Online retail brands need to focus on existing customers for better ROI, and not just look for expansion of their customer base, a new study from Adobe, quoted by Fourth Source, suggests.
In fact, the study finds that customers who have already made a purchase from a brand yield revenue equal to the revenue that seven first-time shoppers would deliver, although typically marketers concentrate the bigger part of their advertising budgets on attracting new customers.
According to data from the Internet Advertising Bureau, about 80% of UK digital advertising budgets is spent on search and display advertising, which is mostly intended to attract potential new customers. By contrast, just 10% of spending is targeted at consumers who have made one or more previous purchases. Analysis of revenue contribution shows that those consumers generate as much as 27% of revenues.
Adobe finds that in Europe it takes seven new customers to deliver the same revenue per visitor as one repeat shopper. In the UK the ratio stands at six to one. This significant difference in revenue per visitor can be explained by the fact that repeat shoppers have a higher average order value than new purchasers, who tend to be cautious with their first transaction.
Experts recommend that brands focus on repeat shoppers as a driving force for revenue by offering loyalty schemes and special offers and tailoring personalised content.