How to increase profits through customer retention

Here’s another one-star Google review for your consideration:

“We were passing through town and decided to do some antique browsing when the clerk approached us and stated that he should charge an entry fee for shoppers like it’s a museum because most people that visit the store don’t buy anything and it costs a lot to keep the store open.”

I wonder if that shopper will be going back?

To be fair, antique stores do attract a lot of browsers who don’t buy anything. In that sense, they are like a museum, and a free one at that. But, isn’t that a great thing for us? Our inventories are interesting and compelling; people want to come in and browse.

Has anyone ever said: “Oh, look! A tire store! Let’s go in and browse around!” Maybe, but I doubt it.

We are a society of shoppers. We love to browse. A 2017 study by Episerver [https://prn.to/2Tjm5JB] reports that 92% of online shoppers don’t buy on their first visit to a website. Contributors to a Shopify community forum [https://bit.ly/2CtMFdc] report that “On average the conversion rate is between 0.5% and 3% — which means you should get a sale every 40 or 150 visits.”

In brick-and-mortar stores the percentage of buyers is upwards of 10 times higher than with online stores: Bindopos reports: “studies show that only ~30% of retail store visitors actually make a purchase, which means that at least 70% of the customers can still be influenced to buy.” [https://bit.ly/1Sj66TU]

We expect people to walk through our store and browse. But to let 70% of our traffic pass through without attempting to leverage some of it is wasteful. It’s well known that it costs less to market to existing customers than it does to acquire new ones. Yet, most retailers’ marketing budgets are spent on customer acquisition rather than on customer retention. We throw money at print and online directories and tourism publications. Sometimes, we buy Facebook or other social media ads. Such media sources charge us for “impressions” or “views.” Why not make an impression on the folks who come to view your store?

We sell two things: products and our business. If shoppers don’t buy a product, sell them on the business. Everyone can be a customer if we build a relationship with them. Even tourists who may never come back can buy from us online. When you fail to make a dollars-and-cents sale, enroll shoppers in a loyalty program. We probably won’t enroll everyone in your program, but if we can get the contact information for just two of the seven who walk out the door, we can significantly build our customer base, and increase our sales.

Customer retention is the most cost-effective method of growing a business. A 2018 Amazon Shopper Behavior study [https://bit.ly/2LaLtNn] reports, “Although as much as 80% of marketing budgets is spent on mass acquisition initiatives, research shows that the path to profitable growth is through the customers you already have. Custora [https://bit.ly/2HJjtCD] reports that:

Doesn’t it make sense to build a relationship with the shoppers already in your store?

The most cost-and-time effective stay-in-touch technology is email. Social media is crammed with spam; email is once again the go-to method for customer contact. In 2018, retail stores had an average email open rate of nearly 23%. Direct mail hovers at around 2%, and Facebook under 5% of page “likes.” Some consider Facebook their stay-in-touch strategy, but Facebook is no longer effective for that purpose. Since their algorithm changed last year, organic reach on the platform has plummeted. The followers you accumulate on Facebook belong to Facebook, not you. Facebook will be glad to take your money to allow you access to them, though. If you want to see how ineffective Facebook is in 2019, go to your page and view “page insights” in the top menu. Toggle between “organic” and “paid” reach to analyze your post performance data. 

Building a customer list that you control is essential for growing your business. Here’s a 4-step process for retaining some of the traffic that’s walking out your door:

1. Track store traffic. Know how many people visit your store, how many shoppers buy, and how many enroll in your loyalty program. These numbers inform your conversion rate, which is a measure of the effectiveness of your merchandising and salesmanship. Conversion rate is calculated by dividing the number of sales by the number of visitors. For example, if you have 50 visitors in the course of a day and 15 of them buy, you have a roughly 30% conversion rate. Over time, your conversion rate should improve.

2. Engage your shoppers but do so in a give-and-take fashion. Greet them. Ask questions. Don’t go overboard, but don’t ignore them, either. If the first exchange is your asking for their email address, you won’t get it. You need to warm them up first.

3. Ask for their email address. To get it, offer them something of value. Here are a few ideas from readers:

• Give them a “welcome package.” This is Welcome Wagon [http://welcomewagon.com] in reverse: Welcome Wagon sells advertising to local businesses and delivers it, by hand in many cases, to new move-ins. Their welcome packages contain restaurant menus, coupons, tourism guides, and other “get to know the community” types of information. You can serve as a de facto visitor’s center. Place a collection of information into a clear plastic bag (so the shopper can see what’s being offered) and offer it as a gift.

As you do, ask them to sign your guest register, which requests an email address. Your State Tourism Department, local Visitors Center, or Chamber of Commerce may be able to supply you with brochures, menus, seasonal recreational newspapers, and other items. This tactic has a higher-than-average success rate.

• Give them a percent-off coupon good for their next visit (best to put a time restriction on it).

• Issue them a Loyalty Club card. Plascards [https://bit.ly/2FpofUn] offers durable plastic cards (similar to a gift card) that identify your customer as a VIP. Vistaprint [https://bit.ly/2JtMmoS] offers inexpensive cardboard cards that function just as well as the plastic cards.

4. Send them a newsletter. eMail newsletters are cheap and effective; some providers (like MailChimp [https://bit.ly/2uiHt7R]) offer free starter email programs. Others, like GoDaddy, include drag-and-drop newsletter software with a business email subscription. [https://bit.ly/2WbBvkQ]

As antique businesses scramble to compete for the same customers in a marketplace with multiple distribution channels, customer retention becomes key to growing your customer base and driving your profits. 

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