Is this the Most Important Secret for Increasing Lifetime Value?
- The Namogoo Team
- August 17, 2020
- 6 min read
2020’s online rush to retail has led a wide variety of brands to refocus their efforts from new user acquisition and towards lifetime value. A rule of thumb is that the cost of attracting a new customer is five times greater than retaining one. Similarly, increasing customer retention by just 5% can increase profits from between 25% to 95%! These stats hint at the effect that improved loyalty and retention can have on LTV.
In light of this, many eCommerce retailers understand that LTV is an extremely important metric, but knowing how to increase it is a different story. Let’s have a look at how and why online retailers are working on their LTV optimization strategies – and one really important factor that many overlook
The Surge in New Traffic
With no end in sight, the coronavirus crisis has led to a substantial surge in the number of first-time online shoppers and greater frequency of eCommerce purchases overall. Consumers have turned in massive numbers to buying a whole range of products online instead of at traditional stores – websites for personal care products, food, and apparel have all seen profound increases in traffic since the pandemic started.
With so many new shoppers trying, enjoying, and staying with online retail, the most important question for many eCommerce businesses is no longer, ‘how do I get people to try out my store?’ Now, it’s ‘how do I keep them coming back?’
The Shift to LTV
Across many eCommerce verticals, the reduction of acquisition budgets and the optimization of LTV is becoming a go-to strategy. To improve LTV, eCommerce retailers are adapting their approach to existing customers in various ways.
Moving from wholesale to DTC. Many world-leading brands that traditionally sell through retailers and wholesalers are now skipping old distribution channels and going directly for the end user. Whether it’s Unilever’s Dollar Shave Club, or Clorox’s Nutranext, or even Anheuser-Busch InBev, companies in a wide range of industries are going for direct to consumer sales to build brand loyalty, make up for lost revenue, and track consumer preferences directly.
Reducing User Acquisition Budgets. Ad spending is a universal acquisition tool, and with the move towards LTV, many firms are slashing their advertising budgets. This change is being promoted by external events such as the Facebook/Instagram advertising ban, which has been joined by more than 1,000 companies. Industry leaders from Coca Cola to Ford to Verizon have ceased (at least temporarily) to buy ads from the social media giant and its subsidiary. With much of their proscribed Facebook advertising dedicated to attracting first-time buyers, these companies are now investing in existing customers to keep them coming back for more – and away from the competition. Similarly, various governments have banned TikTok, or are considering doing so. This situation has the potential to eliminate another advertising medium for online marketers and is hastening more concentration on customer retention.
Focusing on the customer experience and journey.
Every company is fighting fierce competition. eCommerce gives retailers a chance to differentiate themselves with a website and purchase process that is simple, easy, and fast to navigate. Conversely, consumers avoid poor website experiences like the plague – although online shoppers are likely to tell only nine people about a good experience, they are likely to tell 16 people about a negative experience. In fact, feeling unappreciated is the primary reason for a consumer to switch brands.
What am I Missing Here?
Of course, with LTV being so crucial, digital managers, marketing and customer service experts have developed many steps that can potentially increase the number of returning customers and the cash that they spend. The three basic rules for optimizing LTV are to find as many cross-sell and up-sell opportunities as possible; to maximize customer retention through increased engagement and improved service; and to expand product usage through add-ons and revisions.
However, even the most effective LTV strategy has a devastating weakness. What most eCommerce retailers don’t know is that they are constantly losing both new and returning customers to a certain unscrupulous advertising practice. No matter how many resources an online retail store devotes to improving LTV, 20% of their customers are being exposed to ads designed to draw them to another website, and they are missing out on as much as 5% of conversions.
Customer Journey Hijacking uses unauthorized ad injections that are displayed when a consumer visits an online store. These ads are surreptitiously installed in freeware downloads that many consumers use, such as free browser extensions or mobile apps. The ads are designed to draw users away from the retailer they are visiting to a different (and often competing) online store, usually by offering lower prices. And, because the ads appear on the consumer’s device, retailers are unaware of them, and of the damage they cause to LTV.
Eliminate Hijacking, Boost LTV
Namogoo’s Customer Journey Hijacking prevention solution stops ad injections from the moment it starts working. It is fast to implement and requires practically no resources or time from the online stores that it protects. The solution features a rapid and significant ROI as shoppers, once free from the lure of competing ads, progress in far greater numbers through the shopping and purchase process.
By eliminating customer journey hijacking, eCommerce retailers immediately experience a jump in conversion rates by 2%-5%. Instead of taking months to experiment with the basic approaches to increasing LTV (and risking that competitors grab their customers in the meantime), online stores can rapidly win back shoppers who would otherwise be diverted. Without the distraction of injected ads, shoppers can now proceed through the customer journey that you have worked so hard to optimize.
What about long term shoppers? Customer Journey Hijacking ruins the relationship with customers by harming the quality of their purchase experience and by continuously luring them with lower prices. But perhaps the most damaging fact is that Customer Journey Hijacking tends to draw away the type of customers that are the most loyal. Here are just some of the stats that reflect on the disastrous effect of Customer Journey Hijacking on customer loyalty:
- 53% of consumers are likely to click on injected ads that show a low price, and when that leads to a purchase, 80% will buy there again
- 48% of consumers believe that retailers allow unwanted ads to appear
- 62% of consumers believe that injected ads indicate that the customer experience is not a priority for the retailer
- 78% of consumers exposed to injected ads form a negative view of the retailer
In short, getting rid of Customer Journey Hijacking is vital for reaching a higher LTV.
Reclaim Loyal Customers with Namogoo
Namogoo’s solution provides an immediate gain in conversion rates and ensures that you are in full control of the customer journey, which is an essential aspect of customer loyalty, continuing purchases, and lifetime value. Want to make sure that your LTV strategy is the best it can be? Contact Namogoo and find out how to boost your bottom line by getting rid of Customer Journey Hijacking. To support online retailers, we are offering our solution at no cost during the COVID-19 crisis period.