Abstract 5
Abstract 5

What we're thinking and doing.

Building a Customer Retention Optimisation Strategy

REO

REO

9th Sep 2020 · 5 mins

The development of an optimised customer retention strategy must include a focus on retention as much as conversion. It costs 5 times less resources to retain an existing customer than to acquire a new one. Existing customers are also likely to spend 67% more than new customers. 

 

Here, we’re going to discuss common strategic errors in A/B testing, with a breakdown of more effective approaches to analysis.    

 

Identifying Segments 

 

When it comes to A/B testing, both qualitative and quantitative testing need to go hand-in-hand for a complete picture. Businesses often oversee customer segments that matter. For example high-value customers or VIPs with a high order frequency, frequent purchasers, or customers with a high Average Order Value (AOV). Important data segments you don’t want to miss include the average time between purchases, customers with a low-price sensitivity, and those that aren’t swayed by offers.  

 

The most common segments that you can target with your A/B testing are: 

 

  • Attitudinal 
  • Demographic 
  • Geographical 
  • Motivational 
  • Preferential 

 

You need to identify each of these segments and use that information to tweak your ecommerce business further. For instance, for a retail business by comparing your AOV to the Cost Per Order, you can get a good idea of the profits that you’re making with every order. 

 

When is the Right Time to Segment Your Data?  

 

One of the pitfalls that many ecommerce businesses fall into is not knowing when the right time is to segment their data; before the test or after the test. While most people would go with the latter, it’s important to note that segmentation cannot be an after thought. Tests designed with segmentation in mind, will have a large enough sample size that will provide you statistical insights, helping you come to a decision. 

 

No matter what strategy you use, segmentation can take your A/B testing game to a whole new level. 

 

Segmentation: Stages 

 

Segmenting tests at the initial stages does not help with the discovery process. This is mainly because the idea behind the testing is to figure out what segments respond to what treatment, which can be difficult to do if you want to divide them before you’ve begun testing.  

 

If you have no intentions to break up the results into segments, then the best thing to do is to carry out follow-up tests for those segments that are performing well until you get a large enough sample size.  

 

Post-test segmentation helps in identifying patterns that can then be fed into pre-test planning. This information can then be used to run different tests now that you have device-specific hypotheses.  

 

What Motivates Your Customers? 

 

A large part of Conversion Rate Optimisation is about motivating customers to take action; this is where A/B tests can be used as a valuable tool. By using various methods, you can find out what motivates the visitors to your ecommerce site to make a purchase (reviews, social media, etc.)  

 

One method of motivating a purchase is by creating a sense of urgency, which will logically reduce ‘shopper procrastination’. You can add a time limit to your offer to push the customer to make a decision. That being said, you don’t want to come across as being too pushy, or that may scare away the customer.  

 

Bulk discount deals are another great way to pique the interest of your audience if other strategies don’t seem to work. While it can be tempting, it’s important not to try and maximise every transaction. 

 

You can also identify certain behavioural patterns across your site through the use of heatmaps, to identify which sections of the site users focus on most.  

 

Brainstorming A/B Tests  

 

Does a win on desktop cancel out a loss on mobile? In order to target different customers, you need to analyse your test scores across various key segments and then make tweaks accordingly. Some important questions to ask during these brainstorming sessions will be:

  

  • Do variations work better for a specific traffic source? 
  • Are the tests showing different results for new/returning customers?  
  • Is a variation not performing well on a certain platform, browser, or operating system?  

 

Tracking micro conversions or local metrics is useful even when macro conversion is the main focus – by contributing to the testing phase with an extra layer of insights. 

 

Focus on the Customers that Matter 

 

In the ecommerce industry, managing budgets is synonymous to identifying existing marketing efforts. This means that enterprises need to focus on high-value customers. For example, focusing on increasing the AOV of VIP customers through cross-selling. Since VIP customers  have a high-order frequency, increasing the AOV of each order can help increase revenue. 

 

How to identify high-value customers  

 

Ecommerce businesses can track key metrics such as price sensitivity, average order value, frequency of purchases, and overall customer lifetime. This is not to be coupled with trying to maximise every transaction, but rather consistently evaluating your customer experience optimisation programme.  

 

Ending Note 

So, how has your company been performing? Have you experienced an increase or decrease in your customer retention rate over the past few years? A study done by Harvard Business School found that increasing customer retention by 5% can increase your profits by up to 95%.  

 

At REO we are experts at finding solutions to such marketing challenges, utilising the most up-to-date research to identify growth opportunities. Contact us today for a bespoke analysis on optimising your customer retention strategy.  

REO

REO

9th Sep 2020
We create experiences that matter