beginning to Early and Late Majority at the peak and Laggards at the end.
As markets mature, search queries change. Different user bases will use different search terms, not only because they have different characteristics (Innovators tend to be younger and more open to change than Laggards), but mainly because there is nothing there at the beginning.
When new innovations enter the market, people don’t even know what to call them. There is no market leader, there is not even a market, so generic keywords volumes at this stage are low, while branded searches are close to non-existent.
Let’s compare this to Late Majority and Laggards, who are well aware of market leaders and use branded search throughout their decision journey. Generic search queries become rare and as a result, companies see a decrease in branded search volumes.
So how do you navigate this maturity of the market?
- Change to retention model, where customer profitability is a key metric.
- Invest in your brand to encourage returning users.
Our online behaviour is always changing and as it becomes easier to sell online the number of competitors is now high, meaning a decline in returning users.
Andraž recommends creating new KPIs, including a Customer Engagement Score – calculated on their behaviour and actions, including historic value and predicted value. This will enable you to predict who will be high value customers, so you can spend more to keep them.
On Google Search it is possible to segment users by two dimensions:
- The stage of consumer decision journey are they in (Behavioral segments)
- By how well they know the brand (Brand familiarity segments)
The trick is to crossmatch these segments and adapt your copy, approach and bidding for each one of them.